Sony (SNE) Stock Declines on $3.6 Billion Stock, Bond Offering

NEW YORK (TheStreet) -- Sony (SNE) shares closed trading down 6.44% to $28.41 on Tuesday following its announcement that it was raising $3.6 billion by issuing new shares and bonds.

The company will offer 92 million shares of common stock to raise $2.6 billion in an offering scheduled for August 17.

Additionally, the Japanese company will offer about $1 billion in 30 percent callable unsecured convertible bonds in Japan.

"The purpose of this fund raising is to secure funds to invest in growth and to strengthen Sony Corporation's financial base," the company said in a statement today.

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 solid stock price performance, impressive record of earnings per share growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

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

  • Powered by its strong earnings growth of 41.08% and other important driving factors, this stock has surged by 84.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • SONY CORP has improved earnings per share by 41.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SONY CORP continued to lose money by earning -$0.97 versus -$1.22 in the prior year. This year, the market expects an improvement in earnings ($1.49 versus -$0.97).
  • The current debt-to-equity ratio, 0.40, 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 0.64, displays a potential problem in covering short-term cash needs.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Household Durables industry average, but is greater than that of the S&P 500. The net income increased by 33.6% when compared to the same quarter one year prior, rising from -$1,340.40 million to -$890.07 million.
  • Net operating cash flow has decreased to $3,095.67 million or 24.32% when compared to the same quarter last year. Despite a decrease in cash flow SONY CORP is still fairing well by exceeding its industry average cash flow growth rate of -40.74%.
  • You can view the full analysis from the report here: SNE Ratings Report

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