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Why Sonos Stock Investors Are Singing Its Praises Today

By Rich Smith - Feb 11, 2021 at 11:34AM

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The home audio equipment specialist just crushed its quarterly earnings, and it's not expecting to slow down.

What happened

Shares of audio equipment specialist Sonos (SONO -7.03%) pumped up the volume Thursday morning, cranking out a 17.4% gain through 11:30 a.m. EST after the company reported earnings Wednesday night.

The consensus expectation of analysts was that Sonos would report $0.88 per share in adjusted earnings on just $590 million in sales. Instead, it said it earned $1.17 per share (pro forma) on sales of more than $645 million in its fiscal 2021 first quarter, which ended Jan. 2.  

Wavy band of musical notes rising higher

Image source: Getty Images.

So what

Sales for the fiscal quarter climbed 15% year over year. Gross profit margins on those sales jumped 6 full percentage points to 46.4%. With operating costs rising just 1%, operating profit margins were unleashed, surging from 12% a year ago, to 21.2% in this fiscal Q1.  

And when calculated according to generally accepted accounting principles (GAAP), net profits per diluted share jumped 68% to $1.01 -- not quite as high as the pro forma number, but still pretty darned amazing.

Oh, and free cash flow nearly doubled to $203.2 million.

Now what

It gets better.

"Based on our outstanding first quarter performance," said Sonos CEO Patrick Spence, "the momentum in our business, the exciting products we have planned for the future, and the power and profitability of our unique business model, we are raising our outlook for fiscal 2021."

Management now anticipates that Sonos will grow its sales by 15% to 19% in its fiscal 2021 to more than $1.5 billion, while holding gross profit margins steady in the neighborhood of 46%. The company didn't forecast what that might work out to in terms of earnings, but given the sales growth and with margins comparable to those from last quarter, when all's said and done, the news should be pretty good.

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