Sony (SNE) Disappoints With Loss In Q4, Sales Grow Y/Y

Sony Corporation (NYSE:SNE) incurred fourth-quarter fiscal 2017 loss per share of ¥13.3 (12 cents) compared to the year-ago quarter figure of an earnings of ¥21.45.

For fiscal 2017, the company’s earnings per share came in at ¥379.75 ($3.42) compared with ¥56.89 in the year ago.

Inside the Headlines

Sony’s sales and operating revenues were up 2.5% year over year to ¥1,951 billion ($18 billion). Robust performance by the Game and Network Services (G&NS) as well as the Music and Home Entertainment & Sound (HE&S) segments spurred top-line growth.

Also, operating income came in at ¥22.2 million ($205 million), down by 76.4% from the year-ago quarter. Decline in the operating income at the Mobile Communications, the Semiconductors and the Financial Services segments compared unfavourably with the year-over-year tally.

Semiconductor sales in the fourth quarter decreased 17.2% year over year to ¥166.5 billion ($1.5 billion). Significant decline in sales of camera modules had a negative impact on sales of this segment.

Financial Services revenues inched down 0.9%, year over year, to ¥272.7 billion ($2.5 billion). Decrease in gains on sale of assets was a drag on this segment’s sales.

Additionally, sales at the Imaging Products & Solutions (IP&S) segment were up 4.8% year over year to ¥162.4 billion ($1.5 billion). Improvement in product mix reflecting a shift to high value-added models and favorable foreign currency movements acted as a catalyst for the IP&S segment.

Sales at the Music segment rose 16.6% to ¥206.4 billion ($1.9 billion) on a year-over-year basis during the quarter. The segment benefited from growth in Visual Media and Platform sales driven by continued strong performance “Fate/Grand Order” application. Moreover, Recorded Music sales were up supported by a continued rise in digital streaming revenues.

The Home Entertainment & Sound (HE&S) segment’s sales came in at ¥235.1 billion ($2.2 billion), up 9.5% on a year-over-year basis. The top-line rise was driven by improvement in product mix of televisions, reflecting a shift to high value-added models as well as favorable foreign currency movements.

Sales from the Pictures segment decreased 0.5% year over year to ¥300.9 billion ($2.7 billion). The decline in sales was primarily attributable to lower television licensing revenues for catalog product sales, partially offset by higher sales in Media Networks and Motion Pictures.

Sales at the Game & Network Services segment were up 16.4% year over year to ¥444.6 billion ($4.1 billion). Increase in the PS4 software sales (including sales through the network) proved conducive to the segment.

Mobile Communications(MC) sales declined 1.9% year on year to ¥153 billion ($1.4 billion) due to fall in unit sales of smartphones.

Sales at All Other segments were down 34.4% to ¥76.5 billion ($0.7 billion).

Liquidity & Cash Flow

As of Mar 31, 2018, Sony’s cash and cash equivalents were ¥1,586.3 billion ($14,633 million) compared with ¥960.1 billion at the end of Mar 31, 2017.

Long-term debt totalled ¥623.4 billion ($5,751 million) compared with ¥681.4 million as of Mar 31, 2017.

Guidance

Concurrent with the fiscal fourth-quarter results, Sony released the guidance for fiscal 2018. Currently, the company expects total sales to be around ¥8,300. It believes that impressive sales at the Semiconductors, the Financial Services and the Music segments should fuel top-line growth.

Also, the company expects operating income to be around ¥670 billion. Improvement in the metric are expected to be driven by robust operating results in the G&NS and HE&S segments.

Our Take

Over the past few quarters, solid sales of Sony’s flagship gaming product — PlayStation — continued boosting the top line. Also, the spectacular performance of the company’s Semiconductor and IP&S businesses are proving to be a solid profit churner. Going ahead, a number of measures, including cost-reduction initiatives, lower exposure in low-profit geographic regions and reduction in advertising & promotion expenses, are expected to benefit the company.

This apart, the company’s diligent restructuring efforts to streamline business structure have provided a boost to operating performance, thus stoking margins. Furthermore, Sony’s bolt-on acquisitions and strategic investments should help it expand customer base and market share of the company.

Sony currently sports a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Some other top-ranked stocks in the same space include AMC Networks Inc. (NASDAQ:AMCX) , Amaya Inc. (NASDAQ:TSG) and Cable One, Inc. (NYSE:CABO) . While AMC Networks has a Zacks Rank #1, Amaya and Cable One carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMC Networks has an excellent earnings surprise history, surpassing estimates in the trailing four quarters, with an average beat of 24.3%.

Amaya has a modest earnings surprise history, exceeding estimates thrice in the trailing four quarters, with an average beat of 12.6%.

Cable One has posted earning beats twice in the trailing four quarters. It boasts an average beat of 2.7%.

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