By: Craig Bowles
Best Buy Company, Inc. (BBY) is slated to report 1Q FY2018 earnings before the bell on Thursday, May 25th. The earnings release is expected at approximately 7:00 a.m. ET followed by an 8:00 a.m. conference call available at Best Buy Investor Relations. The consumer electronics giant is widely seen as a key barometer on the health of the consumer and the economy. Its results therefore have a historic tendency to impact the broader market, including the CME index futures contracts and other broader market gauges.
Outliers & Strategy
- Non-GAAP Earnings Per Share (EPS): Company guidance is $0.35 to $0.40. The Street estimate is $0.40 (range $0.36 to $0.50) (source: Yahoo! Finance). Consensus was $0.49 three months ago.
- Earnings Per Share (EPS): If an Adjusted/Non-GAAP EPS figure is not available, this value would compare with forecasts.
- Revenues: Company guidance is $8.2 bln to $8.3 bln. Analysts expect $8.27 bln (range $8.19 bln to $8.36 bln). Consensus was $8.48 bln three months ago.
- Comparable Store Sales: Company guidance is -2.0% to -1.0%.
- Non-GAAP Earnings Per Share (EPS) Guidance for 2Q 2018: The current Street estimate is $0.59 (range $0.49 to $0.64).
- Revenue Guidance for 2Q 2018: The current Street estimate is $8.48 bln (range $8.31 bln to $8.63 bln).
- Price/Earnings of 13.9 compares to a 5-year average 12.5; Price/Book of 3.5 compares to a 5-year average 2.5; and Price/Sales of 0.4 compares to a 5-year average 0.2; Price/Cash Flow of 6.6 compares to a 5-year average 7.1; Dividend Yield of 2.3% compares to a 5-year average 3.0%.
- Analysts view Best Buy with 14 (9 two qtrs ago) Buy, 5 Hold, and 3 Sell ratings. (source: MarketBeat.com)
- Best Buy insiders sold 185,718 shares over the last three months and 2,060,303 shares in the past year. (source: NASDAQ.com) The company’s 2015 plan to repurchase $1 billion of shares within three years was already completed in FY2016, so a new plan was announced in February 2016 to repurchase another $1 billion of shares within two years.
- Best Buy results could impact other consumer electronics retailers, such as hhgregg (HGG). Amazon (AMZN) and Wal-Mart (WMT) have a growing presence in this area, as well.
- Best Buy shares have a 1-day average price change on earnings of 8.29%. Options are pricing in an implied move of 8.04% off earnings.
- 05/01: Best Buy’s CEO Hubert Joly earned $14-15 mln in each of the past two years but less than 10% is base salary, according to thestreet.com.
- 04/25: Merrill Lynch upgraded Best Buy to Buy citing improving international growth, stronger growth in online sales, and the “super cycle” of new phones being released by Apple and Samsung will “drive 2H comps and shares”, according to fool.com.
- 03/27: Piper Jaffray upgraded Best Buy to Overweight from Neutral on fading competition, according to CNBC.com.
- 03/02: Jefferies reiterated a Hold rating on Best Buy following the company’s 4Q earnings report sighting softer than expected guidance, according to StreetInsider.com.
At the end of 2016, Best Buy finally pushed through the $42.50 resistance that had been in place since 2009. A breakout after multiple years of consolidation is easy to underestimate in terms of duration and magnitude. The overall market found resistance at the end of February, so it’s hard to expect HPQ to continue to ignore general conditions. (Chart courtesy of StockCharts.com)
Best Buy CEO Hubert Joly said not to pay any attention to rumors that he may leave for another CEO position. Analysts appear to be more bullish overall despite some worries that the company has moved the focus away from efficiencies. Insider selling eased up after last quarter’s ramp up. The company has beaten estimates by an average of 17c the last four quarters with the year ago quarter a 9c beat. Estimize consensus for Non-GAAP EPS of $0.47 on revenue of $8.436 bln compares to analyst consensus of $0.40 on revenue of $8.27 bln. Guidance will factor into the market reaction, as well.
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