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Bull of the Day: Best Buy (BBY)

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Headquartered in Richfield, MN, Best Buy Co. (BBY - Free Report) is a popular consumer electronics retailer that offers a wide range of home office products, entertainment software, communication, appliances, wellness, heath, security, appliances and related services.

Q1 Earnings Recap

Overall, Best Buy reported better-than-expected first quarter fiscal 2021 earnings, despite selling off by nearly 6% after the report was released.

The retailer beat consensus estimates on both the top and bottom line, earning $0.67 per share on sales of $8.56 billion. However, BBY suffered some pretty tough year-over-year comparisons. Revenue fell 6% over the prior-year period, and profits shrank by 38%.

As is a common narrative nowadays, the coronavirus pandemic played a big part in Best Buy’s Q1 sales and earnings declines, thanks to store closures and a curbside-only business model, though digital sales skyrocketed 155% year-over-year in the U.S.

It didn’t take BBY too long to start growing again, and just last week said that it has returned to revenue gains as of mid-July. Revenue is up 2.5% so far for Q2, and store locations that have reopened have contributed to the solid rebound.

Best Buy’s online channel continues to be strong, and sales have climbed a massive 255% for the second quarter.

The company hasn’t provided investors any long-term guidance, but that’s to be expected.

"Strong consumer demand, combined with shopping experiences that emphasize safety and convenience, has helped produce our sales results to date," said CEO Corie Barry in a press release.

BBY is Rallying

 

Best Buy Co., Inc. Price and Consensus

 

 

Since March 23, shares of BBY have climbed almost 90% compared to the S&P 500’s 40.5% increase. Earnings estimates have been rising too, and BBY is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, eight analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 58 cents to $5.57 per share. Earnings are expected to fall 8.2% compared to the prior year period, but 2021 looks strong, and earnings are expected to see double-digit year-over-year growth.

Going forward, Best Buy will likely benefit from a high, sustained surge in online shopping and overall e-commerce demand. Because of its supply chain initiatives, customers are now receiving their goods faster, both online and for in-store pickup.

The company also offers shareholders a nice dividend, currently yielding almost 2.3% on an annual basis. Plus, shares trade at a very reasonable trailing P/E of 16.8X, making it relatively inexpensive compared to the broader retail sector (35.4X) and S&P 500 (20.8X).

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep BBY on your shortlist.

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