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Best Buy's (BBY) to Post Q1 Earnings: Is a Beat in Store?

Zacks Equity Research

Best Buy Co. Inc BBY is likely to witness bottom-line growth in first-quarter fiscal 2020. Notably, this Minnesota-based company’s earnings have comfortably surpassed the Zacks Consensus Estimate in the preceding four quarters.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is currently pegged at 88 cents, implying an increase of 7.3% from the year-ago quarter’s reported figure. We note that the Zacks Consensus Estimate has gone up by a penny over the past 30 days. The consensus mark for revenues is pegged at $9,142 million, almost in line with the figure reported in the year-ago quarter.

Best Buy Co., Inc. Price and EPS Surprise

Best Buy Co., Inc. Price and EPS Surprise


Best Buy Co., Inc. price-eps-surprise | Best Buy Co., Inc. Quote

Factors Likely to Influence Results

Best Buy’s extensive investments to upgrade operations, with special focus on developing omni-channel capabilities, stores and supply chain, new business initiatives, cost-reduction opportunities, and strengthening partnerships with vendors, bode well. These endeavors are expected to drive the company's top line and overall profitability. 

In fact, management had earlier projected adjusted earnings for the fiscal first quarter to be 83-88 cents, up from 82 cents reported in the year-ago period. Best Buy envisioned Enterprise revenues of $9.05-$9.15 billion compared with $9.1 billion reported in the year-ago quarter along with comparable sales of flat to up 1%.

Certainly, the company is leaving no stones unturned to attract consumers and attain incremental revenues. In this regard, Best Buy embarked on a new initiative to break its image of being a brick-and-mortar retailer. In doing so, it has launched Best Buy 2020: Building the New Blue strategy that focuses on expanding the multi-channel retail business, and offering services and solutions that meet customers’ needs. Notably, the company has been smoothly progressing with the implementation of this strategy by improving its In-Home Advisor program and expanding the Total Tech Support members to boost customer experience. The strategy focuses on exploring and pursuing growth opportunities, executing better in key areas, optimizing costs, and investing in people and systems. Such well-chalked plans are likely to drive the company’s results in the to-be-reported quarter.

Additionally, the company is making efforts to improve customer’s shopping experience by innovating and designing its website, app and other channels. Moreover, Best Buy is also undertaking supply-chain initiatives to expedite the delivery process. We anticipate these strategies to positively impact the first-quarter results.

Nevertheless, rise in SG&A costs related to expenses involved in GreatCall may hurt the company’s margin to some extent in the first quarter. Further, investments in supply chain and technology, and increased wage and transportation expenses may keep margins under pressure.

What does the Zacks Model Predict?

Our proven model shows that Best Buy is likely to beat estimates this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Best Buy currently carries a Zacks Rank #3 and an Earnings ESP of +0.31%, which makes us confident of a beat.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Poised to Beat Earnings Estimates

Here are a few other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Target Corporation TGT has an Earnings ESP of +0.42% and a Zacks Rank #2.

Costco Wholesale Corporation COST has an Earnings ESP of +2.10% and a Zacks Rank #3.

Urban Outfitters URBN has an Earnings ESP of +1.81% and a Zacks Rank #3.

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