Bed Bath & Beyond Inc. ( BBBY - Analyst Report ) , one of the leading operators of specialty retail stores in the U.S. and Canada, is scheduled to report its third-quarter 2012 financial results following the close of trade on Dec 19, 2012.

We presently expect earnings of $1.02 per share for the quarter, well within the company’s projected range. Meanwhile, the Zacks Consensus Estimate for revenues is $2.736 billion.

Looking Back - Second-Quarter 2012

Bed Bath & Beyond’s reported earnings of 98 cents per share for the second quarter of fiscal 2012 was 5.4% higher than the year-ago quarter’s earnings of 93 cents. However, it fell short of the Zacks Consensus Estimate of $1.02 per share.

Bed Bath & Beyond's top line increased almost 12.1% to $2.593 billion in the second quarter from $2.314 billion in the year-ago quarter and outpaced the Zacks Consensus Estimate of $2.566 billion. The increase in sales was primarily driven by the recently completed acquisitions of World Market (Cost Plus Inc.) and Linen Holdings, as well as the increase in comparable-store sales and new store openings.

Guidance

Owing to the additional 53rd week in fiscal 2012, management forecasts a comparable-store sales increase of 2% to 4% for the third quarter of fiscal 2012. Further, the company expects that the benefits from newly acquired businesses, along with comparable-store sales growth, will boost net sales by 15% to 18% in the third quarter.

Bed Bath & Beyond expects to deliver third-quarter 2012 earnings per share of between 99 cents and $1.04. Moreover, the company continues to expect fiscal 2012 earnings per share to increase by high-single to a low-double-digit percentage points, including the one additional week this fiscal year.

In addition to the 22 stores opened so far in 2012, the company expects to open a total of 45 stores across all concepts in the year. Moreover, it expects the 2012 mix of store openings by concept to remain similar to that of fiscal 2011.

Agreement of Estimate

For the third quarter of 2012, none of the estimates have been revised over the last 7 and 30 days.

However, for fiscal 2012, 1 out of 21 estimates was revised upwards in the last 30 days and 2 were revised in the opposite direction. In the last 7 days, 1 estimate moved up, while 1 moved down.

Magnitude of Estimate Revisions

The magnitude of estimate revisions for Bed Bath & Beyond depicts a neutral outlook for the upcoming quarter. Over the last 7 and 30 days, estimates for the upcoming quarter remained unchanged at $1.02. However, estimates moved down by a penny to $4.62 per share for fiscal 2012 in the last 7 days.

Surprise History

With respect to earnings surprises, Bed Bath & Beyond has topped as well as missed the Zacks Consensus Estimate over the last four quarters ranging from a positive 11.28% to a negative 3.92%. The average remained at positive 5.32%, indicating that Bed Bath & Beyond has surpassed the Zacks Consensus Estimate by that measure in the trailing four quarters.

Our Recommendation

With the 5.4% increase in earnings per share in the second quarter of fiscal 2012, Bed Bath & Beyond has seen a continuously improving earnings trend. Driven by its strong countrywide network of more than 1,100 stores coupled with strategic efforts to align merchandise based on regional climate and demographics, we believe that the company will continue to boost its top and bottom lines.

Moreover, the company’s recent acquisition of Cost Plus Inc. – one of the leading casual home furnishings and entertainment products retailers – is expected to be accretive to the merged company’s fiscal 2012 earnings per share.

Currently, Bed Bath & Beyond holds a Zacks #3 Rank, implying a short-term Buy rating on the stock. Moreover, our long-term recommendation on the company remains intact at ‘Neutral’, given its strong quarterly performance, robust outlook, store growth initiatives and strong financial position, offset by macroeconomic challenges impacting consumers as well as intense competition from specialty stores.

Bed Bath & Beyond operates in a highly fragmented industry and faces competition from larger retailers such as Target Corporation ( TGT - Analyst Report ) and Wal-Mart Stores Inc. ( WMT - Analyst Report ) .