Q1 Preview: Best Buy (BBY) Expectations Seem Low Amid Widespread Concerns; CEO Situation Doesn't Help


Shares of Best Buy ( BBY ) are underperforming the broader stock market Monday afternoon as traders are placing their bets ahead of the company's first-quarter earnings report Tuesday morning. While the stock is hanging onto positive territory (up about 0.2 percent), the Dow is up about 1 percent and the S&P 500 is up 1.5 percent.

Analysts are looking for the electronics retailer to issue quarterly earnings of about 60 cents per share on sales of $11.5 billion. During the same quarter last year, Best Buy reported first-quarter earnings of 34 cents per share on sales of $10.94 billion.

Best Buy's reported earnings beat Wall Street expectations by about 14 percent during the last quarter of FY12, and missed by about 8 percent and 11 percent during last year's third quarter and second quarter, respectively.

Notably, Best Buy is currently struggling to find a new CEO. On April 10th, Brian Dunn resigned from his position. While the stock traded higher on that day following the news, Best Buy shares have traded down about 18 percent since.

Analysts are largely waiting on the sidelines ahead of the earnings report. Data from our Ratings Insider portal shows four firms with a Buy on the stock, 14 with a Hold, and two suggesting to sell the stock.

Analyst Comments:

  • Deutsche Bank - Will be looking: 1. for comps to remain negative, 2. gross margin around 24.9 percent and operating margin around 3.2 percent, 3. unchanged guidance, 4. an update on the CEO situation, 5. unilateral pricing which should start to show up, and 6. an update on store footprint plans.

    Maintains Hold rating and $25 price target on Best Buy.

  • Wedbush - Expecting "negative comps and depressed margins, exacerbated by management turmoil." Modeling for EPS of 49 cents on sales of $10.9 billion. Sees comps down about 4.1 percent. Wedbush is anticipating a downside trend in international same-store sales to accelerate. Related to a continued move lower in margins, the firm cited a shifting mix of products and promotions.

    "We believe Best Buy store traffic is driven by Consumer Electronics, and think that the company's focus on its growth segments (primarily Computing and Mobile Phones) may yield lower than expected results if store traffic continues to slow. We expect the next major product upgrade cycle for CE devices to be at least a few years away, and Best Buy's stubborn pricing for itesm that are increasingly viewed as commodities could serve to further alienate customers."

    Maintains Neutral, $23 target.
Best Buy generally reports right at 8am ET. Stay tuned to our Earnings category for all the latest news.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: BBY



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