THQ Earnings Preview

Motley Fool Staff
Updated

While THQ (NAS: THQI) missed estimates last quarter, investors hope that it will bounce back and outpace Wall Street expectations this quarter. The company will unveil its latest earnings Wednesday. THQ is a worldwide developer and publisher of interactive entertainment software for all popular game systems.

What analysts say:

  • Buy, sell, or hold?: Analysts think investors should stand pat on THQ with 13 of 17 analysts rating it hold. Analysts don't like THQ as much as competitor Take-Two Interactive Software overall. Five out of 15 analysts rate Take-Two Interactive Software a buy compared with three of 17 for THQ. While analysts still rate the stock a Hold, they are a little more optimistic about it compared with three months ago.

  • Revenue Forecasts: On average, analysts predict $104.2 million in revenue this quarter. That would represent a rise of 48% from the year-ago quarter.

  • Wall Street Earnings Expectations: The average analyst estimate is a loss of $0.86 per share. Estimates range from a loss of $0.90 to a loss of $0.84.

What our community says:
CAPS All-Stars are solidly behind the stock with 79.8% granting it an "outperform" rating. The community at large agrees with the All-Stars with 83.3% giving it a rating of "outperform." Fools are bullish on THQ and haven't been shy with their opinions lately, logging 178 posts in the past 30 days. THQ's bearish CAPS rating of two out of five stars falls short of the Fool community sentiment.

Management:
The company boosted its gross margin by 5.1 percentage points in the last quarter. Revenue rose 30.6% while cost of sales rose 21.9% to $140.1 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q1

Q4

Q3

Q2

Gross Margin

28.2%

30.6%

19.7%

14.7%

Operating Margin

(19.3%)

(39.9%)

(5.1%)

(54.9%)

Net Margin

(19.7%)

(35.5%)

(4.8%)

(61.0%)

We can help you keep tabs on your companies with My Watchlist, our free, personalized service. Add THQ now.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

At the time thisarticle was published

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Advertisement