A month has gone by since the last earnings report for Best Buy (BBY Quick QuoteBBY - Free Report) . Shares have added about 11.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Best Buy Q3 Earnings Beat Estimates, Sales View Down

Best Buy posted better-than-expected earnings for third-quarter fiscal 2024. However, sales and earnings decreased year over year. Best Buy’s adjusted earnings of $1.29 per share beat the Zacks Consensus Estimate of $1.19. The bottom line decreased from $1.38 per share recorded in the year-ago period.

Q3 Details

Enterprise revenues declined 7.8% from the prior fiscal year’s quarterly number to $9,756 million. The figure missed the Zacks Consensus Estimate of $9,883 million. Enterprise comparable sales dropped 6.9% year over year, narrower than 10.4% decline in the year-ago quarter.

Gross profit declined 4.3% to $2,232 million, while the gross margin expanded 90 basis points (bps) to 22.9%. The metric came in line with our estimate.

Adjusted operating income came in at $369 million, down from the $412 million recorded in the year-ago quarter. The adjusted operating margin fell 10 bps to 3.8% but fared better than our estimate of 3.4%.

We note that adjusted selling, general and administrative expenses fell 3% to $1,863 million, while as a percentage of revenues, the same increased 100 bps to 19.1%. Our estimate for adjusted SG&A expenses, as a rate of revenues, was pegged at 19.6%.

Segmental Details

The Domestic segment’s revenues fell 8.2% to $8,996 million. This decline from the last fiscal year’s quarterly reading was mainly induced by a comparable sales decrease of 7.3%. From a merchandising perspective, comparable sales decreased in categories, with the primary drivers being appliances, computing, home theater and mobile phones, partially offset by growth in gaming. We expected revenues of $9,134.5 million from this segment.

The Domestic segment’s online revenues of $2.75 billion declined 9.3% year over year on a comparable basis. As a percentage of total domestic revenues, online revenues were 30.6% compared with 31% in the year-ago quarter.

The segment’s gross profit rate increased 100 bps to 22.9% due to better performance from the company’s membership offerings, including higher service margin rates, favorable product margin rates and lower supply chain expenses.

In the International segment, revenues fell 3.4% to $760 million, mainly due to a comparable sales decline of 1.9% and adverse foreign currency translations. The segment’s operating income came in at $18 million or 2.4% of revenues, lower than the $33 million or 4.2% of revenues reported in the year-ago quarter. Our estimate for revenues from the segment was pegged at $748 million.

Other Details

Best Buy ended the quarter with cash and cash equivalents of $636 million, long-term debt of $1,130 million and a total equity of $2,812 million.

At the end of the reported quarter, merchandise inventories of $7,562 million increased 3.7% from the year-ago quarter’s reading.

In the quarter, BBY returned about $313 million to its shareholders via dividends of $201 million and share repurchases of $112 million. The company’s board announced the payment of a regular quarterly cash dividend of 92 cents per share, payable on Jan 2, 2024, to shareholders of record as of Dec 12, 2023.

Guidance

For fiscal 2024, including 53 weeks, management projects revenues of $43.1-$43.7 billion and a comparable sales decline of 6-7.5%. Earlier, it anticipated revenues of $43.8-$44.5 billion, with a comparable sales decline of 4.5-6%.

The company expects a fiscal 2024 adjusted operating margin of 4-4.1% compared with the 3.9-4.1% mentioned earlier. For fiscal 2024, management anticipates an effective income tax rate of 24%. The company expects adjusted earnings per share (EPS) between $6.00 and $6.30 compared with the $6.00 and $6.40 guided earlier. Capital expenditure is anticipated to be $825 million.

For the fourth quarter of fiscal 2024, Best Buy anticipates comparable sales to decline by 3-7%. The adjusted operating income rate is expected to be in the range of 4.7-5%.

BBY’s guidance includes the impact of the 53rd week in the fiscal year. The 53rd week is expected to add about $700 million of revenue in the fiscal fourth quarter and boost the adjusted operating income rate by 10 basis points in the fiscal year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -6.14% due to these changes.

VGM Scores

At this time, Best Buy has a poor Growth Score of F, 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.