Best Buy Earnings – The 3 Biggest Things to Watch

by James Brumley | May 21, 2014 5:48 am

If Best Buy (BBY[1]) ever needed a solid earnings report, Thursday’s announcement of Q1’s results is it.

best buy earnings ThursdayThe 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[2] 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[3] 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:

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.

Endnotes:

  1. BBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBY
  2. posted weak same-store-sales results: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CEsQFjAC&url=http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2014-01-16%2Fbest-buy-u-s-holiday-sales-fall-as-shoppers-spurn-prices.html&ei=Y6p7U6uFGMGmyATtmIDoAw&usg=AFQjCNFZ1W2NlH12O42W3YzUjpdPVHne0g&sig2=16sfsgb7IyBV1f6bhv4bmA&bvm=bv.67229260,d.aWw
  3. expect the company to report $9.2 billion in revenue: http://finance.yahoo.com/q/ae?s=BBY+Analyst+Estimates
  4. sales have been slumping since 2012: http://www.wikinvest.com/stock/Best_Buy_%28BBY%29/Data/Income_Statement
  5. intermittent improvement beginning in the middle of last year: http://data.cnbc.com/quotes/BBY/tab/5
  6. about $550 million of the $725 million in unnecessary annual expenses: http://blogs.wsj.com/corporate-intelligence/2014/01/16/best-buy-explains-its-grim-quarter-we-were-out-competed/
  7. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  8. online sales grew a hefty 26%: http://www.fool.com/investing/general/2014/03/11/best-buys-turnaround-is-on-track-despite-weak-sale.aspx
  9. so-called Athena project: http://news.investors.com/technology-click/022714-691476-best-buy-shifts-focus-to-online-.htm
  10. full development will take a couple more years.: http://adage.com/article/datadriven-marketing/buy-touts-data-project-key-turnaround/291897/

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