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Best Buy (BBY) Up 8.3% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Best Buy Co., Inc. (BBY - Free Report) . Shares have added about 8.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Best Buy (BBY - Free Report) Q4 Earnings Top, Revenues Lag
Best Buy Company reported mixed quarterly numbers for fourth-quarter fiscal 2017. The company posted earnings per share of $1.95 beating the Zacks Consensus Estimate of $1.66 and increasing 27% year over year. Notably, this is the seventeenth-consecutive quarter in which the company’s earnings have surpassed the estimates. In the reported quarter, earnings were driven by sound promotional strategy, continuous optimization of merchandise margins as well as due to robust expense management.
Including one-time items, quarterly earnings per share came in at $1.91 compared with $1.39 in the year-ago quarter.
However, on the revenues front the company disappointed investors by missing the Zacks Consensus Estimate after surpassing the same in the preceding three quarters. The company’s revenues declined 1% to $13,482 million and also lagged the Zacks Consensus Estimate of $13,608 million. Revenues were near the mid-point of its guidance range. Comparable-store sales (comps) were down 0.7%, compared with a decline of 1.7% in the prior-year period.
Adjusted operating profit came in at $900 million, up 11.4% year over year. While adjusted operating margin was 6.7%, in comparison with 5.9% in the prior-year quarter.
Segment Details
Domestic segment revenues dipped 1.4% year over year to $12,338 million, primarily due to 0.9% decline in comparable sales and loss of revenues from 11 large-format as well as 31 Best Buy Mobile store shut downs.
Domestic comparable-online sales increased 17.5 % to $2.3 billion. The upside was driven by improved traffic and conversion rates.
The segment’s adjusted gross profit increased 1.7% to $2,749 million during the quarter. Adjusted margin came in at 22.3% compared with 21.6% in the prior-year quarter on the back of better margin rates in the computing as well as home theater categories. Adjusted operating income jumped 8.3% to $819 million while adjusted margin expanded 60 basis points (bps) to 6.6%.
International segment revenues rose 2.5% to $1,144 million, primarily backed by favorable currency impact, periodic profit sharing advantage from the company’s services plan portfolio and growth in Mexico business wherein comparable sales increased 0.9%.
The segment’s adjusted gross profit rose 15.2% to $281 million in the quarter and gross margin increased 280 bps to 24.6%. Adjusted operating profit came in at $81 million in comparison with $52 million recorded in the prior-year quarter. Adjusted operating income margin came in at 7.1% compared with 4.7% in the year-ago quarter.
Other Financial Details
Best Buy ended the quarter with cash and cash equivalents of $2,240 million, long-term debt of $1,321 million and total equity of $4,709 million.
On Feb 25, 2016, the board of directors announced a plan to repurchase shares worth $1 billion over the next two years. In the fiscal fourth quarter, the company repurchased 5.3 million shares for $226 million. In fiscal 2017, the company repurchased 21.0 million shares for a total of $743 million.
Guidance
For the fiscal 2018, management forecasts Enterprise revenues (including 53rd week) growth of 1.5%. On a 52-week basis, the company anticipates adjusted operating income growth rate in the low-single digits. On the 52-week basis, it expects enterprise revenues to be flat year over year.
For first-quarter fiscal 2018, management forecasts Enterprise revenues between $8.2 billion and $8.3 billion and comparable sales decline of 1–2%. Management also projects earnings in the range of $0.30–$0.40 cents a share.
Also in the fiscal first quarter, the company expects domestic comparable sales to fall in the range of 1.5–2.5%, while international comparable sales are projected to be in the range of flat to up 3.0%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, Best Buy's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
The stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.
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Best Buy (BBY) Up 8.3% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Best Buy Co., Inc. (BBY - Free Report) . Shares have added about 8.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Best Buy (BBY - Free Report) Q4 Earnings Top, Revenues Lag
Best Buy Company reported mixed quarterly numbers for fourth-quarter fiscal 2017. The company posted earnings per share of $1.95 beating the Zacks Consensus Estimate of $1.66 and increasing 27% year over year. Notably, this is the seventeenth-consecutive quarter in which the company’s earnings have surpassed the estimates. In the reported quarter, earnings were driven by sound promotional strategy, continuous optimization of merchandise margins as well as due to robust expense management.
Including one-time items, quarterly earnings per share came in at $1.91 compared with $1.39 in the year-ago quarter.
However, on the revenues front the company disappointed investors by missing the Zacks Consensus Estimate after surpassing the same in the preceding three quarters. The company’s revenues declined 1% to $13,482 million and also lagged the Zacks Consensus Estimate of $13,608 million. Revenues were near the mid-point of its guidance range. Comparable-store sales (comps) were down 0.7%, compared with a decline of 1.7% in the prior-year period.
Adjusted operating profit came in at $900 million, up 11.4% year over year. While adjusted operating margin was 6.7%, in comparison with 5.9% in the prior-year quarter.
Segment Details
Domestic segment revenues dipped 1.4% year over year to $12,338 million, primarily due to 0.9% decline in comparable sales and loss of revenues from 11 large-format as well as 31 Best Buy Mobile store shut downs.
Domestic comparable-online sales increased 17.5 % to $2.3 billion. The upside was driven by improved traffic and conversion rates.
The segment’s adjusted gross profit increased 1.7% to $2,749 million during the quarter. Adjusted margin came in at 22.3% compared with 21.6% in the prior-year quarter on the back of better margin rates in the computing as well as home theater categories. Adjusted operating income jumped 8.3% to $819 million while adjusted margin expanded 60 basis points (bps) to 6.6%.
International segment revenues rose 2.5% to $1,144 million, primarily backed by favorable currency impact, periodic profit sharing advantage from the company’s services plan portfolio and growth in Mexico business wherein comparable sales increased 0.9%.
The segment’s adjusted gross profit rose 15.2% to $281 million in the quarter and gross margin increased 280 bps to 24.6%. Adjusted operating profit came in at $81 million in comparison with $52 million recorded in the prior-year quarter. Adjusted operating income margin came in at 7.1% compared with 4.7% in the year-ago quarter.
Other Financial Details
Best Buy ended the quarter with cash and cash equivalents of $2,240 million, long-term debt of $1,321 million and total equity of $4,709 million.
On Feb 25, 2016, the board of directors announced a plan to repurchase shares worth $1 billion over the next two years. In the fiscal fourth quarter, the company repurchased 5.3 million shares for $226 million. In fiscal 2017, the company repurchased 21.0 million shares for a total of $743 million.
Guidance
For the fiscal 2018, management forecasts Enterprise revenues (including 53rd week) growth of 1.5%. On a 52-week basis, the company anticipates adjusted operating income growth rate in the low-single digits. On the 52-week basis, it expects enterprise revenues to be flat year over year.
For first-quarter fiscal 2018, management forecasts Enterprise revenues between $8.2 billion and $8.3 billion and comparable sales decline of 1–2%. Management also projects earnings in the range of $0.30–$0.40 cents a share.
Also in the fiscal first quarter, the company expects domestic comparable sales to fall in the range of 1.5–2.5%, while international comparable sales are projected to be in the range of flat to up 3.0%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Best Buy Co., Inc. Price and Consensus
Best Buy Co., Inc. Price and Consensus | Best Buy Co., Inc. Quote
VGM Scores
At this time, Best Buy's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
The stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.