Earnings Preview: Activision

May. 3.10 | About: Activision Blizzard, (ATVI)

Activision (NASDAQ:ATVI) is expected to report Q1 earnings after the market close on Monday, May 3, with a conference call scheduled for 4:30 pm ET.

Guidance

The consensus estimate is 4c for EPS and $565.62M for revenue, according to First Call. On April 15, Activision announced that its 1Q GAAP and non-GAAP net revenue and EPS are tracking ahead of the company’s original "lowered" outlook from the Q4 earnings call, attributing outperformance to certain opex shifting from Q1 into Q2, strong global demand for WoW and COD: Modern Warfare 2, and a solid launch of COD: MW2 Stimulus Package. The company also raised its full-year GAAP and non-GAAP EPS guidance by 2c to 72c. The lower guidance originally provided by management on its Q4 earnings call was for Q1 EPS of 2c on sales of $525M. Guidance for FY10 was also lower at 70c on $4.4B in sales. However, Activision has a history of beating the guidance it sets.

Analyst Views

FBR Capital Markets expect its non-GAAP revenue and pro forma EPS to exceed their estimates of $576M and 4c. After a quarter with only one retail title, the release schedule begins to pick up significantly in the coming months with new IP like Singularity and Blur in Q2, Starcraft in Q2, and Call of Duty: Black Ops and WOW: Cataclysm in Q4. The early reviews on Black Ops from retailers have been surprisingly positive. Looking forward: FBR Capital continues to believe that consensus earnings estimates for 2010 are far too low at 73c on $4.52B in revenue, with analysts failing to fully account for the addition of the two high-margin PC titles from Blizzard, a full year of the NetEase (NASDAQ:NTES) relationship in China, better channel and cost management in the music business, and the potential for Call of Duty: Black Ops to see a stronger-than-historical comp against last year’s Modern Warfare.