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Bear of the Day: Bed Bath and Beyond (BBBY)

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I hate to keep piling on the retail industry, but we are kind of at the point where some investors might start to look for some value plays amid the rubble. This probably isn’t a great idea for most, as the retail sector still is at the bottom of the Zacks Sector Rank list, a position it has occupied for the better part of the past two months now, suggesting more rough trading may be ahead.

A great example of this value trap may be Bed Bath & Beyond (BBBY - Free Report) stock. Sure, BBBY is down about 16% in the past year, it recently beat earnings estimates, and its forward PE is a reasonable 9.1, but that doesn’t mean that a turnaround is at hand. Instead, more pain could actually be in the near future for this stock, at least if we look to recent earnings estimates.

BBBY Estimates

Though BBBY is coming off of a recent earnings beat, this was actually just the company’s first beat in the past year, and it is still posting an average surprise of -5.8% in the past four quarters. Additionally, analysts have been slashing estimates for BBBY stock, almost across the board. For the current quarter we have seen eight estimate cuts in the past two months compared to zero increases, while we have seen eleven cuts for the fully year compared to zero increases.

The magnitude of these estimate cuts has also been troubling, as the current quarter consensus estimate has fallen by roughly 14% in the past week, while we have seen a five percent slice to the consensus estimate for the full year in the past week as well. The following year estimates have also taken a hit, suggesting that the pain looks to continue for this stock in the near term, at least if the recent earnings estimates are any guide.

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

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

No wonder Bed Bath & Beyond receives a Zacks Rank #5 (Strong Buy) and why we are looking for more underperformance from the name in the near term. And with this kind of run, it shouldn’t be much of a surprise that the stock receives an ‘F’ Grade for momentum either, suggesting there are plenty of better picks out there.

Other Choices

In general, the retail market is facing some serious headwinds right now. The sector is ranked dead last for the sector rank, and it has been for each and every week since the start of February. Still, there are a few well-positioned segments, even in this troubled group.

One of the top segments right now is the retail-computer industry, as this is actually in the top 2% overall for the Zacks Industry Rank. This is largely thanks to Tech Data (TECD - Free Report) , a top ranked stock that has an ‘A’ VGM score, and an ‘A’ momentum score too.

This security has an excellent fundamental picture, and its earnings estimates have been trending in the right direction too. Add in a relatively positive surprise history over the past four quarters—the average surprise is a beat by 8.7%-- and this definitely looks to be a better retail play than BBBY, at least until Bed Bath & Beyond can turn things around in terms of estimates and momentum.


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