Sonos, Inc. SONO is scheduled to report fourth-quarter fiscal 2024 results on Nov. 13.
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For the quarter, SONO anticipates revenues between $240 million and $260 million. The Zacks Consensus Estimate for revenues is pegged at $252.7 million, indicating a decrease of 17.2% from the year-ago reported number.
The consensus estimate for the bottom line is pegged at a loss of 22 cents compared with a loss of 7 cents reported in the prior year.
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The company’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters while missing in the remaining occasions. It delivered a trailing four-quarter average negative earnings surprise of 1.2%. In the past year, shares of SONO have gained 35.2% against the sub-industry’s growth of 16.6%.
Factors Shaping SONO’s Upcoming Q4 Results
Sonos revised its fourth-quarter fiscal 2024 expectations due to challenges with the new app rollout. The app redesign fiasco is likely to have affected fourth-quarter revenues in two ways: lower sales across the portfolio owing to app issues and the decision to delay two major product launches until the app meets expected quality standards.
GAAP gross margin is anticipated to be in the band of 40% to 42%, down sequentially. Margin performance is expected to be affected by deleverage, arising from lower revenues. Adjusted EBITDA loss for the fiscal fourth quarter is likely to be in the range of $14 million to $37 million.
Owing to the reduced fourth-quarter outlook, full-year revenues have also been revised downward. Revenues are expected to be in the band of $1.503 billion to $1.523 billion for fiscal 2024 compared with the earlier projection of $1.6 billion to $1.7 billion.
Adjusted EBITDA is anticipated to be in the range of $93 million to $117 million for the fiscal year, indicating a margin of 6.2% to 7.7%. Earlier, Adjusted EBITDA was anticipated to be in the range of $150 million to $180 million for the fiscal year, indicating a margin of 9.4% to 10.6%. Lower revenue forecast is likely to weigh on adjusted EBITDA performance.
Sonos, Inc. Price, Consensus and EPS Surprise
Sonos, Inc. price-consensus-eps-surprise-chart | Sonos, Inc. Quote
SONO has been also investing heavily to fix the app issues which is likely to have proven a drag on margin performance. The company expects to incur $20-$30 million in expenses to fix the app, ramp up customer support and win back customer trust in the near term. Muted discretionary spending amid broader market weakness is an added concern.
However, GAAP gross margin is now expected to be between 45.4% and 45.7%. Earlier, management had guided GAAP gross margin in the range of 45% to 46%. Non-GAAP gross margin is expected to be in the range of 45.8% to 46.1% compared with earlier projected range of 45.4-46.4%. The recovery is expected to have bolstered by reduced component costs and lower excess component provisions coupled with a favorable product mix and fewer spot component purchases.
Moreover, strength in Sonos Ace headphones and higher sales of the Era 100 are likely to have provided some cushioning to top-line expansion in the to-be-reported quarter. Sonos highlighted in the lastearnings callthat premium over-the-ear headphone category is a $5 billion addressable market with double-digits growth annually and doesn’t experience cyclicality.
This launch highlights Sonos’ entry into a new, rapidly growing product category which will help it diversify its revenue streams and reduce dependence on the company’s traditional home audio business.
Major Recent Developments
On Oct. 15, 2024, Sonos introduced the Sonos Arc Ultra, a premium soundbar equipped with advanced Sound Motion transducer technology, and the Sonos Sub 4, an upgraded version of their classic subwoofer, designed to deliver immersive bass for movies and shows. Both the Arc Ultra and Sub 4 are available starting Oct. 29, 2024, priced at $999 and $799, respectively.
In October 2024, Sonos took significant steps to regain customer trust after an internal review of its May app release. The company made seven new commitments to deliver top-quality wireless audio systems that align with the brand's reputation.
In this regard, Sonos released a software update alongside the Arc Ultra and Sub 4. This update aims to improve performance over the previous version, especially for new users setting up devices and grouping Sonos products. Current customers will benefit as well, with 90% of the previously missing features being restored and more updates planned for the future.
What Our Model Says About SONO
Our proven model does not predict an earnings beat for SONO this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.
SONO has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With Favorable Combination
Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
GDS Holdings Limited GDS currently has an Earnings ESP of +4.76% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
GDS is scheduled to report quarterly earnings on Nov. 19. The Zacks Consensus Estimate for GDS’ to-be-reported quarter’s bottom line is pegged at a loss of 21 cents. The consensus estimate for revenues is pegged at $415.4 million. Shares of GDS have gained 119.7% in the past year.
Walmart Inc. WMT presently has an Earnings ESP of +1.61% and a Zacks Rank #2. WMT is scheduled to report quarterly numbers on Nov. 19. The Zacks Consensus Estimate for Walmart’s to-be-reported quarter’s earnings and revenues is pegged at 53 cents per share and $167.5 billion, respectively. Shares of WMT have gained 50.7% in the past year.
BellRing Brands, Inc. BRBR has an Earnings ESP of +8.14% and a Zacks Rank #2 at present. BellRing Brands is scheduled to report quarterly figures on Nov. 18. The Zacks Consensus Estimate for BRBR’s to-be-reported quarter’s earnings and revenues is pegged at 49 cents per share and $543.2 billion, respectively. Shares of BRBR have increased 52.8% in the past year.
5 Stocks Set to Double
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Today, See These 5 Potential Home Runs >>Walmart Inc. (WMT) : Free Stock Analysis Report
Sonos, Inc. (SONO) : Free Stock Analysis Report
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BellRing Brands Inc. (BRBR) : Free Stock Analysis Report
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