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Best Buy (BBY) to Report Q1 Earnings: What to Expect? - Analyst Blog

Zacks Equity Research
Updated

Best Buy Co Inc. BBY, one of the leading consumer electronics retailers in the U.S., is slated to report its first-quarter fiscal 2016 earnings on May 21. In the last quarter, it had delivered a positive earnings surprise of 8.8%. Let’s see how things are shaping up for this announcement.

Factors Influencing the Quarter

Best Buy has maintained a cautious stance for fiscal 2016 given the challenges presented by the sector as well as the ongoing incremental investments. As a result, the company expects comparable-store sales for the first quarter of fiscal 2016 to range from flat to negative low-single digits, while adjusted operating margins might get hurt by 30-50 basis points. Also, unfavorable foreign exchange fluctuations are likely to impact the already dwindling international sales.

Earnings Whispers

Our proven model does not conclusively show that Best Buy is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: ESP for Best Buy is -13.79%. This is because both the Most Accurate estimate stands at 25 cents per share whereas the Zacks Consensus Estimate is pegged at 29 cents.

Zacks Rank: Best Buy’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +18.18% and a Zacks Rank #2 (Buy).

The Fresh Market, Inc. TFM has an Earnings ESP of +4.08% and a Zacks Rank #2.

Lowe's Companies Inc. LOW has an Earnings ESP of +2.70% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
BEST BUY (BBY): Free Stock Analysis Report
 
LOWES COS (LOW): Free Stock Analysis Report
 
AMER EAGLE OUTF (AEO): Free Stock Analysis Report
 
FRESH MARKET (TFM): Free Stock Analysis Report
 
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Zacks Investment Research