Will Bed Bath & Beyond Turn Around Its 6-Month Slump On Wednesday?

Jun.24.14 | About: Bed Bath (BBBY)

Summary

The home goods company has missed analyst forecasts 2 quarters in a row, and will be hoping that Spring sales can turn things around.

This quarter, Wall Street is expecting modest gains relative to the comparable quarter of last year, with EPS improving by 2 cents per share and revenue increasing by 3% on a year-over-year basis.

However, BBBY shares have been on a slide, and investors are not as optimistic as Wall Street about the prospects for growth this quarter.

Bed Bath & Beyond Inc. (NASDAQ:BBBY) is set to report FQ1 2015 earnings after the market closes on Wednesday, June 25th. Bed Bath & Beyond is one of the largest chain retailers of household goods. The home goods company has missed analyst forecasts 2 quarters in a row, and will be hoping that Spring sales can turn things around. This quarter, Wall Street is expecting modest gains relative to the comparable quarter of last year, with EPS improving by 2 cents per share and revenue increasing by 3% on a year-over-year basis. However, BBBY shares have been on a slide, and investors are not as optimistic as Wall Street about the prospects for growth this quarter.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy-side and Independent analyst contributors.

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(Click Here to see Estimates and Interactive Features for Bed Bath & Beyond)

The current Wall Street consensus expectation is for Bed Bath & Beyond to report 95c EPS and $2.691B revenue, while the current Estimize.com consensus from 10 Buy-side and Independent contributing analysts is 95c EPS and $2.676B in revenue. This quarter, the buy-side, as represented by the Estimize.com community, is expecting Bed Bath & Beyond to report in line with the Wall Street consensus on EPS, but come up slightly short on sales.

By tapping into a wider range of contributors, including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time.

More importantly, it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Here, we are seeing a smaller-than-usual differential between the two groups' expectations.

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The distribution of earnings estimates published by analysts on the Estimize.com platform range from 93c to $1.01 per share, and from $2.602B to $2.700B in revenues. This quarter, we're seeing a relatively small range of estimates on Bed Bath & Beyond's EPS compared to previous quarters.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A narrow range of earnings estimates signals more agreement in the market, which could mean less volatility post-earnings.

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Over the past 3 months, the Wall Street consensus fell from $1.03 to 95c, while the Estimize consensus declined from 98c to 95c. Meanwhile, the Wall Street revenue forecast sank from $2.733B to $2.691B, while the Estimize sales consensus dropped to a low of $2.661B, before climbing to $2.676B. Timeliness is correlated with accuracy, and the directionality of analyst revisions at the end of the quarter is often a leading indicator. In this case, we see mostly flat analyst revisions going into the report.

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The analyst with the highest estimate confidence rating this quarter is turbinecity, who projects 96c EPS and $2.700B in revenue. turbinecity was our Winter 2014 season winner, and is ranked 2nd overall among over 4,550 contributing analysts. This season, turbinecity has been more accurate than Wall Street in forecasting EPS and revenue 60% and 51% of the time respectively throughout a massive 1,173 estimates.

Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, turbinecity is expecting Bed Bath & Beyond to beat the Estimize consensus on both EPS and revenue.

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Bed Bath & Beyond stock has been struggling over the past 6 months, after missing the earnings consensus from Estimize 2 quarters in a row. The graph above from ChartIQ Visual Earnings shows how sharply shares fell after the surprising earnings miss in January. This quarter, contributing analysts on the Estimize.com platform have lowered their expectations and are predicting that Bed Bath & Beyond will report in line with the Wall Street EPS consensus, but will miss the sales projection by a relatively small margin of $15 million.

Disclosure: None