Sony Corporation SNE is scheduled to report third-quarter fiscal 2018 financial results before the opening bell on Feb 1. In the last reported quarter, the company delivered a positive earnings surprise of 31.9%.
Let’s find out how things are shaping up prior to the announcement.
Factors at Play
The Japanese electronics giant expects its Game & Network Services segment to have gained from growing game software sales and higher unit sales of PlayStation4 hardware and PlayStationPlus in the fiscal third quarter.
Sony expects its Music segment to benefit from healthy streaming revenues, strong performance of the mobile gaming application Fate/Grand Order and impact from the consolidation of EMI. Notably, in November 2018, Sony Corporation of America — Sony’s wholly owned subsidiary — completed the acquisition of approximately 60% equity interest held by the investor consortium led by Mubadala Investment Company in DH Publishing, L.P., which owned EMI Music Publishing. The transaction almost doubled the number of songs Sony controlled from 2.2 to 4.2 million compositions, making it one of the world’s largest music publishers.
The company expects sales at its Pictures segment to grow on the back of strong theatrical performance of Motion Pictures’ titles released in the current fiscal year. The Imaging Products & Solutions segment is anticipated to report strong sales due to improvement in the product mix of still and video cameras, reflecting the company’s shift to high value-added models. Its Semiconductors segment should benefit from increasing sales of image sensors for mobile products. Furthermore, Sony is ramping up production level of its next-generation 3D camera sensors for 2019 in response to rising interest from several customers, including Apple. However, Sony expects its Mobile Communications segment to generate soft revenues due to decrease in smartphone unit sales mainly in Europe and Japan.
For the fiscal third quarter, the Zacks Consensus Estimate for adjusted earnings per share are pegged at $1.90. The company reported adjusted income of $1.89 per share a year ago.
What Our Model Says
Our proven model does not conclusively show that Sony is likely to beat earnings this quarter as it does not possess one of the two 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: Sony’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at $1.90. 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 Quote
Zacks Rank: Sony currently sports a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s 0.00% Earnings ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) 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:
Archer-Daniels-Midland Company ADM has an Earnings ESP of +2.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Group 1 Automotive, Inc. GPI has an Earnings ESP of +1.32% and a Zacks Rank #1.
Lumentum Holdings Inc. LITE has an Earnings ESP of +1.10% and a Zacks Rank #2.
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