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Will Best Buy (BBY) Succeed in Reporting Higher Q2 Earnings?


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Best Buy Co., Inc. BBY is slated to report second-quarter fiscal 2019 results on Aug 28. In the trailing four quarters, this retailer of technology products, services, and solutions has outperformed the Zacks Consensus Estimate by an average of 8.9%. In the last reported quarter, the company delivered a positive earnings surprise of 9.3%.

Investors are counting on another estimate beat by Best Buy in the to-be-reported quarter. Let's delve deeper and take a look at the factors that will be influencing the results.

How Are Estimates Faring?

After registering a bottom-line increase of 36.7% in the first quarter of fiscal 2019, Best Buy is likely to record year-over-year growth of roughly 20.3% in the second quarter. The Zacks Consensus Estimate for the quarter under review is pegged at 83 cents compared with 69 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has increased by a penny in the last 30 days. Analysts polled by Zacks now project revenues of $9,249 million, up 3.5% from the year-ago period.

If all goes well, this will be the third straight quarter that the company will surpass the Zacks Consensus Estimate for both the top and bottom lines.

Best Buy Co., Inc. Price, Consensus and EPS Surprise

Best Buy Co., Inc. Price, Consensus and EPS Surprise | Best Buy Co., Inc. Quote

Which Factors Hold Key to Best Buy's Performance?

Best Buy's extensive investments to upgrade operations, with special focus on developing omni-channel capabilities, supply chain and cost-reduction opportunities, along with strengthening partnership with vendors bode well. The company's "Best Buy 2020: Building the New Blue" program aims to explore growth opportunities and optimize costs. In an effort to drive growth, the company is focused on expansion of multi-channel retail business, offering services and solutions that solve customers' needs.

Meanwhile, analysts believe Best Buy's investment activities to boost e-commerce operations and supply chains in order to counter competition may strain margins to an extent. We also note that SG&A expenses escalated 18.6%, 2.2% and 3.2% in the fourth, third and second quarter of fiscal 2018, respectively. In the first quarter of fiscal 2019, the same rose 6.3%.

Management hinted that higher investments in supply chain and increased transportation costs are likely to weigh upon gross profit of the Domestic business by approximately 25 bps in the second quarter.

For the second quarter, management anticipates Enterprise revenues between $9.1 billion and $9.2 billion and comparable sales increase of 3-4%. Management projects adjusted earnings in the band of 77-82 cents a share, reflecting an increase of 12-19% year over year.

Further, in the fiscal second quarter, the company expects domestic comparable sales growth of 3-4%, while international comparable sales are estimated in the band of 1-4%.

Model Predicts Higher Probability of Earnings Beat

Our proven model shows that Best Buy is likely to beat estimates this quarter. This is because a stock needs to have both - a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Best Buy has an Earnings ESP of +1.72% and a Zacks Rank #3. This makes us reasonably confident that it is likely to outperform estimates.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post earnings beat.

The Michaels Companies, Inc. MIK has an Earnings ESP of +0.94% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

PVH Corp. PVH has an Earnings ESP of +0.16% and a Zacks Rank #3.

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +2.98% and a Zacks Rank #3.

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



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: AEO , BBY , MIK , PVH



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