Bed Bath & Beyond (BBBY) Q2 Earnings: What's In Store?

Bed Bath & Beyond Inc. (NASDAQ:BBBY) is slated to release second-quarter fiscal 2016 results on Sep 21. Last quarter, the company had delivered a negative earnings surprise of 7%. Let’s see how things are shaping up prior to this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Bed Bath & Beyond is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen.

Bed Bath & Beyond has an Earnings ESP of -1.71%, as the Most Accurate estimate stands at $1.15, while the Zacks Consensus Estimate is pegged higher at $1.17. While the company’s Zacks Rank #3 increases the predictive power of ESP, yet we need to have a positive ESP to be confident about an earnings surprise.

Factors Influencing This Quarter

Sluggish mall traffic and high promotional costs may impact the company’s results in the second-quarter also. Further, due to its exposure to global markets, the company faces various risks associated with international operations, including currency fluctuations. Hence, persistence of the currency headwinds remains a threat.

Management remains hopeful about driving future growth on the back of its strategic investments and omnichannel progress. Following the soft quarter and in view of the current trends, management anticipates fiscal 2016 earnings per share in the range of $4.50 to a little over $5.00. The estimate also includes the expected impact from the company’s recent acquisition of One Kings Lane.

However, Bed Bath & Beyond now projects comps growth for fiscal 2016 in the range of flat to a 1% increase, compared with a 1%–2% rise projected previously. Further, the company witnessed a rise in selling, general and administrative (SG&A) expenses in the first quarter due to higher advertising and technology related expenses. Management expects all these factors to linger in the future and therefore, anticipates gross margin and SG&A expense deleverage in fiscal 2016. We expect the pressurized margins and higher expenses to dent the company’s bottom line performance.

Stocks Poised to Beat Earnings Estimates

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

Coca-Cola European Partners Plc (NYSE:CCE) has an Earnings ESP of +4.11% and a Zacks Rank #3.

Carnival (LON:CCL) Corp. (NYSE:CCL) has an Earnings ESP of +2.13% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Finish Line Inc. (NASDAQ:FINL) has an Earnings ESP of +1.89% and a Zacks Rank #3.

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