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Headquartered in Richfield, MN, Best Buy is a leading specialty retailer of technology products, services and solutions, with approximately 1,600 stores in North America. Domestic Operations accounted for 92% of FY17 total revenue.
According to the company, 70% of the U.S. population lives within 15 minutes of a Best Buy store. That has helped the retailer to improve its e-commerce operations as shoppers can purchase online and pick up from a nearby Best Buy store, within two days in most cases.
Strong Results and Upgraded Guidance
The retailer reported adjusted earnings of $2.42 per share, up 25% year over year and ahead of the Zacks Consensus Estimate of $2.05.
Revenues were up 14% year-over-year and also beat our estimate.
“We are excited to report strong results for the fourth quarter and the year,” said the CEO. “We are especially proud of our 9.0% comparable sales growth in the quarter, which brings our annual comparable sales growth to 5.6% for the year.”
Shares surged after earnings report.
Returning Capital to Shareholders
Best Buy continues to boost shareholders’ value through dividends and share repurchases. With latest results, they announced a 32% increase in the regular quarterly dividend to $0.45 per share and a share repurchase plan of $1.5 billion for FY19.
Rising Estimates
Zacks Consensus Estimates for current and next fiscal years have surged to $4.79 per share and $5.02 per share respectively, up from $4.65 and $4.73, before the results. The company has missed only once in the past twenty quarters. Their average quarterly beat for the last four quarters was 19%.
Big Five Sporting Goods is a sporting goods retailer in the western US, operating 435 stores in 11 states. They product lines include athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment.
Disappointing Results
The retailer reported weak results. Net sales for Q4 fell to $242.9 million from $266.3 million a year ago. Same store sales decreased 9.4% compared to a 3.1% increase in same store sales for Q4 2016.
While the loss was narrower than the Zacks Consensus Estimate, revenues missed our estimate.
The CEO said, “Our performance was impacted by an extraordinarily challenging December period as a result of extremely unfavorable winter weather conditions in most of our markets. The significantly warmer than normal temperatures and one of the driest periods on record in our Western U.S. markets led to a nearly 50% decline in sales for our core winter product categories in December. “
“Sales throughout the quarter also continued to be impacted by reduced demand for firearm-related products."
Analysts have lowered their estimates after disappointing results and guidance.
The Bottom Line
Most retailers are going through a lot of pain thanks to the rising trend for online shopping, particularly on Amazon. While this retailer had earlier benefited from liquidation of Sports Authority and Sport Chalet, their latest quarter reveals rising challenges.
While the stock has recovered significant after a sharp drop following earnings announcement, given Zacks Stock Rank of #5 (Strong Sell) it is better to avoid it for the time being.
Additional content:
Here’s Why Facebook Is Actually Cheap Right Now
Facebook presents a unique opportunity for investors to scoop up shares of a company that is both a leader in its industry and an exciting growth prospect. The internet behemoth simply cannot be touched in the social media space, and despite rising costs and PR disasters, its stock continues to be one of the best options in the tech sector.
But the public’s picture of Facebook over the latest few months has not been a pretty one. Mark Zuckerberg’s company found itself right in the middle of national debate over fake news and Russian meddling in U.S. elections, with America’s top intelligence agency placing at least some of the blame on the failure of internet platform’s to properly vet content.
This headache brought some volatility to Facebook shares, especially after the company promised to spend more on security and hire new employees to focus on preventing abuse. Meanwhile, market-wide volatility has seen some of Wall Street’s top mega-cap tech companies shed value in recent weeks.
Despite all of this, Facebook’s fundamental position appears stronger than ever. The firm crushed the Zacks Consensus Estimate for earnings by 12% in the fourth quarter. Meanwhile, full-year revenue growth touched 49% and net income soared 56%. Management’s strong outlook inspired 17 positive revisions for FB’s fiscal 2018 estimates, and now the stock sports a Zacks Rank #2 (Buy).
Stocks with high Zacks Ranks are poised to outperform the broader market over the next one to three months, and Facebook certainly looks like a company that should be dominant for many years to come. But there is still more for investors to consider.
One might also notice that FB is currently sporting an “F” grade in the Value category of our Style Scores system, implying that the stock is trading at a premium to the market—and perhaps forcing traditional value investors to look elsewhere for a cheap internet stock.
However, a closer look at Facebook’s valuations reveals that the social media powerhouse is trading at its “cheapest” level in more than a year and could very well offer more value than other comparable internet stocks:
Facebook’s Forward P/E of 23.4 is near the lowest it has ever been. We might be able to peg some of this on the recent sell-off, but it is much more likely caused by Facebook’s strong earnings estimates for the next year. And with the stock’s PEG of 0.92, investors are getting a solid price for the company’s expected bottom-line growth.
Still, it is even more important to compare Facebook its peer group. This Zacks-defined group of similar companies looks at 50 internet stocks, including global giants like Alphabet and Baidu. This group currently has an average Forward P/E of 30.5, meaning that Facebook is trading at a significant discount to its peers.
Finally, traditional value investors are buy-and-hold minded. Facebook is a company with an incredible track record, but its best days might still be ahead of it. Management knows that user growth will eventually plateau, and it has strategically invested in video content and artificial intelligence to prepare for a shifting business model.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Don’t Even Think About Buying Bitcoin Until You Read This
The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.
Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Best Buy, Big Five Sporting Goods, Facebook, Alphabet and Baidu highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 5, 2018 – Zacks Equity Research highlights Best Buy (BBY - Free Report) as the Bull of the Day, Big Five Sporting Goods (BGFV - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook , Alphabet (GOOGL - Free Report) and Baidu (BIDU - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in Richfield, MN, Best Buy is a leading specialty retailer of technology products, services and solutions, with approximately 1,600 stores in North America. Domestic Operations accounted for 92% of FY17 total revenue.
According to the company, 70% of the U.S. population lives within 15 minutes of a Best Buy store. That has helped the retailer to improve its e-commerce operations as shoppers can purchase online and pick up from a nearby Best Buy store, within two days in most cases.
Strong Results and Upgraded Guidance
The retailer reported adjusted earnings of $2.42 per share, up 25% year over year and ahead of the Zacks Consensus Estimate of $2.05.
Revenues were up 14% year-over-year and also beat our estimate.
“We are excited to report strong results for the fourth quarter and the year,” said the CEO. “We are especially proud of our 9.0% comparable sales growth in the quarter, which brings our annual comparable sales growth to 5.6% for the year.”
Shares surged after earnings report.
Returning Capital to Shareholders
Best Buy continues to boost shareholders’ value through dividends and share repurchases. With latest results, they announced a 32% increase in the regular quarterly dividend to $0.45 per share and a share repurchase plan of $1.5 billion for FY19.
Rising Estimates
Zacks Consensus Estimates for current and next fiscal years have surged to $4.79 per share and $5.02 per share respectively, up from $4.65 and $4.73, before the results. The company has missed only once in the past twenty quarters. Their average quarterly beat for the last four quarters was 19%.
Bear of the Day:
Big Five Sporting Goods is a sporting goods retailer in the western US, operating 435 stores in 11 states. They product lines include athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment.
Disappointing Results
The retailer reported weak results. Net sales for Q4 fell to $242.9 million from $266.3 million a year ago. Same store sales decreased 9.4% compared to a 3.1% increase in same store sales for Q4 2016.
While the loss was narrower than the Zacks Consensus Estimate, revenues missed our estimate.
The CEO said, “Our performance was impacted by an extraordinarily challenging December period as a result of extremely unfavorable winter weather conditions in most of our markets. The significantly warmer than normal temperatures and one of the driest periods on record in our Western U.S. markets led to a nearly 50% decline in sales for our core winter product categories in December. “
“Sales throughout the quarter also continued to be impacted by reduced demand for firearm-related products."
Analysts have lowered their estimates after disappointing results and guidance.
The Bottom Line
Most retailers are going through a lot of pain thanks to the rising trend for online shopping, particularly on Amazon. While this retailer had earlier benefited from liquidation of Sports Authority and Sport Chalet, their latest quarter reveals rising challenges.
While the stock has recovered significant after a sharp drop following earnings announcement, given Zacks Stock Rank of #5 (Strong Sell) it is better to avoid it for the time being.
Additional content:
Here’s Why Facebook Is Actually Cheap Right Now
Facebook presents a unique opportunity for investors to scoop up shares of a company that is both a leader in its industry and an exciting growth prospect. The internet behemoth simply cannot be touched in the social media space, and despite rising costs and PR disasters, its stock continues to be one of the best options in the tech sector.
But the public’s picture of Facebook over the latest few months has not been a pretty one. Mark Zuckerberg’s company found itself right in the middle of national debate over fake news and Russian meddling in U.S. elections, with America’s top intelligence agency placing at least some of the blame on the failure of internet platform’s to properly vet content.
This headache brought some volatility to Facebook shares, especially after the company promised to spend more on security and hire new employees to focus on preventing abuse. Meanwhile, market-wide volatility has seen some of Wall Street’s top mega-cap tech companies shed value in recent weeks.
Despite all of this, Facebook’s fundamental position appears stronger than ever. The firm crushed the Zacks Consensus Estimate for earnings by 12% in the fourth quarter. Meanwhile, full-year revenue growth touched 49% and net income soared 56%. Management’s strong outlook inspired 17 positive revisions for FB’s fiscal 2018 estimates, and now the stock sports a Zacks Rank #2 (Buy).
Stocks with high Zacks Ranks are poised to outperform the broader market over the next one to three months, and Facebook certainly looks like a company that should be dominant for many years to come. But there is still more for investors to consider.
One might also notice that FB is currently sporting an “F” grade in the Value category of our Style Scores system, implying that the stock is trading at a premium to the market—and perhaps forcing traditional value investors to look elsewhere for a cheap internet stock.
However, a closer look at Facebook’s valuations reveals that the social media powerhouse is trading at its “cheapest” level in more than a year and could very well offer more value than other comparable internet stocks:
Facebook’s Forward P/E of 23.4 is near the lowest it has ever been. We might be able to peg some of this on the recent sell-off, but it is much more likely caused by Facebook’s strong earnings estimates for the next year. And with the stock’s PEG of 0.92, investors are getting a solid price for the company’s expected bottom-line growth.
Still, it is even more important to compare Facebook its peer group. This Zacks-defined group of similar companies looks at 50 internet stocks, including global giants like Alphabet and Baidu. This group currently has an average Forward P/E of 30.5, meaning that Facebook is trading at a significant discount to its peers.
Finally, traditional value investors are buy-and-hold minded. Facebook is a company with an incredible track record, but its best days might still be ahead of it. Management knows that user growth will eventually plateau, and it has strategically invested in video content and artificial intelligence to prepare for a shifting business model.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Don’t Even Think About Buying Bitcoin Until You Read This
The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.
Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 4 crypto-related stocks now >>
Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
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support@zacks.com
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.