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Bull of the Day: Sony (SNE)

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Sony Corporation (SNE - Free Report) is on sale as investors rushed to sell the big technology and gaming companies to end 2018.  However, this Zacks Rank #1 (Strong Buy) isn't struggling. It's expected to grow earnings by 38% in fiscal 2019.

Sony is a global technology, entertainment and gaming company headquartered in Japan. It's most famous for its Sony Walkman but more recently, it's the PlayStation that gets the most love.

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%.

Sony has a solid track record of beating. This was the 6th consecutive earnings beat.

Total revenue grew 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.

Additionally, third quarter will see the results of the surprise global hit "Venom."

Music revenue also declined 1% year-over-year but the company closed on its deal to purchase the rest of EMI Publishing on Nov 15, which was in the third quarter.

The $2.4 billion purchase will make it among the 3 largest music publishers in the world.

In an increasingly content-dependent global economy, this should position Sony well for the coming years.

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

It's mobile division, which is the smartphone, was a disaster however. It continues to take losses against competitors like Apple (AAPL - Free Report) as sales fell 32%. How much longer will it stay in this business?

Full Year Guidance Raised

Sony is usually conservative with guidance so it's not a surprise that the company raised full year operating income guidance to 870b yen from 670b yen.

Zacks only has 2 full year estimates as not many analysts cover Sony, despite its size and reputation, because coverage of foreign companies is sparse.

The Zacks Consensus Estimate for fiscal 2019 is now $4.54 up from $4.17 just 3 months ago. That's earnings growth of 38% as the company earned $3.29 in fiscal 2018.

Analysts expect earnings to grow just 2.1% in fiscal 2020, however.

The Zacks Consensus of $4.63 has been stuck at that number for the last 60 days. However, Sony hasn't yet provided any guidance on fiscal 2020 so the 2 covering analysts appear to be on the sidelines, for now.

Shares are on Sale

Sony shares were having a nice 2018 until the November and December stock market sell-off.



Shares fell 20% in the last 3 months of the year, including an 11% plunge in December.

They're cheaper than ever with a forward P/E of just 10.6.

They also have other classic value fundamentals including a P/B ratio of just 1.7 and a P/S ratio of only 0.8.

Shareholders get a dividend, but it's just yielding 0.4%.

For investors looking for a blue chip technology and media company that is a hidden gem, Sony is one to keep on the short list.

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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