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Bull of the Day: Sony (SNE)

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Sony Corporation (SNE - Free Report) is crushing it as its Playstation division cashes in on the gaming craze. This Zacks Rank #1 (Strong Buy) recently raised full year guidance.

Sony is a global technology, entertainment and gaming company headquartered in Japan.

Big Beat in Fiscal Q2

On Oct 30, Sony reported its fiscal second quarter 2019 results and blew by the Zacks consensus by $0.29. Earnings were $1.20 versus the consensus of $0.91. for a beat of 31%.

It was the 6th consecutive earnings beat.

Total revenue was up 6% to $19.6 billion.

The Gaming division led the results, with gaming revenue, fueled by Playstation, jumping 27% year-over-year to $5 billion. On those sales it made $803 million in profit.

75.1 million games were purchased. Playstation Plus, its subscription gaming service, also had record subscribers for a second quarter at 34.3 million, up from 33.9 million a year ago.

The Pictures segment has also recovered thanks to Hotel Transylvania 3 and the television licensing rights to Jumanji and Peter Rabbit. Pictures revenue actually fell 1% in the quarter, but at least it wasn't the drag it used to be.

Music revenue also declined 1% year-over-year but the company hasn't yet closed on its deal to purchase the rest of EMI Publishing, which will make it one of the biggest music publishers in the world.

Surprising areas of growth included its smaller Semiconductor segment, which saw revenue jump 11%, and the Financial Services segment which saw revenue climb 27% thanks to gains in Sony Life Insurance.

It's mobile division, which is the smartphones, was a disaster however. It continues to take losses there as sales fell 32%. This was offset by the phenomenal gaming revenue, but it's not something that's a positive for the company right now.

Estimates Moving Higher

Zacks only has 2 full year estimates as not many analysts cover Sony, despite its size and reputation.

1 has already been raised since the earnings report, however, as the company raised full year operating income guidance to 870b yen from 670b yen.

However, the analysts believed that the prior guidance was really conservative, so the increase didn't come as any surprise. Through the first half of the fiscal year, the company has already made 451b yen and the second half of the year, thanks to the holidays, is always bigger.

The Zacks Consensus Estimate for fiscal 2019 is now $4.18 up from $4.11 just 3 months ago. That's earnings growth of 27% as the company earned $3.29 in fiscal 2018.

Analysts expect earnings to grow another 10.7% in fiscal 2020 as well. The Zacks Consensus Estimate has jumped to $4.63 from $4.36 in the prior 90 days.

Shares Are Cheap

Shares jumped on the earnings report and are still up 21.5% year-to-date.

However, they're still cheap, with a forward P/E of just 12.9.

Shareholders also get a small dividend, currently yielding 0.5%.

But for investors looking for a bargain amongst the big entertainment and gaming companies, Sony is one to keep on your short list.

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