Photographer: Chris Ratcliffe/Bloomberg

Sony Surges as Analysts Say Profit May Reach Highest Since 1998

  • Operating profit tops $2 billion for second year in a row
  • Analysts expect $4.5 billion profit target, highest since 1998

Sony Corp. 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 percent in early Tokyo trading, headed for its biggest jump since Feb. 3. Sony reported preliminary operating profit of 285 billion yen ($2.6 billion) for the fiscal year through March 2017, 19 percent higher than its previous forecast, according to a statement Friday after the close. It also said net income would be about 73 billion yen, 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 Group Inc. to Credit Suisse Group AG reiterated bullish outlooks. They say that the previous fiscal year’s firm results indicate Sony can achieve operating profit of 500 billion yen, 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 Co., wrote in a report to clients.

The positive results for the previous period mark the second straight year operating profit has topped $2 billion, 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 April 28, 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 500 billion yen. 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."

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