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Best Buy (NYSE: BBY) Stock Spikes With Consensus Earnings Beat

Posted on Tuesday, November 26th, 2019 by Steve Anderson

Best Buy (NYSE: BBY) Stock Spikes With Consensus Earnings Beat

With Thanksgiving just around the corner and Black Friday waiting in the wings, masses are planning out their battle strategies for clearing their Christmas, Hanukkah and Kwanzaa shopping lists. For those planning to hit Best Buy (NYSE: BBY), rest assured you're in good—and broad—company. Best Buy recently offered up its earnings report and revealed that it couldn't have gone much better for the big-box electronics retailer.

Ticking All the Best Boxes at Best Buy

Looking at the reports, the only way things could have been better is if the numbers had been higher or Best Buy was about to announce a way to bring next generation's gaming consoles back from the future for sale this holiday season.

Literally every measure turned out positive. Adjusted earnings per share came in at $1.13, up handily from the $1.03 expected by an analyst consensus. Revenue was up from the $9.7 billion expected, hitting $9.76 billion instead. Even same-store sales growth was on a tear, beating the expected 1.3% by a healthy margin, posting 1.7% instead. Net income for the third quarter was up to $293 million, up from $277 million the same time last year.

The market went quite thoroughly bananas in response. Early trading saw the stock up fully six percent, and though it's given back some of those gains as of this writing, it's still well off yesterday's close. Not only were shares up fully 40% in year-to-year measures, but the stock actually managed to hit a new 52-week high briefly at $78.92.

As excellent as Best Buy's third-quarter earnings report was, it was the projections for the future that put the icing on an already-exciting cake. Adjusted fiscal 2020 earnings were hiked from the prior estimates of $5.60 - $5.75, now showing $5.81 - $5.91. Given reports that analysts are projecting $5.74 for Best Buy's fiscal 2020, these are some welcome numbers.

Best Buy Defying the Odds and Pushing Forward

Retail analysts and longtime fans of “The Simpsons” know that the third quarter is commonly not a good one for retail. There aren't a lot of special events driving things, not like the second quarter with Mother's Day, Father's Day and graduations, or like the fourth quarter with holidays aplenty. Even the first quarter can look forward to a bump from Valentine's Day and the holiday returns/gift card season.  Aside from back-to-school shopping—which doesn't tend to put much of a bump behind much more than school clothes and supplies—the third quarter is quiet. So what's driving gains at Best Buy?

First, Best Buy has been putting a lot of weight behind improving its customer experience and online connections. We saw yesterday that Black Friday can actually hurt some retail stocks, especially if these companies are seen as weakly-connected to the changing shopping landscape. Best Buy recently launched 175 new pickup locations for goods purchased. These alternate pickup points are found in New York CVS (NYSE:CVS) and UPS (NYSE: UPS) stores and Chicago UPS Stores right now, reports from CNBC note. While that's a pretty limited scope, it's still likely welcome for those who want to buy from Best Buy, but can't actually get there.

Second, Best Buy has stepped up its next-day delivery capabilities as well. Back in late October, Best Buy announced plans to put the next-day delivery concept on “thousands of items” that would reach “99% of customers), though this was limited to smaller items. Conversely, shoppers would also be able to pick up any item ordered within an hour at the nearest Best Buy location.

A Bright Holiday Ahead?

While it would have been reasonable to suggest a brisk 2020 holiday, especially with reports of the next generation of gaming consoles poised to go live, it looks like holiday 2019 will be a fine one for Best Buy as well. The particularly eye-catching part here is that Best Buy is making a better holiday on the strength of improved fundamentals, not putting its hope in some new piece of merchandise.

It all goes to underscore the value of improved customer experience, which these days often means “how well you work online.”

Companies Mentioned in This Article

CompanyCurrent
Price
Price
Change
Dividend
Yield
P/E
Ratio
Consensus
Rating
Consensus
Price Target
Best Buy (BBY)$82.05+2.2%2.44%15.42Buy$82.67
CVS Health (CVS)$75.36+1.2%2.65%10.64Buy$77.14

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