How Best Buy (BBY) Is Placed Just Ahead Of Its Q4 Earnings

Best Buy Co., Inc. (NYSE:BBY) is scheduled to report fourth-quarter fiscal 2020 results on Feb 27, before the opening bell. Notably, the company has a trailing four-quarter positive earnings surprise of 9.9%, on average. If all goes well, the quarter will mark the ninth straight quarter of earnings beat for the company.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.76, which suggests growth of 1.5% from $2.72 earned in the year-ago quarter. Moreover, the consensus mark for quarterly revenues is at $15,093 million. The figure indicates a rise of around 2% from the year-ago quarter’s tally.

Key Things to Note

Well-chalked endeavors like “Building the New Blue” program, expansion of omni-channel capabilities and reinforcing foothold in the healthcare technology space are likely to have driven revenues in fiscal fourth quarter. The company is on track with the next phase of its ‘Building the New Blue’ program called ‘Building the New Blue: Chapter Two.’ Through this program, Best Buy is aiming toward growth opportunities, better execution in key areas, cost containment and investment in people as well as systems. Management has been making investments to upgrade operations, with focus on developing stores and supply chain as well as strengthening partnerships with vendors. Also, the Total Tech Support and In-Home Advisor programs bode well.

In its last earnings call, the company projected Enterprise revenues of $14.75-$15.15 billion and comps growth of 0.5-3% for fiscal fourth quarter. Also, Best Buy guided marginal improvement in SG&A expenses on a year-over-year basis for fiscal fourth quarter driven by lower incentive compensation expenses. Management had envisioned adjusted earnings of $2.65-$2.75 per share for the to-be-reported quarter.

Encouragingly, the Zacks Consensus Estimate of $13,820 million for fourth-quarter revenues in the Domestic segment indicates an increase of 2.4% year over year. The consensus mark for Enterprise comparable sales are pegged at growth of 1.9% for the to-be-reported quarter, while Domestic comparable sales are likely to rise 2%.

In spite of the aforesaid factors, Best Buy is exposed to industry headwinds such as aggressive promotional strategies, intense competition and adverse foreign currency risks. Also, sluggishness in its International segment is a concern. Apparently, the consensus mark for the International comparable sales indicates a decline of 1.3% in the to-be-reported quarter.

What Our Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Best Buy this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Best Buy carries a Zacks Rank #2, its Earnings ESP of -2.14% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

G-III Apparel Group (NASDAQ:GIII) has an Earnings ESP of +5.62% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco (NASDAQ:COST) has an Earnings ESP of +0.20% and a Zacks Rank #2.

Burlington Stores (NYSE:BURL) has an Earnings ESP of +0.02% and a Zacks Rank #2.

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