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Sony (SNE) to Report Q1 Earnings: Disappointment in Store?

Zacks Equity Research

Sony Corporation SNE is scheduled to report first-quarter fiscal 2019 results before the opening bell on Jul 30. In the last reported quarter, the company delivered a positive earnings surprise of 226.3%. The company is likely to record relatively higher revenues on a year-over-year basis.

Let’s see how things are shaping up prior to this announcement.

Top-Line Expansion

During the fiscal first quarter, Sony collaborated with Microsoft to explore the utility of Azure cloud computing capabilities to provide immersive gaming experience to end users. The companies will also work on enhancing video game and other content streaming services by enhancing software development. Moreover, the collaboration aims to boost Sony’s image sensors by utilizing Azure’s AI capabilities. Infusing AI into sensors, by adding intelligent capabilities, is expected to drive adoption among enterprise customers. Benefits of such a game-changing partnership are likely to get reflected in the upcoming results.

In the Game & Network Services segment, Sony expects to record flat revenues due to adverse foreign currency translation and lower PS4 hardware unit sales, partially offset by higher game software sales. The Music segment is likely to generate higher sales led by streaming revenues and consolidation of EMI Music Publishing. Solid revenues from television production and motion pictures are likely to propel Picture segment’s top line, while that from Semiconductor is expected to be significantly up buoyed by higher sales from image sensors for mobile products.

During the quarter, Sony acquired network virtualization technology developer Mido Holdings Ltd. The transaction will enable the company to utilize Mido's virtualization technologies with its own image sensor technology, thereby facilitating the configuration of a virtual environment that integrates multiple edge devices equipped with image sensors. This, in turn, will allow the company to provide a new edge computing environment that can be linked with cloud systems.

Sony also inked a strategic partnership with Nevion AS, a leading provider of virtualized media production solutions, to offer advanced, fully-integrated media production solutions. This would increase the efficacy of mutual sharing of technical resource across the network to take the scope of remote production to the next level.

Increased traction from such collaborations and technology buyouts is likely to translate into higher revenues. The Zacks Consensus Estimate for the fiscal first quarter is pegged at $18,205 million, indicating a rise from $17,915 million reported a year ago. The consensus estimate for adjusted earnings per share is pegged at 78 cents. The company reported adjusted earnings of $1.60 per share a year ago.

Earnings Whispers

Our proven model does not show that Sony is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 78 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sony Corporation Price and EPS Surprise

 

Sony Corporation Price and EPS Surprise

Sony Corporation price-eps-surprise | Sony Corporation Quote

Zacks Rank: Sony carries a Zacks Rank #4 (Sell).

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
   
Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ciena Corporation CIEN is set to release quarterly numbers on Aug 29. It has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Verizon Communications, Inc. VZ is scheduled to release results on Aug 1. The company has an Earnings ESP of +0.52% and has a Zacks Rank #3.

The Earnings ESP for Motorola Solutions, Inc. MSI is +1.25% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 1.

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