Will Activision Blizzard (ATVI) Beat Q1 Earnings Estimates? - Analyst Blog

Activision Blizzard Inc. ATVI is set to report first-quarter 2014 results on May 6. Last quarter, the company posted an 8.6% positive surprise. The company has posted an average positive earnings surprise of 225.1% over the past four quarters. Year-to-date, Activision's share price has increased 10.4% compared with 2.7% in the S&P 500.

Let's see how things are shaping up for the first quarter:

Growth Factors this Past Quarter

Activision's first-quarter results are expected to be driven by Hearthstone: Heroes of Warcraft, which was launched on Apple's AAPL Mac and Microsoft MSFT PCs during the quarter. Strong console sales from Microsoft and Sony SNE is expected to boost Activision's gaming pipeline. Robust performance from Call of Duty: Ghosts and Skylanders are also expected to boost the top line in the quarter.

For the first quarter, Activision expects non-GAAP revenues of $675.0 million. This is slightly lower than the Zacks Consensus Estimate of $689.0 million. Earnings are expected to be 9 cents per share as against the Zacks Consensus Estimate which is pegged at 7 cents per share.

Earnings Whispers?

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

Zacks ESP: Earnings ESP for Activision stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 7 cents.

Zacks Rank: Activision has a Zacks Rank #3 (Hold) which when combined with 0.00% ESP makes surprise prediction difficult.

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