Will Q1 Earnings Hold A Surprise For Best Buy (BBY) Stock?

Best Buy Co., Inc. (NYSE:BBY) is slated to report first-quarter fiscal 2017 results on May 24. In the previous quarter, the company surpassed the Zacks Consensus Estimate by 9.3%. Notably, the company has surpassed estimates in all the trailing four quarters, with an average earnings beat of 24.5%. Let’s see how things are shaping up for this announcement.

Likely Earnings Beat in the Cards

Our proven model shows that Best Buy is likely to beat earnings estimates this quarter. 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. The Most Accurate estimate stands at 36 cents, while the Zacks Consensus Estimate is pegged at 35 cents. So the ensuing difference – the Earnings ESP – is of +2.86%. A positive ESP combined with the company’s Zacks Rank #2, makes us reasonably confident of an earnings beat.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Best Buy has been posting better-than-expected results over the last 13 quarters and the trend is expected to continue in the first-quarter of fiscal 2017. Improvement in online comparable sales driven by higher traffic and conversion rates is driving the company’s top line and bottom line higher. The company is making extensive investments to upgrade its operations with special focus on developing omni-channel capacities and strengthening its relationship with vendors.

In fiscal 2016, the company completed its plan of rolling out Pacific Kitchen & Home stores-within-a-store by adding 59 stores and taking the total to 176. This will also help the company to witness top-line growth in the quarter to be reported.

For first-quarter fiscal 2017, management forecasts Enterprise revenues between $8.25 billion and $8.35 billion. Earnings have been estimated in the range of 31 cents to 35 cents per share.

Stocks Likely to Beat Earnings Estimates

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

Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) 2016, currently sports a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +3.39%.

NIKE, Inc. (NYSE:NKE) currently carries a Zacks Rank #3 and has an Earnings ESP of +2.08%.

Carnival (LON:CCL) Corporation (NYSE:CCL) currently carries a Zacks Rank #3 and has an Earnings ESP of +5.26%.