(ATVI) Will Activision’s Earnings Miss Estimate?

Activision Blizzard (ATVI) is set to report first quarter 2013 results on May 8. Activision reported fourth quarter earnings of 75 cents, which surpassed the Zacks Consensus Estimate by 6 cents. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

A strong jump in top-line growth based on solid performance from the Call of Duty and Skylanders franchises were the main forces behind the comfortable beat. Additionally, operating expenses declined in the quarter that pushed up operating margin by 760 basis points (“bps”).

Activision plans to launch a number of games based on its four franchises – Call of Duty, Skylanders, World of Warcraft and StarCraft. However, Activision remains cautious on fiscal 2013 due to volatile macroeconomic environment coupled with uncertainly related to console transition and tough year-over-year comparisons.

Earnings Whispers?

The Zacks Consensus Estimate for the first quarter stands at 9 cents while that for fiscal 2013 stands at 76 cents.

Activision posted positive surprises in the last four quarters with an average surprise of 110.94%.There were no estimate revisions for both the first quarter and fiscal 2013 over the past 30 days. As a result, the Zacks Consensus Estimate for both periods has remained unchanged.

The chances of a big surprise are unlikely given the lack of catalysts during the quarter. The stock carries a Zacks Rank #3 (Hold).

We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that a stock needs to have both a positive Zacks Earnings ESP and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You could, therefore, consider stocks like:

Hasbro Inc (HAS), Earnings ESP of +3.03% and Zacks Rank #2 (Buy)

International Game Technology (IGT), Earning ESP of +3.23% and Zacks Rank #2 (Buy)

Webcom Group Inc (WWWW), Earnings ESP of +2.38% and Zacks Rank #2 (Buy)
ACTIVISION BLZD (ATVI): Free Stock Analysis Report

HASBRO INC (HAS): Free Stock Analysis Report

INTL GAME TECH (IGT): Free Stock Analysis Report

WEB.COM GROUP (WWWW): Free Stock Analysis Report

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