(BBY) Best Buy Company Earnings Scorecard

Best Buy Company, Inc. (BBY), the leading specialty retailer of consumer electronic products, recently posted better-than-expected first-quarter 2012 results.

Street analysts had over a week to ponder on the company’s scores. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.

Earnings Report Review

Best Buy’s quarterly earnings of 35 cents a share, topped the Zacks Consensus Estimate of 33 cents, but fell 2.8% from 36 cents earned in the prior-year quarter. Management reiterated its fiscal 2012 adjusted earnings guidance range of $3.30 to $3.55 per share.

Richfield, Minnesota based Best Buy’s total revenue climbed 1.4% to $10,940 million from the prior-year quarter. However, the company registered a fall of 1.7% in comparable-store sales versus a growth of 2.8% witnessed in the year-ago quarter.

The total revenue also came ahead of the Zacks Consensus Estimate of $10,697 million. For fiscal 2012, Best Buy projected revenue between $51 billion and $52.5 billion.

Agreement of Estimate Revisions

In the last 7 days, 10 out of 25 analysts covering the stock raised their estimates, whereas 4 analysts lowered their estimates for second-quarter 2012. For third-quarter 2012, 7 analysts raised their estimates and 6 analysts cut theirs.

For fiscal 2012, 14 analysts moved their estimates upward, whereas 2 analysts moved their estimates downward. For fiscal 2013, 11 analysts raised their estimates and 2 analysts lowered theirs in the last 7 days.

Magnitude of Estimate Revisions

For second-quarter 2012, the Zacks Consensus Estimate moved up by a penny to 55 cents, whereas for third-quarter 2012, the Zacks Consensus Estimate remains stable at 55 cents in the last 7 days.

For fiscal 2012, the Zacks Consensus Estimate jumped by 4 cents to $3.50, and for fiscal 2013, the Zacks Consensus Estimate rose by 5 cents to $3.71 in the last 7 days.

Best Buy in Neutral Lane

Best Buy’s customer-centric operating model remains the driving factor behind its growth. The company tailors store merchandising, staffing, marketing and presentation to meet the distinct needs of its targeted customers. The company’s various assortments, store formats and brand marketing strategies provide an edge over competitors.

Best Buy intends to focus more on profitable sections, such as tablets, mobile phones, appliances and gaming. 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 expand in new markets of Mexico and the United Kingdom.

However, we still remain concerned about falling comps in televisions, and entertainment hardware and software categories.

Moreover, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels which may negatively impact their discretionary spending, and in turn its growth and profitability.

Given the pros and cons we maintain our ‘Neutral’ rating on the stock. Moreover, Best Buy, which faces competition from Wal-Mart Stores Inc. (WMT), also holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating, and correlates with our long-term recommendation.

BEST BUY (BBY): Free Stock Analysis Report

WAL-MART STORES (WMT): Free Stock Analysis Report

Zacks Investment Research

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