THQ Posts Strong Holiday Sales
THQ
(THQI)
said Thursday that stronger-than-expected holiday sales fueled a 35% year-over-year jump in fiscal third-quarter revenue that surpassed Wall Street estimates. But the video-game software maker's earnings were merely in line with estimates while its fiscal 2005 guidance followed a similar pattern of strong revenue but lighter earnings as development costs go up.
THQ shares were recently up 12 cents, or 0.7%, to $16.40 in after-hours trading after closing up 34 cents, or 2.1%, to $16.28 in regular trading.
Under generally accepted accounting principles, Calabasas Hills, Calif.-based THQ reported third-quarter net income of $30.4 million, or 78 cents a share. That included an increase in allowance for doubtful accounts of $7 million, or 11 cents a share, related to
KB Toys'
bankruptcy. A year ago, THQ reported net income of $3.1 million, or 8 cents a share, including a special charge of 33 cents a share.
Revenue rose 35% to $293.1 million vs. $217.8 million a year earlier.
Wall Street analysts polled by Thomson One Analytics expected THQ to earn net income of 78 cents a share on $256.4 million in revenue in its fiscal third quarter, which ended Dec. 31. THQ's guidance called for sales of $255 million and net income of 77 cents a share.
THQ, the fourth-largest video-game maker, whose lineup includes such children's titles as
Finding Nemo
and
SpongeBob SquarePants
, is the last major video-game maker to report its results from the all-important holiday sales season. Its strong third-quarter sales followed similarly robust results from
Electronic Arts
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(ERTS)
and
Activision
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, while rival
Take-Two Interactive
(TTWO) - Get Take-Two Interactive Software, Inc. Report
earned the dubious distinction of being the only major video-game maker to cite weak holiday sales.
Looking ahead, THQ reaffirmed its previous fourth-quarter guidance calling for revenue of about $90 million, but lowered its earnings outlook by a penny to 7 cents a share. That reflects the rescheduled launch of
Full Spectrum Warrior
to June on Xbox and September for the PC, from a previous debut date of March.
The company's fourth-quarter targets fell shy of analyst estimates pegging fourth-quarter revenue at $91 million and earnings at 12 cents a share.
For full fiscal year 2004, revenue should total $608 million and earnings should ring in at 84 cents a share. The top-line outlook went up from a previous target of $570 million but the bottom-line target fell from 85 cents a share.
The latest mean analyst estimate projected 2004 revenue of $572.5 million and earnings at 85 cents a share.
For fiscal year 2005, which begins in April, THQ anticipates revenue of $644 million and earnings of 94 cents a share. Analyst estimates call for fiscal 2005 revenue of $615.6 million and earnings of $1 a share.
The company said in a press release it is assuming PlayStation 2 and Xbox prices fall to $149 million in fiscal 2005, and a nearly $10 million increase in product development costs to prepare for the next generation of consoles, expected in 2006.
