Best Buy (BBY) Stock Rallies Sharply After Solid Earnings Beat

Shares of Best Buy Co. Inc. (BBY) were trading up +5.51 or +16.80 percent to $38.31 per share in Tuesday’s premarket after the company reported better than expected results for its second fiscal quarter of 2016. Best Buy stock closed at $32.80, up +0.21 or +0.64 percent in Monday’s regular trading session.

Stock Analysis

Founded in 1966 as an audio specialty store called Sound of Music in Saint Paul, Richfield, Minnesota based Best Buy Co. renamed in 1983 concentrating more on consumer electronics.
The company is the world’s largest retailer of consumer electronics products operating over 1,000 stores domestically, as well as more than 100 Best Buy Express automated retail stores operated by Zoom Systems in malls and airports. Best Buy operates stores in the United States, where 70 percent of the population live within 15 minutes of a Best Buy store, Canada and Mexico. In addition to its traditional brick and mortar stores, Best Buy has an increasingly strong online presence with and the Best Buy app for Android and iOS.

For Best Buy’s fiscal second quarter ended on July 30th, 2016, the company reported GAAP earnings of $198 million or $0.61 per share compared to $164 million or $0.46 per share in the same period one year ago.
Best Buy (BBY) Stock Rallies Sharply After Solid Earnings Beat
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On an adjusted basis, with the exclusion of non-recurring items such as discontinued operations, earnings per share came to $0.57.

Revenue for the quarter edged up to $8.533 billion compared to $8.528 billion in 2015’s second quarter. The analyst consensus was for the company to report adjusted earnings of $0.43 per share on revenue of $8.39 billion.

Best Buy Chairman and Chief Executive Officer, Hubert Joly stated in the company’s press release this morning that, “We are encouraged by the quality of our execution, the momentum in our business and the strength of our first half financial results. We are excited by our mission to help customers live their lives and pursue their passions with the help of technology and the growth opportunities this mission creates for us. I want to thank our associates across the company for their focus and work to deliver every day on this mission.”

In addition to the stellar earnings and revenue, same store sales increased +0.8 percent in the quarter after three consecutive quarterly declines, which surprised analysts that had forecast a decline of -0.5 percent. The combination of earnings and revenue increases and strong same store sales indicate that Hubert Joly’s attempt at turning the company around has yielded positive results.

Best Buy reiterated its guidance for revenue in the range of $8.8 billion to $8.9 billion, a change of flat to one percent growth, while international revenue is expected to be flat to a -5 percent decline. Earnings per share for the third quarter are expected to be $0.43 to $0.47 compared to $0.41 in 2015’s third quarter.

Best Buy stock will open at a 10-month high this morning and could easily test the $39.09 52 week high made in early March in today's regular trading session.

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Published on Aug 23, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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