Electronic Arts (EA) is expected to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended December 2021. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price.

The earnings report, which is expected to be released on February 1, 2022, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower.

While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise.

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Estimate Revisions Trend

The consensus EPS estimate for the quarter has been revised 1.74% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts.

Earnings Whisper

Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out.

A positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.

A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings.

How Have the Numbers Shaped Up for Electronic Arts?

For Electronic Arts, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +5.23%.

On the other hand, the stock currently carries a Zacks Rank of #2.

So, this combination indicates that Electronic Arts will most likely beat the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?

Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.

For the last reported quarter, it was expected that Electronic Arts would post earnings of $1.17 per share when it actually produced earnings of $1.67, delivering a surprise of +42.74%.

Over the last four quarters, the company has beaten consensus EPS estimates two times.

Bottom Line

An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.

That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. 

Electronic Arts appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.