If Best Buy (BBY) ever needed a solid earnings report, Thursday’s announcement of Q1’s results is it.

The struggling retailer has been talking about a turnaround for more than a year now, kicking off the overhaul with the decision to hire turnaround specialist Hubert Joly as CEO in late 2012. While we’ve seen some significant store-level changes since then, none of the subsequent Best Buy earnings reports in the meantime have been especially promising.

Perhaps even more alarming is the fact that BBY stock has yet to pick itself up off the mat following its knockout punch in January of this year, after the company posted weak same-store-sales results for the holiday-shopping season. The market seems to be losing what faith in Best Buy it managed to muster over the course of 2013.

That might well be the foundation for an opportunity, however.

Best Buy Earnings – What Wall Street Expects

First and foremost, analysts expect the company to report $9.2 billion in revenue when the Best Buy earnings announcement is made before the open Thursday. That forecast is 1.9% below the top line for the first quarter of 2013. Analysts also expect a profit of 20 cents per share of BBY stock, down from 32 cents a year earlier.

Still, forecasters believe Best Buy will be able to grow its per-share profits for the current year, from $2.07 last fiscal year to $2.20 this time around, despite the slight projected dip in revenue, from $42.41 billion to $42.24 billion.

Meeting or exceeding those targets might well vindicate Joly, while falling short of them could mean a nasty jolt as investors lose what remaining hope they have left and move on to other, more fruitful picks.

What Really Matters for BBY Stock

Smart investors would be wise to look beyond the binary nature of the upcoming Best Buy earnings news, though. Indeed, the knee-jerk reaction to the news might well push BBY stock down to bargain-shopping levels, or it could rekindle the stock’s rally.

The buy/sell decision should have far less to do with last quarter’s numbers, however, and far more to do with these three concerns:

• Margins: While no organization can shrink its way to growth, some organizations can shrink their way to higher margins. Best Buy might be one of those companies. While sales have been slumping since 2012, profits have seen intermittent improvement beginning in the middle of last year. Joly has carved out about $550 million of the $725 million in unnecessary annual expenses he pledged to cut early on in his role as CEO, mostly by resolving some distribution and logistics issues. But, now he believes Best Buy could do even better than saving $725 million. Ideally, the conference call will offer more detailed numbers.
• Online Sales: Prior to Joly’s presence, online sales hadn’t been a bright spot for Best Buy — Amazon (AMZN) was just too tough to beat on prices. Joly didn’t agree, beefing up the company’s price competitiveness online. In the fourth quarter (which ended in January), Best Buy’s online sales grew a hefty 26%, vs. only an 11% improvement in the year-ago quarter. Yet, only 12% of the company’s U.S. revenue comes from web-based sales, so there’s a ton of room for growth. Again, the context of numbers on the online front could mean a big boost for BBY stock.
• Athena: The third and final detail that BBY stock fans and followers might went to ferret out of the Best Buy earnings call is progress of its so-called Athena project. The end-goal for Athena is the replacement of the mass-advertising flyers that are frequently found crammed into a Sunday newspaper … along with a dozen or so other sales and advertising pieces. Athena will promote Best Buy via e-mail notices that are custom-crafted for each potential shopper, which are expected to be particularly helpful on the online sales front. It’s a huge leap for Best Buy, and the project’s progress will be slow going; Joly thinks its full development will take a couple more years. Once it’s in place and working, though, the initiative might have an edge in a world that’s increasingly digital-oriented and decreasingly interested in printed newspapers. There won’t be anything concrete here in the conference call, but a status update could go far with investors.

Bottom Line

For better or worse, this is the time when investors explicitly need to focus on the bigger picture if they’re interested in making a long-term buy/sell decision on BBY stock. In fact, the numbers for last quarter may be the least important piece of news to come from Best Buy on Thursday.

The good news is, a successful quarter may validate the turnaround plan in the market’s eyes and put some new buying pressure on the stock. And a negative reaction might set up a bottom-fishing opportunity.

Whatever the case, the long-term undertow for Best Buy has grown surprisingly — even if tepidly — bullish.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.