Earnings Preview: Best Buy

Best Buy Company, Inc. (BBY), the leading specialty retailer of consumer electronic products, is scheduled to report its first-quarter 2012 financial results on June 14, 2011. The current Zacks Consensus Estimate for the quarter is 33 cents a share. For the quarter under review, revenue is $10,694 million, according to the Zacks Consensus Estimate.

Fourth-Quarter 2011, a Synopsis

Best Buy’s quarterly earnings of $1.98 per share, topped the Zacks Consensus Estimate of $1.84, and rose 8.8% from $1.82 earned in the prior-year quarter.

Richfield, Minnesota based Best Buy’s total revenue tumbled 1.8% year over year to $16,256 million, reflecting a 4.6% fall in comparable-store sales, offset by the net addition of stores in the last 12 months. Comps had risen 7% in the prior-year quarter. The total revenue also fell short of the Zacks Consensus Estimate of $16,355 million.

Management now forecasts fiscal 2012 adjusted earnings in the range of $3.30 to $3.55 per share. For fiscal 2012, Best Buy projected revenue between $51 billion and $52.5 billion, reflecting an increase of 1% to 4%, and comparable-store sales to be flat to down 3%.

First-Quarter 2012 Zacks Consensus

The analysts considered by Zacks, expect Best Buy to post first-quarter 2012 earnings of 33 cents a share. The current Zacks Consensus Estimate reflects a decline of 8.3% from the prior-year quarter’s earnings. The current Zacks Consensus Estimate for the quarter ranges between 28 cents and 37 cents a share.

Zacks Agreement & Magnitude

Of the 25 analysts following the stock, only one analyst has revised the projection upward with none lowering any estimate in the last 30 days, thereby leaving the Zacks Consensus Estimate unchanged. In the last 7 days, none of the analysts revisited their estimates.

Mixed Earnings Surprise History

With respect to earnings surprises, Best Buy has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 28.0% to positive 36.4%. The average remained at positive 1.4%. This suggests that Best Buy has beaten the Zacks Consensus Estimate by an average of 1.4% in the trailing four quarters.

Best Buy in Neutral Lane

Best Buy’s wide array of assortments, store formats and brand marketing strategies provide an edge over competitors. Best Buy intends to focus more on profitable sections, such as mobile, appliances and gaming. The company’s International business also provides opportunities for growth. It expects to strengthen functions of the Best Buy brand in China with the Five Star division, and expand in new markets of Mexico and the United Kingdom. However, we still remain concerned about falling comps in televisions, entertainment hardware and software categories, as well as a cautious consumer behavior.

Currently, we have a long-term “Neutral” rating on the stock. Moreover, Best Buy, which faces competition from Wal-Mart Stores Inc. (WMT), holds a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, and correlates with our long-term recommendation.

WAL-MART STORES (WMT): Free Stock Analysis Report

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