Any increase in EPS, according to the CC, should be solely due to the higher than expected Q2 results. Since the estimates were for 2.09, and THQ beat Q2 by .18, the new 1998 estimates should be 2.27. Of course, that's exactly what the trailing EPS is right now. And that also means that the estimates assume that THQ will fail to continue its 14 quarter growth streak. I think it's ridiculous that anyone expects THQ to post year-over-year results in Q3 and Q4 that are flat. Everyone knows how important the streak is to Farrell (not to mention the fact that a strong business will make it happen). Therefore, we should be absolutely certain that THQ will post at least 2.27 for 1998.
I think that Q3 will beat Q2 for several reasons (a small hint comes from the fact that analysts were expecting a sequentially flat quarter in Q3, and yet they only guessed half of Q2 EPS--why should Q3 be any less surprising on the upside? Therefore their estimates should realistically rise to match Q2's actual numbers):
Q2
WCW Nitro reorders (and initial Europe shipments)
WCW/NWO residual reorders
Quest 64 Big initial shipments
World Cup Big initial shipments
Granstream Saga initial shipments
Q3
Brunswick PC and PSX initial shipments
Devil Dice PSX initial shipments
G. Darius PSX initial shipments
Granstream reorders
BASS PC initial shipments
RedJack PC initial shipments
Quest 64 reorders
WCW vs. NWO re-release shipments
World Cup 98 reorders
Mulan initial shipments
Small Soldiers initial shipments
Matching products from Q3 to Q2, I'd say that the GB sales match up fairly closely. Sales and earnings from Quest reorders and WCW vs. NWO should approximate Q2 sales of Quest and WCW vs. NWO. The Q3 PSX releases should equal the Q2 PSX releases. And the Q3 PC releases make up the difference between Q2 and Q3 sales. The only reason I think sales will grow 20% sequentially, but EPS will increase by only 11%, is that the expected tax rate is 33% (up from 27.3% in Q2) and avg. shares should be 7,950 instead of 7,799.
Todd |
