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Bed Bath & Beyond Inc. (BBBY), one of the leading operators of specialty retail stores in the U.S. and Canada, is scheduled to report its third-quarter 2011 financial results after the market closes on December 21, 2011. The current Zacks Consensus Estimate for the quarter is earnings of 88 cents a share. For the quarter under review, revenue is expected to be $2,355 million, according to the Zacks Consensus Estimate.

Second-Quarter 2011, a synopsis

Bed Bath & Beyond reported better-than-expected second-quarter 2011 results on the heels of strong growth in sales and higher margins. Earnings rose approximately 33% to 93 cents per share from the year-ago quarter earnings of 70 cents a share, handily surpassing its earnings guidance range of 77 cents per share to 82 cents per share. Bed Bath & Beyond also outpaced the Zacks Consensus Estimate of 84 cents a share.

Bed Bath’s top line jumped almost 8.3% to $2,314.1 million from $2,136.7 million in the year-ago quarter. The company's top line also came marginally ahead of the Zacks Consensus Estimate of $2,313.0 million. The company has been witnessing increasing trends in comparable-store sales.

Earnings Guidance

Bed Bath & Beyond expects to deliver third-quarter 2011 earnings per share between 82 and 87 cents. Moreover, fiscal 2011 earnings per share are expected to increase by 22% to 25% from the prior-year, up from its previous forecast of 15% and 20%.

Zacks Consensus

The analyst covered by Zacks expects Bed Bath to post third-quarter 2011 earnings of 88 cents a share, higher than 74 cents delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of 85 cents and 93 cents a share.

For fiscal 2011, the Zacks Consensus Estimate stood at $3.83 per share, higher than the previous fiscal earnings of $3.07. The current Zacks estimate ranges between $3.76 and $3.93 per share.

Agreement of Estimate

In the last 7 and 30 days, only 1 out of 21 analysts have revised its estimate in the positive direction for the third quarter as well as for fiscal 2011.

Magnitude of Estimate Revisions

Despite positive estimate revision by an analyst, the Zacks Consensus Estimates remained stagnant at 88 cents and $3.83 per share for the third quarter and fiscal 2011, respectively over the last 7 and 30 days.

Surprise History

With respect to earnings surprises, Bed Bath has topped the Zacks Consensus Estimate over the last four quarters in the range of 10.7% to 16.1%. The average remained at positive 13.6%. This suggests that Bed Bath has surpassed the Zacks Consensus Estimate by an average of 13.6% in the trailing four quarters.

Our View

Bed Bath is a leading operator of merchandise and home furnishing stores in the U.S. Moreover, a strong countrywide network of more than 1,100 stores coupled with the strategic effort to align merchandise according to regional climate and demographics offer a strong competitive advantage while strengthening its well-established position in the market.

Moreover,Bed Bath has reported ten consecutive quarters of improving trend, as its earnings for second-quarter 2011 rose approximately 33% to 93 cents per share compared with the prior-year quarter’s earnings of 70 cents, on the heels of high single-digit growth in sales and improved margins.

Bolstered by better-than-expected quarterly earnings, the company has raised its fiscal 2011 earnings guidance range. Bed Bath & Beyond now expects earnings per share for fiscal 2011 to increase by 22% to 25% year-over-year, a rise from its previous forecast of 15% and 20%.

However,the company operates in a highly fragmented industry and faces competition from larger retailers, such as Target Corporation (TGT) and Wal-Mart Stores Inc. (WMT) as well as departmental and specialty stores. Bed Bath may find it difficult to execute and implement new business strategies in such a competitive industry, thereby impacting its operations adversely.

We currently have a short-term Zacks #2 Rank (Buy) and a long-term Neutral recommendation on the stock.

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Source: Bed Bath & Beyond: Earnings Preview