A month has gone by since the last earnings report for Sonos (SONO Quick QuoteSONO - Free Report) . Shares have added about 2.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sonos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sonos Swings to Loss in Q4

Sonos reported a non-GAAP loss of 32 cents per share for fourth-quarter fiscal 2022 against earnings of 8 cents per share in the prior-year quarter. The Zacks Consensus Estimate was pegged at a loss of 43 cents per share.

Quarterly revenues declined 12% (up 6.6% on a constant-currency basis or cc) year over year to $316.3 million, owing to soft demand for its products amid continued supply constraints and unfavorable foreign exchange movements. However, the top line beat the consensus estimate by 4.6%.

The company also announced a new $100 million share repurchase program after completing the existing $150 million share repurchase plan.

Revenue Details

Revenues from Sonos speakers were $235.1 million, up 14.1% from the prior-year quarter’s levels.

Sonos system products’ revenues were $62.8 million, down 7.3%. Revenues from Partner products and other totaled $18.4 million, up 0.8% year over year.

Region-wise, revenues from the Americas came in at $199.7 million, up 2% year over year. Revenues from Europe, the Middle East and Africa were $91.4 million, down 34%. Revenues from the Asia Pacific were down 2% to $25.2 million.

Other Details

Gross profit was $124.1 million, down 25.6% from the prior-year quarter’s levels. Gross margin contracted 720 bps year over year to 39.2%, mainly due to increasing component costs.

Total operating expenses were $184.1 million, up from $178.5 million, reflecting higher research and development, and general and administrative expenses.

Operating loss was $60 million compared with $11.5 million in the year-ago quarter. Adjusted EBITDA loss totaled $25.6 million compared with adjusted EBITDA income of $17.1 million in the prior-year quarter. The downside in adjusted EBITDA was caused by higher operating investments and lower revenue.

Cash Flow & Liquidity

For the fiscal year, Sonos used $28.3 million of cash from operations. Free cash outflow was $74.5 million.

As of Oct 1, 2022, the company had $274.9 million in cash and cash equivalents compared with $640.1 million as of Oct 2, 2021. The company has no debt.

Guidance

Sonos now expects revenues to be down 3% to up 3% year over year and come in the range of $1.7-$1.8 billion. On a constant-currency basis, revenues are expected to increase 1-7%. The gross margin is now projected to be between 45% and 46%.

Adjusted EBITDA is estimated to be between $145 million and $180 million, with the margin ranging from 8.5-10%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -14.74% due to these changes.

VGM Scores

Currently, Sonos has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Sonos has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.