Earnings Preview: Best Buy - Analyst Blog

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Best Buy Company, Inc. ( BBY ), the leading specialty retailer of consumer electronic products, is slated to report its third-quarter 2012 financial results on Tuesday, December 13. The current Zacks Consensus Estimate for the quarter is 52 cents a share. The Zacks Consensus estimates revenue at 12,127 million.

Second-Quarter 2012, a Synopsis

Best Buy posted lower-than-expected second-quarter 2012 results. The quarterly earnings of 47 cents a share missed the Zacks Consensus Estimate of 53 cents and plunged 21.7% from 60 cents earned in the prior-year quarter.

Richfield, Minnesota-based Best Buy said that total revenue remained almost flat with the prior-year quarter at $11,347 million. However, the company registered a fall of 2.8% in comparable-store sales versus a marginal decrease of 0.1% witnessed in the year-ago quarter. The total revenue also came below the Zacks Consensus Estimate of $11,442 million.

Management updated its fiscal 2012 adjusted earnings guidance range to $3.35 to $3.65 (including the positive impact of 20 cents to 25 cents per share from a share repurchases). Excluding the favorable impact of share buyback the updated earnings guidance is lower than its previous adjusted annual net earnings guidance range of $3.30 to $3.55 per share.

Best Buy stood by its earlier projection and expects revenue between $51 billion to $52.5 billion with full-year comps of flat to down 3%.

Third-Quarter 2012 Zacks Consensus

The analysts considered by Zacks, expect Best Buy to post third-quarter 2012 earnings of 52 cents a share. The current Zacks Consensus Estimate reflects a decline of 3.7% from the prior-year quarter's earnings. The current Zacks Consensus Estimate for the quarter ranges between 49 cents and 55 cents a share.

Zacks Agreement & Magnitude

Of the 20 analysts following the stock, 4 analysts revised their projections upward and one lowered the same in the last 30 days. In the last 7 days, 3 analysts increased their estimates with none lowering the same. The revision in estimates resulted in a penny's increase in the Zacks Consensus Estimate to 52 cents a share.

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 11.3% to positive 7%. The average remained at negative 2.1%. This suggests that Best Buy has missed the Zacks Consensus Estimate by an average of 2.1% in the trailing four quarters.

Price Stats

Since its last earnings release on September 13, 2011, Best Buy's market price has increased 21.2% to $28.11 as of December 9. During trading hours on December 9, the stock reached the day low of $27.18 and the day high of $28.21.

The stock price is within the range of the 52-week low-high range of $21.79 attained on October 4, 2011 and $42.57 achieved on December 13, 2010. From September 13, 2011 to December 5, 2011, the stock dropped to a low of $21.79 on October 4, 2011 and rose to a high of $28.53 on December 5, 2011.

Best Buy in Neutral Lane

Best Buy's wide array of assortments, store formats and brand marketing strategies provide an edge over competitors. The company intends to focus more on profitable sections, such as mobile computing, eReaders and appliances. Its International business also provides opportunities for growth.

Management expects to strengthen the 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. However, Best Buy, which faces competition from Wal-Mart Stores Inc. ( WMT ), holds a Zacks #2 Rank that translates into a short-term Buy rating.

BEST BUY ( BBY ): Free Stock Analysis Report

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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.

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

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