Sony (SNE) Q2 Earnings Surpass Estimates, Revenues Fall Y/Y

Sony Corporation (NYSE:SNE) reported mixed second-quarter fiscal 2019 financial results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same.

Net Income

For the fiscal second quarter, Sony’s net income increased 8.6% year over year to ¥187.9 billion or ¥148.59 per share ($1,749.3 million or $1.39 per share), primarily due to lower expenses. The bottom line beat the Zacks Consensus Estimate by 31 cents.

Sony Corporation Price, Consensus and EPS Surprise

Revenues

Total quarterly operating revenues were down 2.8% year over year to ¥2,122.3 billion ($19,758.6 million) due to significant decline in Game & Network Services (G&NS) and Electronics Products & Solutions (EP&S) segment sales. The top line lagged the consensus estimate of $20,565 million.

Segment Results

Sales at G&NS declined 17.4% year over year to ¥454.4 billion primarily due to decrease in game software sales and PlayStation 4 hardware sales, as well as impact of foreign exchange rates. The segment’s operating income was ¥65 billion compared with ¥90.6 billion in the prior-year quarter.

Sales at Music improved 7.6% to ¥219.3 billion due to higher sales for Music Publishing resulting from the consolidation of EMI, and higher sales for Recorded Music owing to an increase in streaming revenues. The segment’s operating income was ¥37.5 billion, which increased from ¥31.5 billion in the prior-year quarter.

Sales from Pictures rose 8.2% to ¥260.6 billion due to higher worldwide theatrical revenues in Motion Pictures, benefiting from Spider-Man: Far from Home and Once Upon a Time ... in Hollywood. The segment’s operating income was ¥39.3 billion compared with ¥23.5 billion in the prior-year quarter.

EP&S sales came in at ¥493.5 billion, down 11.2% on a year-over-year basis. This was due to decline in smartphone and television unit sales. The segment’s operating income was ¥41.4 billion compared with ¥16.5 billion in the prior-year quarter.

Sales at Imaging & Sensing Solutions (I&SS) were up 22.1% to ¥310.7 billion due to significant increase in sales of image sensors for mobile products. The segment’s operating income was ¥76.4 billion compared with ¥47.9 billion in the prior-year quarter.

Financial Services sales were up 6.7% to ¥377.2 billion due to increase in revenues at Sony Life. The segment’s operating income was ¥38.8 billion compared with ¥39.2 billion a year ago.

Sales from All Other were down 22.7% to ¥68.9 billion. Operating income was ¥2.4 billion compared with ¥5 billion in the prior-year quarter.

Other Details

Total expenses were ¥1,845.7 billion, down 5.1% year over year, due to lower cost of sales and SG&A expenses. Overall operating income was ¥279 billion, up 16.5%, driven by significant increase in operating income in the I&SS and EP&S segments.

Cash Flow & Liquidity

During the first six months of fiscal 2019, Sony generated ¥410.5 billion of net cash from operating activities compared with ¥410.8 billion in the year-ago period. As of Sep 30, 2019, the electronics and media company had ¥1,252.9 billion ($11,601.9 million) in cash and equivalents with ¥529.6 billion ($4,904.1 million) of long-term debt.

FY19 Outlook

The Japanese firm has provided its consolidated guidance for the fiscal ending Mar 31, 2020. The company expects operating revenues to be ¥8,400 billion (down from the previous guidance of ¥8,600 billion, as a result of weak demand for PlayStation 4 gaming console, televisions and smartphones). Operating income is projected to be ¥840 billion. Income before income taxes is expected to be ¥800 billion. Sony anticipates net income to be ¥540 billion, while operating cash flow (without Financial Services) is projected to be ¥760 billion.

Zacks Rank & Other Stocks to Consider

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

A few other top-ranked stocks in the broader industry are BrightView Holdings, Inc. (NYSE:BV) , Care.com, Inc. (NYSE:CRCM) and Rent-A-Center, Inc. (NASDAQ:RCII) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BrightView Holdings surpassed earnings estimates twice in the trailing four quarters, the average positive surprise being 3.8%.

Care.com surpassed earnings estimates in each of the trailing four quarters, the average surprise being 34.1%.

Rent-A-Center surpassed earnings estimates in each of the trailing four quarters, the average surprise being 49.6%.

Conversion rate used:

¥1 = $0.009310 (period average from Jul 1, 2019 to Sep 30, 2019)

¥1 = $0.009260 (as of Sep 30, 2019)

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