We expect Take-Two Interactive Software Inc. TTWO to beat expectations when it reports second-quarter fiscal 2017 results on Nov 2. In the last quarter, it had posted a positive earnings surprise of 22.45%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Take Two is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Take Two has the right combination of the two key components.
Zacks ESP: Take Two’s Earnings ESP is +14.29%. This is because the Most Accurate estimate stands at 16 cents while the Zacks Consensus Estimate stands at 14 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Take Two carries a Zacks Rank #3, which when combined with a positive ESP make us reasonably confident of an earnings beat.
Conversely, the Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
What is Driving the Better-than-Expected Earnings?
The company expects to benefit from its popular offerings like GrandTheft Auto V and Grand Theft Auto Online (though sales are slowing down), along with its other releases like NBA 2K17, XCOM 2 and BioShock: The Collection. In fact, higher sales of the digital version of the games add to the company’s margins. The company continues to expect growth in digital revenues driven by higher sale of full game downloads and increases in recurrent consumer spending. However, increasing competition from the likes of Electronic Arts, Activision ATVI and Zynga remains a headwind.
For the second quarter, the company expects net revenue in a range of $375 million to $425 million and earnings per share in a range of 35 cents to 45 cents.
Other Stocks to Consider
Here are a couple of stocks that, as per our model, also have the right combination of elements to post an earnings beat this quarter:
Stratasys Ltd. SSYS with an Earnings ESP of +41.67% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inovalon Holdings, Inc. INOV with an Earnings ESP of +50.00% and a Zacks Rank #2
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