Best Buy Company Inc. (BBY), the leading specialty retailer of consumer electronic products,is slated to report its fourth-quarter 2012 financial results on March 29. The current Zacks Consensus Estimate for the quarter stands at $2.16 per share, representing an estimated year-over-year increase of about 9%. Revenue, as per the Zacks Consensus Estimate, is $17,233 million.
Third Quarter Overview
Best Buy's quarterly earnings of 47 cents a share missed the Zacks Consensus Estimate of 51 cents and declined 13% from 54 cents earned in the prior-year quarter. Moreover, including one-time items, earnings plunged 22% to 42 cents a share.
The company posted a 2% increase in its top line to $12,099 million. Moreover, Best Buy marked a trend reversal and registered a 0.3% growth in comparable-store sales versus a decrease of 3.3% witnessed in the year-ago quarter. However, total revenue missed the Zacks Consensus Estimate of $12,127 million.
Agreement of Estimate Revisions
We do not see any major estimate revisions at this point. Among the 20 analysts covering the stock, 1 revised the estimate downward in the last 30 days, while none moved in the opposite direction. For fiscal 2012, one analyst revised the estimate downward, while none raised the same.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the quarter and the current fiscal remained stable over the last 30 days. The company has been lagging in performance compared to its peers, such as Target Corporation (TGT) and Costco Wholesale Corporation (COST).
Best Buy's top- and bottom-line results missed the Zacks Consensus Estimate in the past two quarters. Moreover, soft comparable store sales and declining margins continue to remain a drag on its performance.
Mixed Earnings Surprise History
With respect to earnings surprises, Best Buy surpassed as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 11.3% to positive 7.3%. The average remained at negative 1.5%. This suggests that Best Buy has missed the Zacks Consensus Estimate by the same magnitude in the trailing four quarters.
Our Take
Best Buy intends to focus more on profitable sections, such as mobile computing, eReaders and appliances. The company's International business also provides opportunities for growth. It expects to strengthen the functions of the Best Buy brand in China with the Five Star division and is currently concentrating on its European operations. However, we still remain concerned regarding the falling comps in televisions, entertainment hardware and software categories, cautious consumer behavior and a sluggish economic recovery.
Considering the company's fundamentals, we maintain a long-term 'Neutral' recommendation on the stock. Moreover, Best Buy currently retains a Zacks #3 Rank, which translates into a short-term 'Hold' rating.
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