U.S. Markets closed

Falling Earnings Estimates Signal Weakness Ahead for Best Buy (BBY)

Zacks Equity Research

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Best Buy Co., Inc. (BBY), which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #5 (Strong Sell) further confirms weakness in BBY.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 19 estimates moving down in the past 30 days, compared with no upward revision. This trend has caused the consensus estimate to trend lower, going from $2.46 a share a month ago to its current level of $1.85.

Also, for the current quarter, Best Buy has seen 16 downward estimate revisions versus no revision in the opposite direction, dragging the consensus estimate down from $1.62 a share to $1.01 over the past 30 days.   

The stock also has seen some pretty dismal trading lately, as the share price has dropped 38.9% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the Retail sector, you may instead consider some better-ranked stocks including Macy's, Inc. (M), Foot Locker, Inc. (FL) and priceline.com Incorporated (PCLN). All these stocks hold a Zacks Rank #2 (Buy) and may be better selections at this time.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

BEST BUY INC (BBY): Free Stock Analysis Report

MACYS INC (M): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

PRICELINE.COM INC (PCLN): Free Stock Analysis Report

Zacks Investment Research