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Bed Bath & Beyond (BBBY) Q4 Earnings: Is a Beat Likely?

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Bed Bath & Beyond Inc. is slated to release fourth-quarter fiscal 2017 results on Apr 11. The question lingering in investors’ minds is whether or not this home furnishings retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

The company posted a positive earnings surprise of 22.2% in the last reported quarter. However, it lagged the Zacks Consensus Estimate by an average of 1.8% over the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise

Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise | Bed Bath & Beyond Inc. Quote

 

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is $1.41 per share, reflecting a year-over-year decline of 23.4%. We note that the Zacks Consensus Estimate has remained unchanged in the past 30 days. Further, analysts polled by Zacks project revenues of $3.67 billion, up about 4% from the year-ago quarter.

Notably, Bed Bath & Beyond has outperformed the broader industry in the last three months, reflecting positive investor sentiment ahead of earnings. The company’s shares inched up 0.3%, against the industry’s decline of 9.8%.



Factors at Play

Bed Bath & Beyond is gaining from its focus on transformation plan to deliver a seamless customer experience. The transformation plan focuses on improving operational efficiency through the overhaul of IT and business processes, as well as adopting customer-centric plans like enriching product assortment and enhancing services.

In this regard, it adopted a new model to better recognize and prioritize technology-related needs. It has also set up a strategic portfolio management office (“SPMO”) to allocate resources toward more profitable areas. Through the SPMO, the company is creating an integrated portfolio of strategies to improve gross margin, optimize inventory levels, enhance supply chain and implement customer service transformation.

Further, the company's capital initiatives and constant shareholder-friendly moves bode well. Additionally, the company is progressing well with its strategic store expansion plans. It also targets increasing the productivity of existing stores by adjusting the breadth and depth of its merchandise offerings to suit customer preferences. Consequently, it remains focused on expanding, renovating and relocating stores to adapt to the changing market conditions. We believe these initiatives will go a long way in retaining the company's existing customers while attracting new ones.

However, Bed Bath & Beyond has been grappling with soft gross and operating margins for the past six quarters now. Management expects this trend to continue in fiscal 2017 due to higher shipping and coupon expenses as well as rise in SG&A expense.

Additionally, the company’s dismal comparable store sales (comps) trend remains a concern. Driven by initial comps performance in the fiscal fourth quarter, it projects comps to decline in the low-single-digit percentage range. Further, it envisions fiscal 2017 earnings per share of roughly $3.00, which reflects a decline of more than 30% from the year-ago period.

Though Bed Bath & Beyond is striving hard to spark a turnaround, the current dismal trends cannot simply be overlooked. So, let’s see what is in store for the company in the upcoming release.

What the Zacks Model Unveils?

Our proven model shows that Bed Bath & Beyond is likely to beat earnings estimates because it has the right combination of two key components. 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 company has an Earnings ESP of +0.07%. This, along with the company’s Zacks Rank #3, makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

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

Amazon.com Inc. (AMZN - Free Report) has an Earnings ESP of +12.11% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fastenal Company (FAST - Free Report) has an Earnings ESP of +0.21% and a Zacks Rank #2.

Kimberly-Clark Corporation (KMB - Free Report) has an Earnings ESP of +0.76% and a Zacks Rank #2.

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