Sony Corp (SNE), the world's No.4 LCD TV maker and a major display panel supplier, is scheduled to report its fiscal second quarter 2009 financial results on Friday, October 30, 2009. In the last two quarters, the company's actual earnings exceeded the market's consensus significantly. However, the company reported earnings losses in the first two quarters of 2009. I see no reason why the pattern should break in the September quarter.
Analysts' estimates for the quarter ending September 2009 (Q2) range from a low of $-0.43 to a high of $-0.26, with a consensus of $-0.37. For the fiscal quarter ending September 2009, the consensus EPS forecast has remained the same over the past week at $-0.370 and increased over the past month from $-0.410 to $-0.370 (9.76%). Of the 3 analysts making quarterly forecasts, 1 raised and none lowered their forecast.
The upward revision over the past month in earnings is attributable to gaining on Nintendo in games and brisk demand for LCD panels. Last month Sony launched a lower-priced PlayStation 3 to better compete with Nintendo Co Ltd's Wii and Microsoft Corp's Xbox 360, likely resulting in appraisal losses on its hardware inventory. But, on a brighter note, the price cut helped the PS3 become the top-selling game console for the first time in the United States in September.
However, the company is set to post a fourth straight quarter of losses due to weakness in its cellphone and video game operations. Sony's losses are likely to have expanded from the previous quarter due to appraisal losses on game console inventory. However, the company could surprise investors by reporting lower losses as it could have cut losses at its flat TV business by focusing on profitability rather than sales growth - a shift that may cap long-term growth potential.
Going forward, PlayStation 3 is expected to get a further boost in December when Square Enix Holdings Co launches the latest version of its blockbuster "Final Fantasy" role-playing game series. On a negative note, Sony is recalling about 69,000 VAIO computer AC adapters due to concerns that insulation inside the adapter may fail and pose an electrical shock hazard to consumers.
For the fiscal year ending March 2010, the consensus EPS forecast has increased over the past week from $-0.937 to $-0.933 (0.43%) and decreased over the past month from $-0.930 to $-0.933 (-0.32%). Of the 3 analysts making yearly forecasts, 2 raised and none lowered their forecast. The company's stock closed Wednesday at $28.63, compared to the 52 week range of $15.64 and $30.15. The stock seems to be trading at appropriate levels.
