Take-Two Interactive (TTWO) Q4 Earnings: Will It Surprise?

Take-Two Interactive Software Inc. (NASDAQ:TTWO) is set to report fourth-quarter fiscal 2016 results on May 18. Last quarter, the company delivered a positive earnings surprise of 85.0%. The company delivered positive earnings surprises in three out of the last four quarters, translating to an average positive earnings surprise of 211.53%. Let’s see how things are shaping up for this announcement.

Factors to Consider

The company expects to benefit from its popular offerings like GrandTheft Auto V and Grand Theft Auto online, along with other releases like XCOM2 and NBA 2K16. In fact, higher sales of the digital version of the games is adding 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 (NYSE:A) , Activision (NASDAQ:ATVI) and Zynga remains a headwind.

For the fourth quarter, the company expects net revenues in a range of $260 million to $310 million and earnings per share in a range of 15 cents to 25 cents. For the full year, revenues are expected to be in a range of $1.48 billion to $1.53 billion on earnings of $1.65 to $1.75 per share. Revenue contribution from the 2K and Rockstar Games will be 50:50.

Earnings Whispers

Our proven model does not conclusively show that Take-Two is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Take Two’s Earnings ESP is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 12 cents.

Zacks Rank: Take-Two’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However we need to have a positive ESP to be confident of an earnings beat.

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

Stock to Consider

Here is a company, which you may consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Agilent Technologies, Inc. (NYSE:A) , with an Earnings ESP of +2.56% and a Zacks Rank #2 (Buy).

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