Does Best Buy's Efforts Place the Stock Favorably for 2020?
Best Buy Co., Inc. BBY is benefiting from its focus on developing omnichannel capabilities, supply chain and cost containment efforts along with strengthening partnership with vendors. Also, the company has been making a significant headway into healthcare technology business by undertaking strategic buyouts.
We note that shares of this Richfield, MN-based company have rallied approximately 33% in past three months compared with the industry’s growth of 24.3%. Also, this Zacks Rank #2 (Buy) stock has comfortably outperformed the Retail - Wholesale sector and the S&P 500 Index that advanced 3.7% and 6.9%, respectively in the said time frame. The stock is trading at its 52-week high of $88.84 on Dec 19. Further a VGM Score of A portray its inherent strength.
Factors Narrating Best Buy’s Growth Story
Best Buy remains focused on the next phase of its “Building the New Blue” program — Building the New Blue: Chapter Two — which aims at pursuing growth opportunities, better execution in key areas, cost containment, and investing in people and systems.
In this regard, management targets $600 million of cost reduction by fiscal 2021. Apart from this, it has been progressing well with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices.
Further, the company is making efforts to strengthen its healthcare technology business by undertaking buyouts in this space. Its purchases include GreatCall, Critical Signal Technologies and BioSensics. Moreover, Best Buy expanded its In-Home Advisor program to core U.S. markets. It is also committed toward strengthening partnerships with vendors, offering services and solutions to meet varied customer needs, and optimizing costs.
For fiscal 2020, the company now envisions adjusted earnings per share of $5.81-$5.91, up from the prior forecast of $5.60-$5.75. The company now forecasts Enterprise revenues of $43.2-$43.6 billion compared with the previous guidance of $43.1-$43.6 billion. Furthermore, comparable sales are expected to grow 1-2% compared with the prior view of 0.7-1.7% increase.
These upsides, along with the supply-chain transformation plan, are expected to boost the company's performance. Keeping in these lines, management continues to envision enterprise revenues of approximately $50 billion, with adjusted operating income rate of 5% by 2025. This consumer electronics retailer also intends to reduce costs by about $1 billion in the said period.
All said, we expect the company’s robust prospects to help it keep the stellar show on in 2020.
3 More Stocks to Consider
Target Corp. TGT has a long-term earnings growth rate of 7.5% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zumiez Inc. ZUMZ has a long-term earnings growth rate of 12% and currently sports a Zacks Rank #1.
Tilly's, Inc. TLYS has a long-term earnings growth rate of 11% and a Zacks Rank #1.
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