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Q1 Preview: Best Buy (BBY) Looks to Meet and Beat Lowered Expectations

Best Buy Co. Inc. ( BBY ) is trading strong Monday ahead of its first-quarter earnings release due out Tuesday before the market opens.

Earnings of 33 cents per share on revenue of $10.70 billion are expected. The number would be an 8.3 percent decline in EPS from the 36 cents reported last year. Revenue would be just about in line on a year-over-year basis.

Best Buy shares fell just under 1 percent through the quarter and are down an additional 9 percent since.

Data from Bloomberg has analysts not overly bullish on the shares: 12 have a Buy rating, 13 have a Hold, and two suggest to Sell. The price target average is $36, with a low of $27 and high of $42. Best Buy has traded in a range of $28.09 to $45.63 over the last 52-weeks.

Analyst Commentary

  • Goldman Sachs is looking for earnings of 33 cents per share. The firm notes Best Buy comps likely troughed last quarter, with EBIT and EPS trends troughing through first half of 2011 as comps ease further and TV and notebook PC market disruption moderates.

    Goldman says sales over the last several weeks have "confronted the same challenges noted across other discretionary categories. The margin outlook appears stable as vendors fund promotions, but the top line is choppy." The firm is on the sidelines into earnings.

  • Deutsche Bank is looking for earnings of 36 cents. The firm believes expectations for a miss are already built into estimates as well as the recent stock drop. Deutsche Bank expects comps to fall about 4 percent and sees no improvement from operating margins quarter-over-quarter. "Leading indicators, like industry sales and competitor comments, point to a soft quarter, but no worse than these expectations, in our view."

  • Janney is looking for earnings of 36 cents per share. Sees first-quarter comps falling 2.7 percent, with 3 percent coming from the domestic markets and 2 percent internationally. Janney looks for Best Buy Mobile to aid sales, while PCs are still a near-term question with tablets now beginning to line store shelves and laptop sales still soft.

    "E-commerce sales should continue to grow in double digits as BBY enhances the website, improves functionalities such as site to store (about 40% of orders are picked up in stores; 80% for large TVs) and adds more internet only SKUs. Our channel checks suggest that pricing is competitive online as MAP enforcement ramps up."

  • Wedbush is looking for revs of $10.8 billion and earnings of 37 cents per share. Sees comps down 4.2 percent, with a 5 percent domestic drop and 2 percent international. Commenting, "Domestically, negative comps for consumer electronics (TV commoditization) and entertainment (market share losses to lower priced competitors) should offset stabilizing home office comps (mobile phones), and appliances and services growth. China will drive international growth."

    Also notable, Wedbush sees a strategy shift from carrying the biggest and best items to focusing more on Internet sales imminent at Best Buy.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.

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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