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By: Todd McDonald - Analyst

Overview

Bed Bath & Beyond (NASDAQ:BBBY) is slated to report 4Q 2012 earnings after the close of trading on Wednesday, April 10, with a conference call to follow at 5:00 p.m. EST. The results are typically available at 4:15 p.m. EST. Although there are continuing concerns over brick-and-mortar retail businesses, stocks such as Best Buy (NYSE:BBY), Target (NYSE:TGT) and Macy's (NYSE:M) have been outperforming the broader market indices, as well as Amazon (NASDAQ:AMZN) in 2013.

Outliers And Strategy

  • Earnings Per Share: In the 3Q2012 earnings release, the company forecasted 4Q2012 Earnings Per Share of $1.60 to $1.67, below the current Street consensus of $1.68, with a range of $1.65 to $1.80. (Source: Yahoo Finance) EPS have been reported above consensus estimates seven out of the past eight quarters.
  • Revenues: Revenues are seen rising 24.2% from 4Q2011 to $3.39 BLN with a range of $3.30 BLN to $3.45 BLN. Revenues have exceeded estimates in four of the last eight quarters.
  • Earnings Per Share Guidance (1Q2013): Analysts estimates for 1Q2013 are $0.95, with a range of $0.89 to $1.00.
  • Comparable Store Sales: According to a March 13 post on Benzinga.com, Morgan Stanley expects a 1.7% increase in comparable store sales, while the street consensus is 2.7%.
  • Implied Volatility: Over the past eight quarters, the average, absolute one day move after earnings has been 8.05%. Using options premiums, traders are expecting a move of approximately 6.4% after earnings are disseminated.

Recent News

  • 04/05: According to a study done by Placed.com called "Aisle to Amazon," Bed Bath & Beyond was deemed to be the most vulnerable to the recent trend of showrooming - where consumers visit retail stores, then purchase goods online.
  • 04/01: Goldman Sachs reiterated a sell rating, according to a post on StreetInsider.com. Analyst Matthew Fassler cites concerns about pricing competition from online retailers and difficulty of encouraging impulse buys on their website.
  • 03/28: According to a post on Benzinga.com, Oppenheimer reiterated its Outperform rating and $71 price target. Analyst Brian Nagel believes the recent pullback presents a buying opportunity. The firm believes that concerns about margin pressures due to online retailers are overdone.
  • 03/13: US Retail Sales were much better than expected in February, increasing 1.1% versus expectations for an increase of 0.5%.
  • 03/09: An article in Barron's by Andrew Bary highlights the bull case for Bed Bath & Beyond, citing relative valuation, potential for a takeover, buybacks and plans to roll out a new website this year.

Technical Review

Bed Bath & Beyond shares are currently consolidating and working off an overbought reading on RSI. Further, the 50-day SMA looks poised to form a bullish "golden-cross" over the 200-day SMA. For an earnings surprise to the upside, look for initial resistance at the recent highs near $65, followed by $68, which is the low from the gap down on September 19, 2012. Should earnings disappoint, look for support at old resistance near $60, which also corresponds with both moving averages (Chart courtesy of StockCharts.com).

Summary

Bed Bath & Beyond has seen a solid run-up in share prices YTD, thanks in part to an improving housing market and a more confident consumer. However, the company still faces concerns over showrooming and margin compression due to competition from online retailers. A combination of earnings per share, revenues, comparable store sales, and next quarter earnings per share guidance should be used to provide a reliable trading signal, one way or the other. Any missteps could have severe implications to the stock's price action.

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Source: Bed Bath & Beyond: Q4 2012 Earnings Preview