THQ Earnings Preview

While THQ (Nasdaq: 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%)

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