Why Sony (SNE) Is Falling Today

NEW YORK (TheStreet) -- Sony (SNE) was falling -0.6% to $16.40 Thursday after forecasting another year of losses.

The Japanese electronic company said it expects another annual loss for the fiscal year ending March 2015. Sony expects a loss of -50 billion yen (about $489 million) for the fiscal year, smaller than the -128 billion yen loss is posted for the year ending Marc 2014.

Sony said it will spend 135 billion yen (about $1.32 billion) on restructuring in the next year on top of the 177.4 billion yen spent on restructuring in the previous fiscal year. The company announced in February that it would cut 5,000 jobs, sell the Vaio PC line, and split-off its TV unit.

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TheStreet Ratings team rates SONY CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SONY CORP (SNE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 468.6% when compared to the same quarter one year prior, rising from -$72.42 million to $266.97 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.0%. Since the same quarter one year prior, revenues rose by 11.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SNE's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for SONY CORP is currently extremely low, coming in at 7.87%. Regardless of SNE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.29% trails the industry average.
  • In its most recent trading session, SNE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • You can view the full analysis from the report here: SNE Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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