Best Buy's (BBY) Resurgence Continues With 2nd Quarter EPS, Revenue Beat

Best Buy ()

Best Buy ()

Shares of Best Buy (BBY) are rising more than 3% in the pre-market session Tuesday after the electronics retailer reported second quarter fiscal 2018 earnings results that beat Wall Street estimates on both the top and bottom lines.

Traditional brick-and-mortar retail has been presumed dead for some time. And there’s tons of physical and anecdotal evidence to support the morbid view. But Best Buy — thanks to better-than-expected revenue from its e-commerce segment and ongoing costs cuts — has executed an impressive turnaround under CEO Hubert Joly, which has lead to twelve straight earnings beats. In the process, the company has made investors very wealthy. Let’s go through the numbers.

In the three months that ended July, Best Buy reported a net profit of $209 million, or 67 cents per share. On an adjusted basis, when taking out one-time gains and costs, earnings were 69 cents per share per share, which beat Thomson Reuters consensus estimates of 63 cents per share. The Richfield, MN-based retailer posted revenue of $8.94 billion, which also topped Street forecasts $8.66 billion.

Just as impressive, revenue at established stores (same-store sales) rose 5.4% year over year, topping the 2.2% growth analysts were looking for. “Our higher-than-expected comparable sales of 5.4% were driven by stronger consumer demand for technology products and by the strong execution of our strategy,” said CEO Joly in a statement. “Against a backdrop of continued healthy consumer confidence, we believe broad-based product innovation is resonating with consumers and driving higher spend.”

Joly’s confidence in Best Buy’s execution was reflected in the company’s guidance for the current quarter, ending in November, during which Best Buy expects its per-share earnings to range from 75 cents to 80 cents — well above consensus of 65 cents per share. The company also forecasts revenue in the range of $9.3 billion to $9.4 billion, which is above analysts’ estimates of $8.99 billion.

Best Buy’s efforts to strengthen its in-home advisory program as well as scale in regions such as Canada and Mexico, while also finding strategic ways to cut costs, continue to pay off. Tuesday’s Q2 beat, however, which has sent BBY shares to all-time highs, should raise valuation concerns. BBY stock, which has surged 45% year to date, no longer scream bargain today.

That said, purely from a David-versus-Goliath perspective and for those who enjoy rooting for the underdog, Best Buy deserves applause for doing what many thought was impossible -- escape the death grip of e-commerce giant Amazon (AMZN). For my taste, however, there are yet too many of things that must go right for these shares to maintain their lofty levels.

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

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

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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