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Sony (SNE): What's in Store for the Stock in Q1 Earnings?
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Sony Corporation is set to report first-quarter fiscal 2016 results on Jul 29.
Last quarter, the company posted a negative surprise of 6.9%. Lackluster sales across five of Sony’s eight segments proved to be a drag on the bottom line.
Let's see how things are shaping up for this announcement.
Key Factors Influencing Q1
Sony’s Game & Network Services business, which accounts for service-related revenues, is likely to remain the fundamental growth driver in the quarter to be reported. Especially, the company’s flagship product PlayStation 4’s (“PS4”) hardware and software sales have been phenomenal over the past few quarters, offsetting much of the sales decline in the other segments.
As per the company’s mid-term business plan, console sales, subscriber addition to PlayStation network and virtual reality headset prospects are likely to boost growth. The company forecasted games and network services business profit increase of 52% to ¥135 billion this fiscal. In order to capitalize on the PS4 prospects, Sony has launched a series of products that have already attracted a lot of attention.
During the first quarter of 2016, Sony’s gaming division, Sony Interactive Entertainment America LLC (“SIEA”), unveiled an attractive line-up for PS4 including Days Gone, Spider-Man, LEGO Star Wars: The Force Awakens, God of War, Death Stranding, Final Fantasy XV, Resident Evil 7 biohazard at the Electronic Entertainment Expo (“E3”) video game conference. Sony is largely banking on its PS4 customer base of 40 million for increased traction of the new games.
In addition to the thriving gaming business, Sony has been restructuring its administrative setup to attain a leaner organization. During the fourth quarter of 2015, the company implemented a host of restructuring measures and was able to bring down operating expenses by approximately ¥80 billion in fiscal 2015 from fiscal 2014. We believe that the restructuring actions since Apr 1, 2016, for positioning certain operations under the IP&S and Devices segments will fuel growth in first-quarter 2016. This apart, the anticipated rebound in the Pictures business is expected to be a profit churner.
Despite these positives, Sony’s downcast outlook since the release of the company’s fourth-quarter fiscal 2015 results signals at potential headwinds that can mar growth significantly. Sony expects tepid sales at the Imaging Products & Solutions and Devices, Mobile Communications, Home Entertainment & Sound and Music segments to offset the robust performance of G&NS, Pictures and Financial Services.
The Kumamoto earthquakes have marred the prospects of IP&S and Devices. Also, declining image-sensor sales is one of the biggest challenges for the company. Also, intense rivalry in television and games along with higher impairment charges in both camera module and battery businesses are expected to weigh on first-quarter 2016 results. In addition, foreign currency fluctuations have proved to be a major drag on Sony’s Mobile Communications, Imaging Products and Solutions, Home Entertainment & Sound, and Devices businesses in the last quarter. Meanwhile, music sales are expected to decline substantially due to currency fluctuations, thereby compounding the challenges for the company.
Our proven model does not conclusively show that Sony will beat earnings in its fiscal first quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 28 cents.
Zacks Rank: Though Sony has a Zacks Rank #3, its 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Spectra Energy Corp. (SE - Free Report) has an earnings ESP of +12.00% and a Zacks Rank #1. The company is slated to release earnings on Aug 3.
FMC Corp. (FMC - Free Report) , with an Earnings ESP of +4.48% and a Zacks Rank #2. The company is slated to release earnings on Aug 3.
CBS Corp has an earnings ESP of +1.16% and a Zacks Rank #2. The company is expected to release results on Jul 28.
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Sony (SNE): What's in Store for the Stock in Q1 Earnings?
Sony Corporation is set to report first-quarter fiscal 2016 results on Jul 29.
Last quarter, the company posted a negative surprise of 6.9%. Lackluster sales across five of Sony’s eight segments proved to be a drag on the bottom line.
Let's see how things are shaping up for this announcement.
Key Factors Influencing Q1
Sony’s Game & Network Services business, which accounts for service-related revenues, is likely to remain the fundamental growth driver in the quarter to be reported. Especially, the company’s flagship product PlayStation 4’s (“PS4”) hardware and software sales have been phenomenal over the past few quarters, offsetting much of the sales decline in the other segments.
As per the company’s mid-term business plan, console sales, subscriber addition to PlayStation network and virtual reality headset prospects are likely to boost growth. The company forecasted games and network services business profit increase of 52% to ¥135 billion this fiscal. In order to capitalize on the PS4 prospects, Sony has launched a series of products that have already attracted a lot of attention.
During the first quarter of 2016, Sony’s gaming division, Sony Interactive Entertainment America LLC (“SIEA”), unveiled an attractive line-up for PS4 including Days Gone, Spider-Man, LEGO Star Wars: The Force Awakens, God of War, Death Stranding, Final Fantasy XV, Resident Evil 7 biohazard at the Electronic Entertainment Expo (“E3”) video game conference. Sony is largely banking on its PS4 customer base of 40 million for increased traction of the new games.
In addition to the thriving gaming business, Sony has been restructuring its administrative setup to attain a leaner organization. During the fourth quarter of 2015, the company implemented a host of restructuring measures and was able to bring down operating expenses by approximately ¥80 billion in fiscal 2015 from fiscal 2014. We believe that the restructuring actions since Apr 1, 2016, for positioning certain operations under the IP&S and Devices segments will fuel growth in first-quarter 2016. This apart, the anticipated rebound in the Pictures business is expected to be a profit churner.
Despite these positives, Sony’s downcast outlook since the release of the company’s fourth-quarter fiscal 2015 results signals at potential headwinds that can mar growth significantly. Sony expects tepid sales at the Imaging Products & Solutions and Devices, Mobile Communications, Home Entertainment & Sound and Music segments to offset the robust performance of G&NS, Pictures and Financial Services.
The Kumamoto earthquakes have marred the prospects of IP&S and Devices. Also, declining image-sensor sales is one of the biggest challenges for the company. Also, intense rivalry in television and games along with higher impairment charges in both camera module and battery businesses are expected to weigh on first-quarter 2016 results. In addition, foreign currency fluctuations have proved to be a major drag on Sony’s Mobile Communications, Imaging Products and Solutions, Home Entertainment & Sound, and Devices businesses in the last quarter. Meanwhile, music sales are expected to decline substantially due to currency fluctuations, thereby compounding the challenges for the company.
SONY CORP ADR Price and EPS Surprise
SONY CORP ADR Price and EPS Surprise | SONY CORP ADR Quote
Earnings Whispers
Our proven model does not conclusively show that Sony will beat earnings in its fiscal first quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 28 cents.
Zacks Rank: Though Sony has a Zacks Rank #3, its 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Spectra Energy Corp. (SE - Free Report) has an earnings ESP of +12.00% and a Zacks Rank #1. The company is slated to release earnings on Aug 3.
FMC Corp. (FMC - Free Report) , with an Earnings ESP of +4.48% and a Zacks Rank #2. The company is slated to release earnings on Aug 3.
CBS Corp has an earnings ESP of +1.16% and a Zacks Rank #2. The company is expected to release results on Jul 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>