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Sony's (SNE) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Sony Corporation SNE reported decent first-quarter fiscal 2020 results, with the bottom line beating the Zacks Consensus Estimate.

Net Income

Sony’s GAAP net income surged 53.4% year over year to ¥233.3 billion or ¥186.94 per share ($2,168 million or $1.74 per share), supported by gain on equity securities of ¥96,900 million.

Adjusted net income came in at ¥230.8 billion compared with ¥146.4 billion in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by $1.30, with an earnings surprise of 295.5%.

Sony Corporation Price, Consensus and EPS Surprise

Sony Corporation price-consensus-eps-surprise-chart | Sony Corporation Quote

Revenues

Quarterly aggregate operating revenues rose 2.2% year over year to ¥1,968.9 billion ($18,297 million). The upside was caused by increases in Game & Network Services (G&NS) and Financial Services segment sales.

Segment Results

Sales in G&NS soared 32.5% year over year to ¥606.1 billion driven by significant increase in game software sales as well as PlayStation Plus. The segment’s operating income was ¥124 billion compared with ¥73.8 billion in the prior-year quarter. At the end of June 2020, PlayStation Plus subscribers reached almost 45 million. The company continues to expand user engagement for the launch of PlayStation 5.

Sales in Music fell 12.5% year over year to ¥177.1 billion due to lower sales of recorded music and music publishing resulting from the COVID-19 situation. The segment’s operating income was ¥34.9 billion, which declined from ¥38.3 billion in the prior-year quarter. The company’s paid subscription streaming services continue to grow. However, revenues in most categories are being negatively impacted by the pandemic.

Sales in Pictures fell 5.9% year over year to ¥175.1 billion due to a decrease in theatrical revenues owing to theater closures and lower advertising revenues for media networks. The segment’s operating income was ¥24.7 billion compared with ¥0.4 billion in the prior-year quarter driven by lower marketing costs from the absence of theatrical releases. The company is facing significant production delays in Motion Pictures and TV Productions.

Electronics Products & Solutions (EP&S) sales came in at ¥331.8 billion, down 31.4% year over year. This was due to fall in unit sales of digital cameras, televisions as well as audio and video. The segment’s operating loss was ¥9.1 billion against an operating income of ¥25.1 billion in the year-ago quarter. Sony is transforming the business structure into a more resilient one, while customer demand is beginning to recover.

Sales in Imaging & Sensing Solutions (I&SS) were down 10.6% year over year to ¥206.2 billion due to a decrease in unit sales of image sensors for digital cameras and mobile products. The segment’s operating income was ¥25.4 billion compared with ¥49.5 billion in the prior-year quarter. The company expects a decrease in sales of image sensors for mobile products due to a change in the business environment. Sony plans to grow the business over the mid to long term.

Financial Services sales climbed 32.6% year over year to ¥446.8 billion driven by a significant increase in revenues at Sony Life as well as improvement in valuation gains and losses on securities at Sony Bank. The segment’s operating income was ¥47.2 billion compared with ¥46.1 billion in the year-ago quarter.

All Other sales were down 22.3% year over year to ¥54.1 billion. Operating income was ¥3.5 billion against an operating loss of ¥2.6 billion in the prior-year quarter.

Other Details

Total expenses were ¥1,740.3 billion, up 2.6% year over year, primarily due to higher financial services expenses. Overall, operating income was ¥228.4 billion, down 1.1% year over year.

Cash Flow & Liquidity

In the fiscal first quarter, Sony generated ¥126.2 billion of net cash from operating activities compared with a cash utilization of ¥0.8 billion in the prior-fiscal quarter.

As of Jun 30, 2020, the Japan-based electronics and media company had ¥1,448.6 billion ($13,438.7 million) in cash and cash equivalents with ¥654.1 billion ($6,068.1 million) of long-term debt compared with the respective tallies of ¥1,512.4 billion and ¥635 billion at the end of the previous quarter.

Conversion rate used:

¥1 = $0.009293 (period average from Apr 1, 2020 to Jun 30, 2020)

¥1 = $0.009277 (as of Jun 30, 2020)

Zacks Rank & Stocks to Consider

Sony carries a Zacks Rank #3 (Hold), at present.

Some better-ranked stocks in the broader sector are Turtle Beach Corporation HEAR, T-Mobile US, Inc. TMUS and Clearfield, Inc. CLFD, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Turtle Beach has a trailing four-quarter earnings surprise of 46.4%, on average.

T-Mobile has a trailing four-quarter earnings surprise of 19.4%, on average.

Clearfield has a trailing four-quarter positive earnings surprise of 45.6%, on average. The company’s earnings beat the Zacks Consensus Estimate in two of the last four quarters.

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Sony Corporation (SNE): Free Stock Analysis Report
 
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