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SONY Surpasses Q2 Earnings Estimates, Raises FY21 Outlook

Sony Group Corporation SONY reported mixed second-quarter fiscal 2021 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same.

Net Income

On a GAAP basis, net income in the quarter decreased 53.5% year over year to ¥213.1 billion ($1,935.6 million) or ¥170.26 ($1.55) per share. The decline was mainly due to higher financial expenses and income tax. The bottom line beat the Zacks Consensus Estimate by 7 cents.

Adjusted net income came in at ¥209.2 billion compared with ¥254.4 billion in the prior-year quarter.

Sony Corporation Price, Consensus and EPS Surprise Sony Corporation Price, Consensus and EPS Surprise

Sony Corporation price-consensus-eps-surprise-chart | Sony Corporation Quote

Revenues

Quarterly total revenues increased 12.6% year over year to ¥2,369.4 billion ($21,523 million). The rise was driven by an increase in Game & Network Services (G&NS), Pictures, Music, and Electronics Products & Solutions (EP&S) segments sales. The top line, however, missed the consensus estimate of $21,958 million.

Segment Results

G&NS sales grew 27.4% year over year to ¥645.4 billion, driven by a rise in sales of hardware, a positive impact of foreign exchange rates, and an increase in sales of non-first-party titles including add-on content. The segment’s operating income was ¥82.7 billion compared with ¥105.4 billion in the prior-year quarter.

Music sales increased 17.6% year over year to ¥271.6 billion, driven by higher sales of recorded music and music publishing, an increase in revenues from paid subscription streaming services, and a rise in revenues from advertising-supported streaming services, which were affected by the pandemic in second-quarter fiscal 2020. Operating income was ¥50.6 billion, which declined from ¥54.3 billion in the prior-year quarter.

Pictures sales increased 39.8% year over year to ¥260.7 billion. This was driven by higher sales of television productions, media networks, and motion pictures. Operating income was ¥31.6 billion compared with ¥32.8 billion a year ago.

EP&S sales came in at ¥581.9 billion, up 9.1% year over year, driven by an increase in sales of smartphones and a positive impact of foreign exchange rates. Operating income was ¥72.7 billion compared with ¥53.4 billion in the year-ago quarter.

Imaging & Sensing Solutions sales were down 9.4% year over year to ¥278.3 billion due to a decrease in sales of image sensors for mobile products. Operating income was ¥49.7 billion compared with ¥50.8 billion in the prior-year quarter.

Financial Services sales were almost flat year over year at ¥368.4 billion, which reflects an increase in insurance premium revenues and a decrease in gains on investments. Operating income was ¥43.1 billion compared with ¥37 billion in the year-ago quarter.

All Other sales were up 7% to ¥24.5 billion. Operating income was ¥8.6 billion compared with ¥1.5 billion a year ago.

Other Details

Total expenses were ¥2,059.3 billion, up 14.9% year over year. Operating income was ¥318.5 billion, up 1%.

Cash Flow & Liquidity

During the first six months of fiscal 2021, Sony generated ¥317 billion of cash from operating activities compared with ¥600.9 billion in the prior-year period.

As of Sep 30, 2021, the company had ¥1,473.8 billion ($13,192 million) in cash and cash equivalents with ¥995.8 billion ($8,913.4 million) of long-term debt.

FY21 Outlook Raised

Sony has provided the outlook for the fiscal year ending Mar 31, 2022. It now expects sales of ¥9,900 billion, increasing from the August forecast of ¥9,700 billion. Operating income is projected to be ¥1,040 billion, increasing from ¥980 billion. Net income is estimated to be ¥730 billion, up from ¥700 billion.

Zacks Rank & Stocks to Consider

Sony currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader sector are Ooma, Inc. OOMA, Ubiquiti, Inc. UI, and SeaChange International, Inc. SEAC. While Ooma sports a Zacks Rank #1 (Strong Buy), Ubiquiti and SeaChange carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ooma delivered a trailing four-quarter earnings surprise of 55.2%, on average.

Ubiquiti pulled off a trailing four-quarter earnings surprise of 20.5%, on average.

SeaChange delivered a trailing four-quarter earnings surprise of 28.9%, on average.

Conversion rate used:

¥1 = $0.009083 (period average from Jul 1, 2021 to Sep 30, 2021)

¥1 = $0.008951 (as of Sep 30, 2021)


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