Best Buy (BBY) Q2 Earnings Awaited: What to Anticipate?

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Best Buy Co., Inc. BBY is slated to report second-quarter fiscal 2017 results on Aug 23. In the previous quarter, the company surpassed the Zacks Consensus Estimate by 25.7%. Notably, the company has surpassed earnings estimates in all the trailing four quarters, with an average beat of 24.1%. Let’s see how things are shaping up for this announcement.

Likely Earnings Beat in the Cards

Our proven model shows that Best Buy is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. The Most Accurate estimate stands at 44 cents, while the Zacks Consensus Estimate is pegged at 42 cents. So the ensuing difference – the Earnings ESP – is of +4.76%. A positive ESP combined with the company’s Zacks Rank #3, makes us reasonably confident of an earnings beat.

Factors at Play

Best Buy has been posting better-than-expected results over the last 14 quarters and the trend is expected to continue in the second-quarter of fiscal 2017. Improvement in online comparable sales, driven by higher traffic and conversion rates, is driving the company’s top line and bottom line.

In the previous quarter, the company reported a 23.9% surge in online comparable sales, driven by improved traffic and conversion rates. The company is investing extensively to upgrade its operations with special focus on developing omni-channel capacities and cementing its relationship with vendors.

Management had earlier projected  Enterprise revenues between $8.35 billion and $8.45 billion for the fiscal second quarter. Comparable sales are expected to remain flat year over year. Management expects earnings in the range of 38 cents–42 cents per share.

On the flip side, International revenues had declined 22.1%, 25.6%, 29.2% and 26.2% in the first, second, third and fourth quarter of fiscal 2016, respectively. In the first quarter, International segmental revenues declined 8.1% to $614 million due to brand consolidation and soft performance in Canada along with sharp fluctuations in foreign exchange rates.

Also, in the fiscal second quarter, the company expects international revenues to decline 5–10%. SG&A is expected to increase in the quarter primarily due to advertising expenses associated with the back-to-school season.

BEST BUY Price and EPS Surprise

BEST BUY Price and EPS Surprise | BEST BUY Quote

Stocks Likely to Beat Earnings Estimates

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

Sanderson Farms, Inc. SAFM currently carries a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +4.96%.

Dollar Tree, Inc. DLTR currently sports a Zacks Rank #2 (Buy) and has an Earnings ESP of +4.11%.

GameStop Corp. GME currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of +3.70%.

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