Japanese entertainment giant Sony cut its full-year profit outlook on Friday.
What does this mean?
First, the good news: Sony’s operating profit grew by a better-than-expected 10% last quarter from the same time last year. That was partly thanks to strong results from its movie and music segments, and partly down to a weak yen that meant international profits were worth more when converted back. But Sony’s gaming business was a shambles: the company sold 26% fewer games, and barely sold any more PS5s because it’s still not producing enough of them. No surprise, then, that the segment’s profit was down 37% from the same time last year. Sony slashed its annual profit outlook for the segment by 16% too, potentially because it doesn’t have enough high-profile titles in the works or because – new – gamers are spending more time outdoors. And since its gaming segment makes up around a quarter of its overall business, the company slashed its overall profit outlook by 4% too.
Source: The Wall Street Journal, S&P Global Market Intelligence
Why should I care?
Zooming in: Optimism only goes so far.
Sony isn’t giving up on its target of selling 18 million PS5s this financial year, promising to bring shipments forward so there’s plenty to go around by Christmas. But it’s setting its sights lower elsewhere in its business: it cut its revenue forecast for its camera image sensors, as the war and Covid continue to impact shipping, production, and costs. Sony’s not the only one: South Korean giant Samsung Electronics warned late last week that it was adjusting its forecasts almost daily because of all the uncertainty.
Sony’s forecast | Source: the company
Zooming out: An investment in the future.
Some of Sony’s production struggles can be put down to the chip shortage, which is something the US has been dealing with too. That’s why the US government finally passed a long-awaited bill late last week that should boost its chipmaking industry, with around $52 billion in subsidies for production and $200 billion to boost research over the next decade.
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Chevron and Exxon Mobil Posted Record Quarterly Profits
US oil giants Chevron and Exxon Mobil both posted record quarterly profits on Friday.
What does this mean?
The average price of one of Chevron’s barrels of oil was up 65% last quarter from the same time last year, while its natural gas was up nearly 200%. That helped the firm bring in a quarterly profit of nearly $12 billion – 50% more than its previous quarterly record. Exxon didn’t do too shabbily either, with the rival oil giant’s profit coming in at a record $17.9 billion – around four times more than it managed this time last year.
If you’re thinking those are big ol’ profits at a time when so many people are being crippled by their energy bills, you’re not alone: the US has previously called on companies to raise output to bring prices down, and this will only reinforce their concerns. And sure, Chevron and Exxon have both said they’re boosting supply, but the numbers don’t lie: they’re investing less in production than they are on share buybacks and dividends.
Why should I care?
The bigger picture: What goes up…
This comes hot on the heels of Shell and TotalEnergies’ updates last week, in which they broke records and tripled profits respectively. That means the four oil giants – plus BP, which reports next week – are on track to have made well over $50 billion in profit last quarter. But with the prospect of a recession looming, analysts think it could be downhill from here. That’s certainly plausible: the oil price fell 20% from its 14-year high last quarter.
For markets: Energy is your king.
That potential for a recession has weighed down the energy sector’s stocks, with a key index tracking some of its biggest US companies down around 20% since June. But so dominant has the sector been that it’s still by far the best-performing of the year: it’s up 35% since the start of January, while the second-best performer – utilities – has risen a measly 2%.
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