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Sony's (SNE) Performance Impaired by Operational Headwinds
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Sony Corporation has been grappling with numerous headwinds in recent times, and its share price trend reflects the same. Over the past three months, the company’s shares recorded an average return of -16.3%, underperforming the Zacks-categorized Audio Video Home Product industry average of -11.4%.
Further, the company’s earnings estimates have moved south in the past couple of months. Analysts have become increasingly bearish on the stock, as they have revised the Zacks Consensus Estimate for fiscal 2016 earnings downward in the past 60 days, from 80 cents to 62 cents per share, a move of 22.5%.
In the recently reported second-quarter fiscal 2016 results, Sony’s net income plunged 86% year over year to ¥4.8 billion. An appreciating Yen, weakness in games and semiconductors end markets, and costs from the sale of its battery business hurt the company’s results. These factors remain headwinds for the company going forward and could be the reason for the bearishness in analysts’ sentiments as well as the substandard stock price performance.
Also, one of Sony’s strongest performers – its imaging sensor business – took a ¥1.2-billion hit due to damage from the Kumamoto earthquakes. In addition, a general contraction of this market and foreign currency headwinds compounded problems.
In fact, the present market scenario has led Sony to revise the fiscal 2016 forecast for consolidated operating income downward by ¥30 billion compared with the July forecast. A write-down of about ¥33 billion, triggered by the transfer of Sony's battery business to Murata Manufacturing, contributed largely to the downcast operating income view. Moreover, a loss of approximately ¥37.5 billion is expected to be recorded in the company’s net income.
We believe that Sony’s business remains deeply vulnerable to tepid smartphone demand, some weak end markets and currency fluctuations (particularly a strengthening Yen). In fact, the company estimates that the appreciation of Yen will have about ¥63 billion negative impact on operating income this fiscal year.
This apart, the effect of the Kumamoto earthquakes will likely continue to cast a dampener on the company’s operations. Further, the recent shift of the battery business may constrain the company’s margins in the near term.
Despite such overwhelming headwinds, Sony has been leveraging on the strength of its flagship gaming product, PlayStation. Sales of the latest PS4 hardware and software have surpassed those of all the previous versions, bolstering Sony’s revenues to a great extent.
Additionally, Sony has the launch of the PlayStation’s VR headset coming up, along with an interesting lineup of PS4 games. Also, diligent efforts to improve its internal administration and uptick of sales in Mobile Communications, Home Entertainment & Sound and Imaging Products & Solutions segments signal brighter days ahead for Sony.
Whether these driving factors will be enough to counter the numerous problems, that plague Sony, remains to be seen. Currently, this Japanese conglomerate carries a Zacks Rank #3 (Hold).
Headquartered in Minneapolis, MN, Capella Education, through its wholly owned subsidiaries, provides online post-secondary education services in the U.S, focused primarily on working adults. The company has an excellent earnings surprise history as it beat estimates in all of the trailing four quarters. It boasts an average positive surprise of 10.9%.
Perry Ellis International operates as a mountain resort and adventure company which delivers vacation and travel experiences to its customers. The company has registered three solid earnings beats for the trailing four quarters.
Ralph Lauren designs, markets and distributes lifestyle products worldwide. They offer two primary collections, namely luxury collection and accessible luxury collection. The company has strongly surpassed estimates each time in the trailing four quarters, with an average beat of 11.1%.
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Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
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Sony's (SNE) Performance Impaired by Operational Headwinds
Sony Corporation has been grappling with numerous headwinds in recent times, and its share price trend reflects the same. Over the past three months, the company’s shares recorded an average return of -16.3%, underperforming the Zacks-categorized Audio Video Home Product industry average of -11.4%.
Further, the company’s earnings estimates have moved south in the past couple of months. Analysts have become increasingly bearish on the stock, as they have revised the Zacks Consensus Estimate for fiscal 2016 earnings downward in the past 60 days, from 80 cents to 62 cents per share, a move of 22.5%.
In the recently reported second-quarter fiscal 2016 results, Sony’s net income plunged 86% year over year to ¥4.8 billion. An appreciating Yen, weakness in games and semiconductors end markets, and costs from the sale of its battery business hurt the company’s results. These factors remain headwinds for the company going forward and could be the reason for the bearishness in analysts’ sentiments as well as the substandard stock price performance.
Also, one of Sony’s strongest performers – its imaging sensor business – took a ¥1.2-billion hit due to damage from the Kumamoto earthquakes. In addition, a general contraction of this market and foreign currency headwinds compounded problems.
In fact, the present market scenario has led Sony to revise the fiscal 2016 forecast for consolidated operating income downward by ¥30 billion compared with the July forecast. A write-down of about ¥33 billion, triggered by the transfer of Sony's battery business to Murata Manufacturing, contributed largely to the downcast operating income view. Moreover, a loss of approximately ¥37.5 billion is expected to be recorded in the company’s net income.
We believe that Sony’s business remains deeply vulnerable to tepid smartphone demand, some weak end markets and currency fluctuations (particularly a strengthening Yen). In fact, the company estimates that the appreciation of Yen will have about ¥63 billion negative impact on operating income this fiscal year.
This apart, the effect of the Kumamoto earthquakes will likely continue to cast a dampener on the company’s operations. Further, the recent shift of the battery business may constrain the company’s margins in the near term.
Despite such overwhelming headwinds, Sony has been leveraging on the strength of its flagship gaming product, PlayStation. Sales of the latest PS4 hardware and software have surpassed those of all the previous versions, bolstering Sony’s revenues to a great extent.
Additionally, Sony has the launch of the PlayStation’s VR headset coming up, along with an interesting lineup of PS4 games. Also, diligent efforts to improve its internal administration and uptick of sales in Mobile Communications, Home Entertainment & Sound and Imaging Products & Solutions segments signal brighter days ahead for Sony.
Whether these driving factors will be enough to counter the numerous problems, that plague Sony, remains to be seen. Currently, this Japanese conglomerate carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the broader sector include Capella Education Co. , Perry Ellis International, Inc. and Ralph Lauren Corporation (RL - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Minneapolis, MN, Capella Education, through its wholly owned subsidiaries, provides online post-secondary education services in the U.S, focused primarily on working adults. The company has an excellent earnings surprise history as it beat estimates in all of the trailing four quarters. It boasts an average positive surprise of 10.9%.
Perry Ellis International operates as a mountain resort and adventure company which delivers vacation and travel experiences to its customers. The company has registered three solid earnings beats for the trailing four quarters.
Ralph Lauren designs, markets and distributes lifestyle products worldwide. They offer two primary collections, namely luxury collection and accessible luxury collection. The company has strongly surpassed estimates each time in the trailing four quarters, with an average beat of 11.1%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>