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Is Best Buy (BBY) the Perfect Back-to-School Stock Pick?

Back-to-school season is almost upon us, and that means investors needs to start looking at companies that thrive during this time of the year. Just like during the holidays, retailers around the country will be using special promotions and deals to attract the most customers during this busy shopping period, and companies like Best Buy BBY looked poised to succeed.

During the back-to-school season, investors need to remember how the market tends to react to things. While back-to-school business will already be priced in to most retail stocks, the market will always tend to react positively to any additional news about a company’s success during promotional periods.

With that in mind, the best back-to-school stocks are those that are already poised to succeed with strong fundamental metrics and are also in a competitive position to get the most back-to-school shoppers through the doors.

For this back-to-school season, one of the hottest stocks has to be Best Buy. Currently, Best Buy is a Zacks Rank #2 (Buy), and based on forecasts about this year’s retail shopping behavior, the company should be ready to win the back-to-school race.

The Numbers

While the majority of Best Buy’s back-to-school revenue will come in the current quarter, the company has yet to report its earnings for the period ending in July. For that quarter, Best Buy has a positive Earnings ESP of 7.14%. Paired with its strong Zacks Rank, Best Buy’s positive Earnings ESP should make investors feel more comfortable about the possibility of a beat when the company reports on the 23rd.

Of course, we should also remember that Best Buy has surprised on earnings for fourteen quarters in a row. Over the trailing four quarters, Best Buy has surpassed the Zacks Consensus Estimate by an average of 24.07%, and the company shows no signs of slowing down now.

For the “back-to-school quarter,” Best Buy is expected to post earnings of 45 cents per share on $8.78 billion in revenue. While that revenue figure would represent a slight decline year-over-year, Best Buy’s earnings are still expected to grow by over 10%.

On top of everything else, Best Buy is currently a leader in a group of companies that sit in the top 7% of the Zacks Industry Rank.

Back-to-School Trends

While the fundamental figures look great, it’s also important to note that Best Buy is the exact type of store that looks to have a great back-to-school season this year. According to research from the National Retail Federation, families this year are feeling more confident about the economy and will spend more money on back-to-school supplies.

(Also Read: How Will Shoppers Spend This Back-to-School Season?)

The NRF expects a larger number of students to head to college this year, which means that total spending in that area will increase. The study predicts that total spending by families of college students will increase $5 billion to $48.5 billion.

This is great news for Best Buy, a back-to-school outlet that’s much more welcome to college students. While K-12 students need pencils and notebooks, college students need more expensive items like computers or TVs for their dorm rooms. Best Buy has always targeted these students with great back-to-school deals during this season.

Bottom Line

Best Buy and its investors always expect stores to be busy during the back-to-school season, but this year it looks like all of the pieces are in place for a better-than-expected period. If you want to look at more back-to-school stocks, check out our 5 Stocks to Watch This Back-to-School Season.

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