A month has gone by since the last earnings report for Best Buy (BBY Quick QuoteBBY - Free Report) . Shares have added about 15.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Best Buy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Best Buy Q4 Earnings Exceeds Estimates, Sales Up Y/Y

Best Buy posted fourth-quarter fiscal 2021 results, with the top and the bottom line increasing year on year. Also, quarterly earnings surpassed the Zacks Consensus Estimate. However, sales fell short of the consensus mark.

Markedly, sales increased across both the Domestic and the International segments. Online sales remained strong in the domestic channel. Management highlighted that stores played an important role in the fulfillment of online sales. Well, these factors contributed toward top-line growth in the reported quarter. Additionally management provided comparable sales view for fiscal 2022 as well as for the first quarter.

Q4 Details

Best Buy delivered adjusted earnings of $3.48 per share, which surpassed the Zacks Consensus Estimate of $3.46. Moreover, the bottom line increased 20% from earnings of $2.90 reported in the year-ago quarter.

Enterprise revenues rose 11.5% year over year to $16,937 million, but missed the Zacks Consensus Estimate of $17,194 million. Enterprise comparable sales increased 12.6% compared with 3.2% growth recorded in the prior-year quarter. Moreover, revenues increased across both the Domestic and the International segments.

We note that adjusted gross profit grew 8.4% to $3,509 million. However, adjusted gross margin contracted 60 basis points to 20.7%. Markedly, adjusted operating income came in at $1,161 million, up from $986 million reported in the year-ago quarter. Again, adjusted operating margin increased 40 basis points to 6.9%.

Segment Details

Domestic segment revenues increased 11.2% to $15,400 million. This year-over-year growth was mainly driven by comparable sales increase of 12.4%, partly offset by loss of revenues from permanent store closures in the past year. The company registered comparable sales growth across most of its categories, with the largest drivers being computing, gaming, home theater, virtual reality and appliances. These were partly offset by decline in mobile phone and headphone sales.

Meanwhile, comparable online sales soared 89.3% to $6.66 billion. As a percentage of overall Domestic revenues, online revenues rose nearly 43.2% compared with 25.4% in the last year.

We note that the segment’s gross margin contracted 30 basis points year over year to 20.9% owing to higher supply chain costs stemming from increased mix of online revenues.

Moving on to the International segment, revenues increased 14% to $1,537 million. This upside was backed by comparable sales growth of 14.9% and gains from favorable foreign currency exchange rates to the tune of 160 basis points. The segment’s gross margin expanded 100 basis points to 21.6%.

Other Details

Best Buy ended the quarter with cash and cash equivalents of $5,494 million, long-term debt of $1,253 million and total equity of $4,587 million.

During the quarter, the company returned a total of $392 million to shareholders through share repurchases of $250 million and dividends worth $142 million. Additionally, the company announced a 27% hike in its quarterly dividend rate to 70 cents per share. The raised dividend will be paid out on Apr 8, 2021, to shareholders of record as on Mar 18.  Further, management approved a new share repurchase authorization plan worth $5 billion. This replaces the company’s existing share repurchase authorization, under which $1.7 billion was remaining, as at the end of fiscal 2021. The company expects to carry out share repurchases of at least $2 billion in fiscal 2022. Capital expenditures in fiscal 2022 are expected in the range of $750-$850 million.

Additionally, in recognition of the efforts of employees amid the pandemic, the company will provide bonuses worth $500 to full-time and $200 to part-time employees, in the upcoming weeks.

Guidance

For fiscal 2022, management expects enterprise comparable sales to range between a decline of 2% and growth of 1%. The top-line view is based upon the assumption that consumers will resume or accelerate spending on areas that were slowed during the pandemic such as travel and outdoor dining, especially in the back half of the year. Additionally, online sales are expected to contribute 40% to Domestic sales.  Gross margin is expected to be slightly lower than fiscal 2021 levels.

For first-quarter fiscal 2022, the company expects enterprise comparable sales growth of nearly 20%. Moreover, gross margin is expected at a slightly lower level than first-quarter fiscal 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 18.48% due to these changes.

VGM Scores

At this time, Best Buy has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Best Buy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.