By: Craig Bowles
Bed Bath and Beyond, Inc. (BBBY) is slated to report 2Q 2017 earnings after the bell on Tuesday, September 19th. The earnings release is expected at approximately 4:15 p.m. ET followed by a 5:00 p.m. conference call available at Bed Bath and Beyond Investor Relations. The home furnishing and retail company operates close to 1500 stores and is an index component of the Standard and Poor’s 500 and NASDAQ-100.
Outliers & Strategy
- Earnings Per Share (EPS): The Street estimate is $0.95 (range $0.88 to $0.99) (source: Yahoo! Finance). Consensus was $1.03 three months ago. The company normally reports a “clean” number comparable to estimates.
- Revenues: Analysts expect an increase of 0.7% y/y to $3.01 bln (range $2.97 bln to $3.05 bln).
- Comparable Store Sales: Company y/y guidance was flat to up slightly in 2017. Q1 was -2.0% but the company hopes that unexpected softness won’t carry over.
- Earnings Per Share (EPS) Guidance for FY 2017: Company y/y guidance was previously for declines ranging from low single digits to down 10%. Expects better visibility with Q2 results. The current Street estimate is $4.02 (range $3.75 to $4.16). Consensus was $4.32 three months ago.
- P/E of 6.8 compares to a 5-year average of 13.3, Price/Book of 1.6 compares to a 5-year average of 3.6, Price/Sales of 0.4 compares to a 5-year average of 1.2, and Price/Cash Flow of 4.2 compares to a 5-year average of 9.3.
- Analysts view BBBY with 1 Buy, 12 Hold, and 8 (6 last qtr) Sell ratings (source: MarketBeat.com).
- Insiders bought 18,718 shares the last three months but sold a net 501,256 shares in the past year (source: NASDAQ.com). September 2015’s $2.5 bln stock buyback still is being used. 2014 was $2 bln. 2016 launched a $0.125 dividend. Bulls point to 40% of the company’s shares having been bought back since 2010. Bears note that the company is buying a declining stock and losing billions doing it.
- Lumber prices have been shown to lead housing-related stocks by one year, indirectly effecting BBBY. Lumber prices suggested better upside potential in the first half of 2017 which didn’t happen but upside potential continues through Q1 2018, shown by RandomLengths.com. Eurodollars showed commercials reached an all-time record net long in Q1 and tend to mirror lumber prices, so both appeared to have been overbought as shown by mcoscillator.com.
- Bed Bath and Beyond results are compared to other home furnishing retailers, such as Sears (SHLD), Williams-Sonoma (WSM), Pier 1 Imports (PIR), Lowe’s (LOW), and Home Depot (HD). Wal-Mart (WMT) and Target (TGT) have a presence in this area, as well.
- Bed Bath and Beyond shares have a 1-day average price change on earnings of 3.54%. Options are pricing in an implied move of 6.79% off earnings.
- 09/06: Zacks Investment Research downgraded Bed Bath & Beyond to Hold from Buy citing that management’s dismal view for fiscal 2017 raises concerns. A number of equities research analysts have cut their price targets. Bed Bath & Beyond is focused on strategic initiatives like eCommerce enhancement and improvement of customer services. Comps from customer-facing digital networks grew over 20% last quarter. Sluggish mall traffic that has been intensifying. Margins have been pressurized for four quarters, according to a post on Zacks.com.
- 08/04: Bed Bath and Beyond will eliminate about 880 department and assistant store management positions.
Bed Bath and Beyond appears to have been a favorite of sellers, especially after the stock pops up on takeover rumors. The stock had been finding support at just above $40 in 2016 but that started giving way before the November earnings release. A full retracement of the bull market would return to the low $20s. The continued weakness of home furnishings retail is even more glaring given that housing related stocks have shown the strength in 2017 suggested by a 1-year lag of lumber prices. (Chart courtesy of StockCharts.com).
Bed Bath and Beyond is dealing with margin pressure due to competition with online retailers as well as the company’s investment in online retail. The worry is a carryover from Q1’s increased softness in transactions in stores, as well as higher net-direct-to-customer shipping expense, coupon expense, and advertising costs. Insiders bought some shares after heavey selling into weakness the previous quarter. Buybacks and now a dividend have attempted to help support the stock. The company has an average beat/miss of 10c the past four quarters with only one quarter being a beat. Estimize consensus for the company to earn $0.96 on revenue of $3.005 bln compares to analyst consensus of $0.95 on revenue of $3.01 bln. Guidance will be factored into the market reaction.
DISCLAIMER: By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.