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Summary

  • Best Buy Company, Inc. is slated to report Q2 2015 earnings before the bell on Tuesday, August 26th.
  • Adjusted or Non-GAAP Earnings Per Share: The Street's estimate is $0.31 (range $0.25 to $0.39).
  • Revenues: Analysts expect a decline of 3.3% y/y to $8.99 bln (range $8.76 bln to $9.16 bln).

By Craig Bowles

Overview

Best Buy Company, Inc. (NYSE:BBY) is slated to report Q2 2015 earnings before the bell on Tuesday, August 26th. The earnings release is expected at approximately 7:00 a.m. EST, followed by an 8:00 a.m. conference call available at Best Buy Investor Relations. The consumer electronics giant is widely seen as a key barometer on the health of the consumer and the economy. Its results, therefore, have a historical tendency to impact the broader market, including the CME index futures contracts and other broader market gauges.

Outliers & Strategy

Key measures:

  • Adjusted or Non-GAAP Earnings Per Share: The Street's estimate is $0.31 (range $0.25 to $0.39) (Source: Yahoo Finance).
  • Earnings Per Share: If an Adjusted EPS figure is not available, this value would compare with forecasts.
  • Revenues: Analysts expect a decline of 3.3% y/y to $8.99 bln (range $8.76 bln to $9.16 bln).
  • Comparable Store Sales: According to Zacks Investment Research, analysts are expecting -2.2%.
  • Earnings Per Share Guidance for FY2015: Best Buy suspended guidance and stock buybacks in August 2012 while transitioning to a new CEO, but hasn't reinstated guidance so far. The current Street estimate is $2.28 (range $1.95 to $2.83).
  • Best Buy insiders sold 1,811,247 shares over the last three months and 4,925,988 shares in the past year.
  • Wal-Mart set a neutral-to-negative tone for retailers after reporting earnings in-line and beating on revenue, but lowering FY earnings guidance. Target (NYSE:TGT) lowered guidance, as well. (40% of S&P 500 retail has beaten estimates.)
  • Price/Book of 2.3 and Price/Sales of 0.2 are in line with the 5-year average. Last quarter, the Dividend Yield was similar to the 5-year average at 2.6, but is now 2.3, so the company increased the dividend by 12%. Price/Cash Flow of 7.4 compares to a 5-year average of 2.8.
  • Best Buy results could impact other consumer electronics retailers, such as Radio Shack (NYSE:RSH) and hhgregg (NYSE:HGG). Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) have a growing presence in this area, as well.
  • Best Buy shares have a 1-day average price change on earnings of 6.65%. Options are pricing in an implied move of 7.59% off earnings.

Recent News

  • 08/14 Best Buy CEO Hubert Joly said tablets sales were "crashing" and the PC business was seeing a revival in sales, according to a post on Reuters.com.
  • 07/24 Best Buy could gain on Radio Shack's eventual failure, as the company still generates $3 bln in sales annually, according to a post on Fool.com.
  • 07/22 Best Buy showed a large bearish position taken in purchases of December puts and sales of December calls, according to a post on Optionmonster.com.

Technical Review

Best Buy regained 50% of the drop that took place at the first of the year, so time will tell if recent strength was just a normal bounceback reaction. Moving back below $29 would reaffirm the declining 200-day moving average and has limited support down to $23. So, the break-out of the current $29-$32 range potentially has more than just short-term implications. Long-term holders are probably wishing they had gotten out when highs were retested late last year, so may be acting as a drag on the recent bounce. (Chart courtesy of StockCharts.com)

Summary

Best Buy remains in a transition phase as it attempts to cut costs while expanding its private-label electronics business. Analysts aren't very optimistic on retail, with Wal-Mart and Target lowering guidance. The company normally handily beats estimates, so would probably need to at least hit the original analyst estimate of $0.34 for the quarter with revenue above analysts' consensus. Analysts expect same-store sales to decline, with the most optimistic seeing a 1.3% decrease. The stock has bounced around wildly for a number of years without a general trend, so long-term investors may be losing patience.

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Source: Earnings Preview: Best Buy Q2 2015