More Gamers, More Gaming Lead Activision Blizzard Higher in Q2

Enhancements to the toys-to-life game Skylanderscould be a catalyst for Activision Blizzard stock. Credit: Activision Blizzard.

Shares of Activision Blizzard rose over 6% in late trading as investors cheered second-quarter results that crushed estimates. Here's a closer look at the Q2 totals versus Wall Street's projections:

ATVI Revenue YOY Growth EPS YOY Growth
Consensus estimate $667.05 million 1.4% $0.08 33.3%
Q2 actual $759 million 15.3% $0.13 116.7%
DIFFERENCE $91.95 million 13.9% $0.05 83.4%

Sources: S&P Capital IQand Activision Blizzard press release.

Commenting on the results, CEO Bobby Kotick said in a press release:

What went right: Higher engagement with Activision's gaming community led to much better than expected growth on both the topand bottom lines. Kotick and his team are also being careful to give shareholders the maxium return for their investment, boosting the quarterly dividend by 15% year over year to $0.23 per share. Activision Blizzard stock yields 0.90% annually as of this writing.

What went wrong:Promised stock buybacks didn't materialize in Q2, though I'm not so sure that's a bad thing. Activision Blizzard shares ended the day up nearly 11% over the past three months.Kotick and his team would have paid a premium had they used that time to spend a chunk of the $750 million set aside for repurchasing stock.

What's next:Looking ahead, Activision Blizzard forecasts $930 million in third-quarter revenue and $0.14 a share in profit after accounting for stock-based compensation and other noncash items. For the year, Activision Blizzard now anticipates $4.6 billion in adjusted revenue and $1.30 a share in adjusted earnings, up from its previous outlook of $4.425 billion and $1.20 a share, respectively.

For Q3, analysts tracked by S&P Capital IQ have the company generating $865.99 million in revenue and $0.14 a share in adjusted profit. That compares with $1,170 million and $0.23 a share in last year's third quarter.

Longer term, analysts have Activision Blizzard growing earnings by an average of 9.2%annuallyover the next three to five years.

In the meantime, investors should continue to keep an eye on Activision Blizzard's engagement metrics as new titles reach the shelves. Plans include a Sept. 15 update ofDestiny followed almost immediately bySkylanders SuperChargers, which introduces vehicles into the company's toys-to-life game franchise.Guitar Hero returns on Oct. 20, and then Call of Duty: Blacks Ops III arrives on Nov.6, during the company's annual BlizzCon showcase.

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Tim Beyers is more board gamer than video gamer, yet still completely fascinated by Twitch. He's also a member of theMotley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission but didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sweb homeandportfolio holdingsor connect with him onGoogle+,Tumblr, or Twitter, where he goes by@milehighfool.The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. 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.

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