Sony Surprise to the Upside
February 4, 2010
Sony (SNE) today posted a much better-than-forecast profit in the October-December quarter and cut its full-year loss outlook, citing stronger sales and benefits of restructuring steps.
The group said net profit rose to 79.2 billion yen ($861 million), up from a profit of 10.4 billion yen in the year-ago period, and more than twice a mean profit estimate of 33.73 billion yen by analysts polled by Thomson Reuters.
The Japanese electronics maker said its October-December revenue rose 3.9 percent to 2.24 trillion yen. Its operating profit was 146.1 billion yen, up from a 17.96 billion yen loss in the year-earlier period.
For the full fiscal year through March, Sony halved its operating loss forecast to 30 billion yen from 60 billion yen. It posted a 227.78 billion yen loss last fiscal year.
Sony also cut its net loss forecast to 70 billion yen from its previous loss estimate of 95 billion yen. It maintained its revenue outlook of 7.3 trillion yen.
With more than half of its revenues from overseas, the results of its yet another restructuring plan is highly dependent on the further Yen appreciation. We continue to believe that given Japan's poor demographic landscape, further strong Yen appreciation against the Dollar is unlikely over the next few years.
Sony's current valuation (P/S 0.48) is currently discounting many of its problems and we believe the shares should continue to recover to sell on a Price to Sales ratio of 1.0.
Sony is no longer held in the model Beacon Master Portfolio, as we took profits after its strong January performance. We will look to re-purchase the shares on an expected market pull back during the summer months.
Source: Ned Davis Research
