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The Zacks Analyst Blog Highlights: Best Buy, Microsoft, Wal-Mart Stores, Amazon.com and Estee Lauder

Zacks Equity Research

For Immediate Release
Chicago, IL – February 04, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Best Buy Co., Inc. ( BBY- Free Report), Microsoft Corporation ( MSFT- Free Report), Wal-Mart Stores Inc. ( WMT- Free Report), Amazon.com Inc. ( AMZN- Free Report) and Estee Lauder Inc ( EL- Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free .

Here are highlights from Monday’s Analyst Blog:

Best Buy Taking Steps to Turn Around
As per media reports, electronic giant retailer Best Buy Co., Inc. ( BBY- Free Report) is likely to slash 950 employees from its Canadian operations (Best Buy and Future Shop outlets) to cut down on costs.
Further, Best Buy is remodeling its outlets in Quebec, British Columbia, Manitoba, Ontario and Alberta with “Stores-within-a-Store” idea by collaborating with vendor partners including South Korean giant Samsung and Microsoft Corporation ( MSFT- Free Report).   
These moves are a part of Best Buy Canada’s efforts to streamline its operations and lay more emphasis on developing its online sales. This announcement comes nearly a year after Best Buy Canada declared its decision to shut down 15 outlets and lay off 900 employees.
Earlier in Jan 2014, Best Buy’s stock had crashed 30% in a single day following dismal holiday sales data and the subsequent trimming of guidance, raising concerns over CEO Hubert Joly’s ambitious restructuring strategy.
Best Buy’s sales fell 2.6% year over year to $11,451 million for the nine weeks ended Jan 4, 2014, while comparable store sales (comps) dipped 0.8% over the same time frame.
Best Buy held that intense promotional war, which characterized the holiday season, had significantly impacted its margins and thus compelled a downward revision in its operating margin guidance. The company had cut down prices, at the expense of profits, to compete better with peers such as Wal-Mart Stores Inc. ( WMT- Free Report).
The only silver lining was Best Buy’s strong online performance amid heightened competition from online giants like Amazon.com Inc. ( AMZN- Free Report). Online sales at the domestic segment rose 23.5% versus 10% in the prior-year period (nine weeks ended Jan 5, 2013).
The rise of e-commerce could become a potentially catastrophic event for bricks-and-mortar retailers. Amazon has metamorphosed the way consumers used to shop, and the company’s performance over this holiday season bears a testimony to it.
E-retailers have the biggest advantage of not maintaining any stores and as a result command a better pricing technique without denting margins. Bricks-and-mortar retailers falter on this ground as prices can be lowered only at the expense of margins as seen this holiday season.
We believe that Best Buy’s strategy is on the right track. However, it has failed to produce desired results as reflected in the dismal holiday sales. Hence, it is not easy to comprehend Best Buy’s situation at present until we get a clear picture.
Best Buy currently carries a Zacks Rank #5 (Strong Sell).
Can Estee Lauder (EL) Keep Its Earnings Streak Intact?

We expect cosmetics maker Estee Lauder Inc ( EL- Free Report) to beat expectations when it reports second-quarter fiscal 2014 results on Feb 5, 2014.

Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.94%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Estee Lauder’s Zacks Rank #2 and +0.94% ESP makes us very confident in looking for a positive earnings beat on Feb 5.

What is Driving the Better-than-Expected Earnings?

Estee Lauder has posted better-than-expected results in the last four quarters. Organic sales growth, product innovation and cost savings measures have remained the company’s strong points. We believe these factors will boost earnings in the upcoming quarter as well.

We are encouraged by Estee Lauder’s booming travel retail business. Rising air traffic is expected to boost sales in the Travel Retail segment in the upcoming quarter.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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