Will GameStop (GME) Stock Fall on Earnings Miss Expectations?
NEW YORK (TheStreet) -- Industry data suggests that GameStop (GME) - Get Report could report disappointing financial results for the fiscal 2015 third quarter, which are scheduled to be released on Monday before the market open.
U.S. sales of physical software and hardware declined 5% and 14%, respectively for the three months ended October, according to NPD data, Pacific Crest Securities said in an analyst note.
Overall, analysts have estimated for earnings of 59 cents per share on $2.15 billion in revenue for the latest quarter.
Last year, GameStop reported earnings of 57 cents per share on $2.09 billion in revenue for the quarter ended November 1, 2014.
The video game retailer has struggled to meet guidance since 2008, a trend which is expected to continue this year, analyst noted.
For the fiscal third quarter, GameStop expects earnings of 53 cents to 60 cents per share and comparable store sales growth between 1% and 4%.
"If industry physical games do not grow in 2015 with an improved slate and much less of an old-gen headwind (and after declining from 2009 to 2014), we think it's unlikely they ever will," analysts added.
November and December sales are key to show if physical games can withstand the growing digital gaming market, analysts said.
GameStop stock is rising 0.32% to $37.94 in mid-morning trading on Thursday.
Separately, TheStreet Ratings team rates GAMESTOP CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate GAMESTOP CORP (GME) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GAMESTOP CORP has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GAMESTOP CORP increased its bottom line by earning $3.54 versus $3.02 in the prior year. This year, the market expects an improvement in earnings ($3.91 versus $3.54).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 2.8% when compared to the same quarter one year prior, going from $24.60 million to $25.30 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has significantly increased by 5457.89% to $105.60 million when compared to the same quarter last year. In addition, GAMESTOP CORP has also vastly surpassed the industry average cash flow growth rate of -11.31%.
- You can view the full analysis from the report here: GME
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.