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Things You Need to Know Before Best Buy's (BBY) Q1 Earnings

Best Buy Co., Inc.BBY is slated to report first-quarter fiscal 2019 results on May 24. In the last reported quarter, the company outpaced the Zacks Consensus Estimate by 18%. Notably, it has surpassed earnings estimates in the trailing four quarters with an average beat of 19.1%. Let's see, how things are shaping up prior to this announcement.

How Are Top & Bottom-Line Estimates Faring?

After registering a bottom-line increase of 18.1% in the fourth quarter of fiscal 2018, Best Buy is likely to record year-over-year growth of 25% in first-quarter fiscal 2019. The Zacks Consensus Estimate for the quarter under review is pegged at 75 cents compared with 60 cents reported in the year-ago quarter. We note that the company's Zacks Consensus Estimate has increased by a penny in the last 30 days. Analysts now project $8.77 billion revenues, up from $8.53 billion in the year-ago quarter.

If the estimates are taken into consideration, this is going to be the second straight quarter of an earnings and revenue beat for the company.

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

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

Deciding Factors

Robust domestic and international sales are likely to drive the company's results in the first quarter. Analysts surveyed by Zacks expect domestic revenues of $8,091 million, up 2.7% year over year while international revenues are also anticipated to increase nearly 3.6% to $638 million.

Best Buy is making extensive investments to upgrade operations with special focus on developing omni-channel capabilities and strengthening partnership with vendors. In recent quarters, the company reported a massive gain in domestic comparable online sales on the back of conversion rates and higher average order values.

Following the successful completion of "Renew Blue" program, the company launched a fresh strategy called "Best Buy 2020: Building the New Blue" to explore and pursue growth opportunities, cost optimization and investing in people as well as systems to drive growth. In addition, management earlier projected first-quarter fiscal 2019 Enterprise revenues of $8.65-$8.75 billion and comparable sales increase of 1.5-2.5%. Management also anticipated adjusted earnings of 68-73 cents a share.

In the fiscal first quarter, the company expects domestic comparable sales to rise 1.5-2.5% while international comparable sales are estimated flat to up 3%.

However, analysts believe that an increase in investment to boost e-commerce operations and supply chains to counter competition might strain margins. Moreover, challenging retail landscape and waning store traffic may weigh on the company's performance.We also note that SG&A expenses have increased 18.6%, 2.2% and 3.2% in the fourth, third and second quarter of fiscal 2018, respectively.

Additionally, management hinted earlier that higher investments in supply chain and increased transportation costs are likely to weigh upon gross profit of the Domestic business by approximately 25 basis points in each quarter.

What the Zacks Model Unveils

Our proven model shows that Best Buy is likely to beat estimates this quarter as the stock has the right combination of two key ingredients - a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen.

Best Buy has an Earnings ESP of +2.01%, which, when combined with the company's Zacks Rank #2, increases the chances of an earnings beat.

Other Stocks Poised to Beat Earnings Estimates

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

Deckers Outdoor Corporation DECK has an Earnings ESP of +23.37% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Costco Wholesale Corporation COST has an Earnings ESP of +1.39% and a Zacks Rank #3.

Kroger KR has an Earnings ESP of +3.94% 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.


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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