Can BBY Stock Keep Sizzling After Best Buy Earnings?

by Will Ashworth | November 18, 2013 5:55 am

Best Buy (BBY[1]) is progressing nicely under CEO Hubert Joly’s turnaround plan, with BBY stock up almost 270% in 2013. That means all eyes will be on BBY stock when Best Buy earnings come out on Nov. 19.

bby-stockWill Best Buy earnings please investors … and can BBY stock keep up its torrid pace as we head into 2014? Let’s take a look.

What to Expect Out of Best Buy Earnings

Zacks expects a 9% surprise in Best Buy earnings when it reports on Tuesday. And BBY stock analysts in general are very enthusiastic about Best Buy’s future. In fact, several upped the BBY target price this week including Sun Trust, which bumped Best Buy stock from $46 to $55 and considers BBY stock a “buy.”

The average analyst estimate for Best Buy earnings is 11 cents per share — 7 cents higher over last year’s third quarter. In the last two quarterly reports, BBY has delivered upside earnings surprises of 167% and 28%. InvestorPlace assistant editor Marc Bastow recently discussed some of the reasons why he feels BBY stock is realistically priced[2] at $50. Most importantly, he too feels BBY will surprise on the upside come Tuesday.

Personally, I will be shocked if Best Buy earnings aren’t strong — especially as BBY heads into the most important part of its fiscal year. The holiday season makes or breaks retailers and, given all the positive changes implemented by Joly as part of Best Buy’s “Renew Blue” initiatives, I believe it’s reasonable to assume BBY will have a bumper November and December.

After BBY reported Q2 earnings[3] in August, I reminded BBY stock investors just how much progress it had made under Joly’s turnaround plan. Joly, who’s been at BBY for almost 16 months now, has made a lot of good moves — none more important than hiring CFO Sharon McCollum from Williams-Sonoma (WSM[4]). McCollum has been able to cut more than $325 million in annual expenses while at the same time boosting cash flow.

Even more critical, she’s totally revamped BBY logistics so it can handle e-commerce orders from individual stores, thereby reducing out-of-stock issues. This move alone has had a big impact on BBY revenues and the overall customer experience. In the second quarter, BBY online sales increased by 6.1% — an 80 basis-point increase from the first quarter.

Multi-channel retailing success for me includes e-commerce sales that are at least 10% of overall revenues. While BBY isn’t there just yet, if it continues with 15% increases every quarter, it should hit double digits some time in 2015.

Should You Buy BBY Stock?

Like I said in my Q2 summation, Best Buy is on the right side of its turnaround — and BBY stock is solid as a result. I don’t believe anything’s changed except that Best Buy’s business has gotten stronger. Tuesday’s Best Buy earnings results will give investors some indication as to where BBY is on the turnaround continuum.

Of course, the real evidence won’t come until January when all the holiday numbers are in. And the early prognosis for retail this holiday season is not good.

However, I think Best Buy will surprise and BBY stock will hit $60 by the end of January.

So go ahead and buy some Best Buy stock — just don’t expect another 250% in less than a year.

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

  1. BBY:
  2. realistically priced:
  3. Q2 earnings:
  4. WSM:

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