A month has gone by since the last earnings report for Best Buy (BBY Quick QuoteBBY - Free Report) . Shares have lost about 16.6% in that time frame, underperforming the S&P 500.

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

Best Buy Q3 Earnings Beat, FY22 Comparable Sales View Up

Best Buy Co., Inc. posted third-quarter fiscal 2022 results, wherein both the top and the bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The company’s omnichannel capabilities as well as investments in new membership program, technology, advertising and health strategy should continue to contribute to the overall performance. Management raised enterprise comparable sales growth view for fiscal 2022 and also issued guidance for the final quarter.

Despite third-quarter beat, Best Buy provided soft enterprise comparable sales forecast for the fourth quarter.

Q3 Details

Best Buy delivered adjusted earnings of $2.08 per share that surpassed the Zacks Consensus Estimate of $1.95. Moreover, the bottom line increased a couple of cents from the year-ago period. A lower share count resulted in a benefit of 12 cents, on a year-over-year basis.

Enterprise revenues rose a marginal 0.5% year over year to $11,910 million and came ahead of the Zacks Consensus Estimate of $11,706 million. Enterprise comparable sales increased 1.6% versus 23% growth seen in the year-ago quarter.

Adjusted gross profit declined 1% to $2,802 million, while adjusted gross margin contracted 40 basis points to 23.5%. Adjusted operating income came in at $694 million, down 4.7% from the year-ago quarter. Again, adjusted operating margin shrunk 30 bps to 5.8% due to investments in the launch of new Total tech membership.

We note that adjusted SG&A expenses rose slightly 0.2% to $2,108 million, while as a percentage of revenues, it remained flat at 17.7%.

Segment Details

Domestic segment revenues jumped 1.2% to $10,985 million. This year-over-year growth was mainly driven by comparable sales increase of 2%, partly offset by the loss of revenues from permanent store closures in the prior year. The company registered comparable sales growth in categories such as appliances, home theater and mobile phones. These were partly offset by a decline in computing.

Domestic online revenues of $3.44 billion declined 10.1% year over year, on a comparable basis. As a percentage of total Domestic revenues, online revenues decreased to approximately 31.3% compared with 35.2% last year.

Segment gross profit rate decreased 60 basis points to 23.4% owing to lower product margin and service margin rates. These were partially offset by higher profit-sharing revenues from the company’s private label and co-branded credit card arrangement.

Moving on to the International segment, revenues fell 7.8% to $925 million owing to loss of approximately $90 million in revenues from exiting Mexico and a comparable sales decline of 3% in Canada. However, favorable foreign currency exchange rates benefited the metric to the tune of 450 basis points. The segment’s adjusted gross profit rate expanded 240 basis points to 25% driven by improved product margin rates in Canada and sales mixing out of Mexico, which had a lower gross profit rate than Canada.

Other Details

Best Buy ended the quarter with cash and cash equivalents of $3,465 million, long-term debt of $1,223 million and a total equity of $4,278 million. Inventory balance was 15% higher than last year's comparable period. During the quarter, the company returned about $577 million to its shareholders via share repurchases of $405 million and dividends worth $172 million. For fiscal 2022, the company expects share repurchases of more than $2.5 billion. Management’s expects capital expenditure in the range of $800-$850 million for fiscal 2022.

Guidance

Management now envisions fiscal 2022 enterprise revenues between $51.8 billion and $52.3 billion compared with the prior view of $51 billion to $52 billion, and up from year-ago reported figure of $47.3 billion. Best Buy guided enterprise comparable sales growth of 10.5-11.5% versus the prior forecast of 9-11% increase. The metric compared favorably with 9.7% increase registered in the past fiscal year. It continues to expect adjusted gross profit rate to be marginally higher than last year. Adjusted SG&A growth is anticipated at nearly 9.5% compared with the past projection of 9% rise.

For the fourth quarter, Best Buy estimates enterprise revenues in the band of $16.4-$16.9 billion, the mid-point $16.65 billion is below the prior-year’ quarter reported figure of $16.9 billion. The company expects enterprise comparable sales to be down 2% to up 1% versus 12.6% growth registered in the year-ago period. It projected a decline of approximately 30 basis points in adjusted gross profit rate compared with year-ago period.

Adjusted SG&A dollar growth is anticipated at nearly 8%. The largest drivers of SG&A increase are expected to be technology investments, increased advertising, health investments, and higher compensation.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.64% due to these changes.

VGM Scores

Currently, Best Buy has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Best Buy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.