Sony Corp., the world's second-largest maker of consumer electronics, climbed the most in almost seven months after forecasting a 20 percent increase in operating profit this year, exceeding analysts' estimates.
Sony surged 8.7 percent to close at 5,270 yen on the Tokyo Stock Exchange. The stock had its biggest gain since October, creating $4 billion in market value, after Nomura Securities Co. upgraded its investment rating. Goldman, Sachs & Co. and Nikko Citigroup Ltd. increased their price estimates on Sony.
The maker of the PlayStation 3 game console joined Matsushita Electric Industrial Co. in forecasting earnings that beat analyst estimates, easing concern over the slowing U.S. economy and stronger yen, which led Toyota Motor Corp. to predict its first profit decline in nine years. Sony said yesterday its games and TV operations, which analysts estimated would lose money, will turn profitable this year.
``It's good to see Sony is getting out of the situation where they walked towards death every time they sold another PlayStation 3,'' said Seiichiro Iwamoto, who helps look after $977 million at Mizuho Asset Management Co. in Tokyo.
Sony, based in Tokyo, said yesterday operating income will rise to 450 billion yen ($4.3 billion) in the year ending March 2009, exceeding the 400 billion yen median estimates of five analysts surveyed by Bloomberg. The company forecast it will post a profit from games, countering the 40 billion yen loss median estimate from the survey. JPMorgan Chase & Co. had estimated a 5.8 billion yen loss at the TV business.
Significant Contributor
``The game business is expected to contribute significantly to Sony's earnings this fiscal year because of cost cuts,'' said Mitsushige Akino, who oversees $468 million in assets at Ichiyoshi Investment Management Co. in Tokyo. Akino's holdings don't include Sony shares.
Still, Chairman Howard Stringer hasn't convinced everyone that Sony will meet its targets after he abandoned a three-year goal in January to raise the annual operating margin to 5 percent.
UBS AG said in a report yesterday that Sony's projections for its TV and games operations may be ``overly optimistic.'' The brokerage kept its ``neutral'' rating on the stock.
``It's too early to see sustained buying while there are some downside risks such as exchange rates,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo.
Sony said it's assuming an exchange rate of 100 yen to the dollar for its projection. Every one-yen move against the U.S. currency affects operating profit by 4 billion yen, Chief Financial Officer Nobuyuki Oneda said at a briefing in Tokyo. Sony in January estimated the impact at 6 billion yen.
Analyst Upgrades
Nomura upgraded its recommendation on Sony to ``strong buy'' from ``buy,'' citing the company's efforts to reduce its vulnerability to currency fluctuations and the expected improvement of earnings at the games business, Eiichi Katayama, a Tokyo-based analyst at Nomura, wrote in a report yesterday.
Goldman increased its price estimate for the stock by 16 percent to 5,800 yen, while Nikko Citigroup raised the projection by 1.7 percent to 6,100 yen.