Sony (SNE) Tops Q2 Earnings & Revenue Estimates, Raises View

Zacks Equity Research
·5-min read

Sony Corporation SNE reported decent second-quarter fiscal 2020 results, wherein the top and the bottom lines beat the respective Zacks Consensus Estimate.

Net Income

Sony’s GAAP net income surged 144.6% year over year to ¥459.6 billion or ¥367.82 per share ($4,327.6 million or $3.47 per share), primarily attributable to an income tax benefit of ¥225.8 billion.

Adjusted net income came in at ¥255.4 billion compared with ¥175.2 billion in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by $2.57, delivering a positive surprise of 285.6%.

Sony Corporation Price, Consensus and EPS Surprise

Sony Corporation Price, Consensus and EPS Surprise
Sony Corporation Price, Consensus and EPS Surprise

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

Revenues

Quarterly consolidated operating revenues slipped 0.4% year over year to ¥2,113.5 billion ($19,900.7 million). This reflects a significant decrease in Pictures segment sales but an increase in Game & Network Services (G&NS) segment sales. The top line surpassed the consensus estimate of $17,527 million.

Segment Results

G&NS sales grew 11.5% year over year to ¥506.6 billion, driven by an increase in game software sales as well as PlayStation Plus. The segment’s operating income was ¥104.9 billion compared with ¥65 billion in the prior-year quarter.

Music sales increased 5.3% year over year to ¥230.9 billion due to higher sales of recorded music. The segment’s operating income was ¥52.9 billion, which improved from ¥37.5 billion in the prior-year quarter.

Pictures sales tumbled 26.2% year over year to ¥192.3 billion. This was a result of a significant decrease in theatrical revenues due to theater closings on account of the COVID-19 pandemic, lower advertising revenues for Media Networks, and fall in revenues because of fewer deliveries of TV shows due to production shutdowns. The segment’s operating income was ¥31.8 billion compared with ¥39.3 billion in the prior-year quarter.

Electronics Products & Solutions (EP&S) sales came in at ¥504.7 billion, up 2.3% year over year, driven by an increase in unit sales of televisions. The segment’s operating income was ¥54 billion compared with ¥41.4 billion in the year-ago quarter, thanks to reductions in operating costs.

Imaging & Sensing Solutions (I&SS) sales were down 1.2% year over year to ¥307.1 billion due to decrease in sales of image sensors for digital cameras. The segment’s operating income was ¥49.8 billion compared with ¥76.4 billion in the prior-year quarter. This was due to inventory write-downs of certain image sensors for mobile products, an increase in R&D expenses, and depreciation and amortization charges.

Financial Services sales slipped 0.9% year over year to ¥373.9 billion due to a decrease in premiums from single premium insurance. The segment’s operating income was ¥43.7 billion compared with ¥38.8 billion in the year-ago quarter.

All Other sales were down 28.6% year over year to ¥49.2 billion. Operating income was ¥3.2 billion compared with ¥2.4 billion in the prior-year quarter.

Other Details

Total expenses were ¥1,798.1 billion, down 2.6% year over year, mainly due to lower SG&A expenses. Overall, operating income was ¥317.8 billion, up 13.9%. This was driven by increases in G&NS, Music and EP&S segments’ operating income.

Cash Flow & Liquidity

In the first six months of fiscal 2020, Sony generated ¥633.5 billion of net cash from operating activities compared with ¥410.5 billion in the prior fiscal period.

As of Sep 30, the Japan-based company had ¥1,884.4 billion ($17,847.2 million) in cash and cash equivalents with ¥745.6 billion ($7,061.6 million) of long-term debt.

FY20 Outlook Raised

Sony has revised its forecast for consolidated results for the fiscal year ending Mar 31, 2021. It now expects operating revenues of ¥8,500 billion, up from the earlier forecasted figure (announced on Aug 4, 2020) of ¥8,300 billion. This is due to higher-than-expected sales in the G&NS, Music and Financial Services segments.

Operating income is estimated to be ¥700 billion, up from the previous expectation of ¥620 billion. This is due to expected increases in operating income in all segments except for the I&SS segment.

Net income is projected to be ¥800 billion, up from the previous expectation of ¥510 billion. This is largely due to the reversal of valuation allowances recorded against a significant portion of the deferred tax assets of Sony and its national tax filing group in Japan.

Zacks Rank & Stocks to Consider

Sony has a Zacks Rank #4 (Sell), at present.

Some better-ranked stocks in the broader sector are Viasat VSAT, Viavi Solutions VIAV and Harmonic HLIT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Viasat delivered a trailing four-quarter positive earnings surprise of 361.3%, on average.

Viavi delivered a trailing four-quarter positive earnings surprise of 17.5%, on average.

Harmonic delivered a trailing four-quarter positive earnings surprise of 41%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

Conversion rate used:

¥1 = $0.009416 (period average from Jul 1, 2020 to Sep 30, 2020)

¥1 = $0.009471 (as of Sep 30, 2020)

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