Sony shares jumped the most in almost three months after the company’s better-than-projected preliminary earnings boosted analyst confidence in its ability to hit the highest profit levels in almost two decades.
The Tokyo-based company rose as much as 4,6% in early Tokyo trading, headed for its biggest jump since 3 February.
Sony reported preliminary operating profit of ¥285bn (US$2,6bn) for the fiscal year to March 2017, 19% higher than its previous forecast, according to a statement on Friday after the close. It also said net income would be about ¥73bn, more than twice the previous forecast.
That triggered JPMorgan Chase & Co to upgrade its rating on the stock to overweight from neutral, while analysts from Goldman Sachs to Credit Suisse reiterated bullish outlooks. They say that the previous fiscal year’s firm results indicate Sony can achieve operating profit of ¥500bn, which would be the highest level since 1998.
“In fundamental terms, the fact that earnings have become more resilient to swings in the macroeconomic environment (excluding one-off factors such as earthquakes) is a result of improvement in business management capabilities,” Kenichi Saita, an analyst at Mizuho Securities, wrote in a report to clients.
The positive results for the previous period mark the second straight year operating profit has topped $2bn, the longest such streak since 2001. The company cited strong performance across most businesses and cost savings in its insurance unit. Its chips division also saw lower expenses after a faster-than-expected recovery from last year’s earthquake in western Japan.
“This will strengthen the market’s confidence going into the next fiscal year,” said Kazunori Ito, an analyst at Morningstar Investment Services. “Despite the strengthening yen, the fact that chips were mentioned in this release means they probably contributed quite a lot to this upward revision.”
Analysts now turn their attention to 28 April, when Sony is expected to announce its forecast for the 12-month period that began this month.
Goldman’s Masaru Sugiyama said the company is likely to announce operating profit target of at least ¥500bn. The 1998 profit was driven by the original PlayStation console, which solidified Sony as a home gaming force with hits like Metal Gear Solid and Parasite Eve, and its movie division, which churned out blockbusters like Men in Black. — (c) 2017 Bloomberg LP
