Is Best Buy a Buy or a Sell?

Best Buy (BBY) announced first quarter ended April 30, 2016 total revenue of $8.4 billion, down 2 percent year-over-year from $8.6 billion during the same period last year. Going forward, the company has provided revenue guidance for second quarter of fiscal 2017 and estimates enterprise revenue to decline 2.1% to 0.9% year-over-year and to be recorded in the $8.35 billion to $8.45 billion range while international revenue is estimated to decline in the range of 5% to 10%.

Best Buy declared first quarter of 2016 net earnings of $229 million or $0.44 per diluted share, up 78 percent year-over-year from $129 million or $0.37 per diluted share in first quarter of 2015.
The company expects second quarter of fiscal 2017 non-GAAP diluted EPS to be in $0.38 to $0.42 range as against $0.49 in fiscal 2016.

The global technology products, services, and solutions retailer reported significant year-over-year bottom line growth primarily driven by significant customer traction for the company’s advanced set of technology products and solutions. However, the top line suffered somewhat due to a robust demand for home theaters, appliances and wearable devices failed to compensate poor sales of computers and mobile phones.

What’s powering growth?

Best Buy declared somewhat flat comparable sales for its domestic business compared to the projected sales decline of 1% to 2% which was primarily allowed by robust year-over-year sales expansion in home theater, wearables, health and appliances offset by ongoing sales weakness in tablets and mobile phones. Further, the company’s online channel performed superbly and greatly contributed to these superior quarterly results and better than the expectations, expanding 24% during the quarter.

Moving ahead, Best Buy is constantly focused on developing on its robust industry position along with superior multi-channel capabilities for driving the current business, executing upon cost minimization and efficiency maximization strategies while advancing major efforts to deliver impressive prospective company differentiation and growth. BBY is continuously and closely pursuing customer needs, demand and passion which is estimated to drive sustainable long-term growth for the key electronics retailer.

A majority of the company’s key growth segments are delivering impressive quarterly performance and increasingly adding to Best Buy top line growth which is expected to continue over a longer term, given the company’s solid financial position and innovative expansion strategies to drive long-term growth and attractive shareholder returns.

Importantly, the Board of Directors at Best Buy Co., Inc. recently declared a quarterly cash dividend payment of $0.28 per common share payable July 5, 2016 to all the key stakeholders as of June 14, 2016, which is a solid 22% growth over the previous regularly paid quarterly dividend.

In addition, BBY has strategically announced a fresh $1 billion share buyback program which is estimated to get completed in two consecutive years. Also, the company recently declared an unusual $0.45 per share of dividend, or nearly $145 million and linked to the total after-tax advances from some planned asset disposals and legal settlements.

Therefore, Best Buy seems keenly focused on delivering attractive shareholder returns in the form of dividends and planned share repurchases through uniquely maintaining a robust cash position by only investing strategically in key growth operations and value-based acquisitions while minimizing non-core expenditures.

Conclusion

Overall, the investors are advised to “Hold” their position in Best Buy Co., Inc. considering the company’s significant long-term growth prospects being supported by a solid financial position with notable total cash of $3.06 billion against a smaller total debt position of $1.38 billion only, encouraging the company to make future growth investments. The profit margin of 2.53% seems attractive. The PEG ratio of 1.05 signifies healthy company growth and better than the industry’s growth average of 0.79 only.
Published on Jun 9, 2016
By Subhen Mittra

Copyrighted 2016. Content published with author's permission.

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