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Best Buy (BBY) Stock Gains on Q3 Earnings & Sales Beat

ZUMZ FL BBY BURL

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Best Buy Company, Inc. (BBY - Free Report) reported robust quarterly numbers for third-quarter fiscal 2017. The company posted earnings per share of 62 cents beating the Zacks Consensus Estimate of 47 cents. Earnings also increasing 51.2% year over year. Notably, this is the sixteenth-consecutive quarter in which the company’s earnings have surpassed estimates. Following the results, the company’s shares jumped nearly 9% during pre-market trading session.

Including one-time items, quarterly earnings per share came in at 61 cents compared with 37 cents in the year-ago quarter.

Revenues of $8,945 million also surpassed the Zacks Consensus Estimate of $8,841 million and increased 1.4% year over year. Comparable-store sales (comps) were up 1.8%, compared with a rise of 0.8% in the prior-year period.

Adjusted operating profit came in at $321 million, up 30% year over year. On the other hand, operating margin was 3.6% compared with 2.8% in the prior-year quarter.

Segment Details

Domestic segment revenues inched up 1.3% year over year to $8,192 million, primarily due to 1.8% rise in comparable sales, marginally offset by loss of revenues from 14 large-format as well as 23 Best Buy Mobile store shut downs.

Comparable online sales increased 24.1% to $881 million. The upside was driven by improved traffic, conversion rates and higher average order values.

The segment’s adjusted gross profit increased 3.7% to $2,020 million during the quarter. Adjusted margin came in at 24.7% compared with 24.1% in the prior-year quarter on the back of better margin rates in the computing as well as home theater categories. Adjusted operating income jumped 20.4% to $307 million whereas adjusted margin expanded 50 basis points (bps) to 3.7%.

International segment revenues rose 3.3% to $753 million, primarily driven by growth in Canada and Mexico which partially offset negative impact of foreign currency exchange rate. On a constant-currency basis, the company’s international segment revenues edged up 4%.

The segment’s adjusted gross profit rose 12.7% to $183 million in the quarter and gross margin increased 190 bps to 24.3%. Adjusted operating profit came in at $14 million. The company had recorded an operating loss of $8 million in the year-ago period.

BEST BUY Price, Consensus and EPS Surprise

BEST BUY Price, Consensus and EPS Surprise | BEST BUY Quote

Other Financial Details

Best Buy ended the quarter with cash and cash equivalents of $1,341 million, long-term debt of $1,324 million and total equity of $4,261 million.

On Feb 25, 2016, the company’s board of directors announced a plan to repurchase shares worth $1 billion over the next two years. In the fiscal third quarter, the company repurchased 5.4 million shares for $201 million.

Guidance

For the fiscal fourth quarter, management forecast Enterprise revenues between $13.4 billion and $13.6 billion. Enterprise comparable sales are expected to be in the range of down 1% to up 1%. Management projects earnings in the range of $1.62–$1.67 per share compared with $1.53 in the prior-year quarter. The current Zacks Consensus Estimate for the fiscal fourth quarter is pegged at $1.58.

Further in the fiscal fourth quarter, the company anticipates international comparable sales to be in the range of down 2% to up 2%, whereas domestic comparable sales are projected to range between -1% and +1%.

Zacks Rank

Best Buy carries a Zacks Rank #2 (Buy). Other stocks which warrant a look in the retail sector include Burlington Stores, Inc. (BURL - Free Report) , Zumiez, Inc. (ZUMZ - Free Report) and Foot Locker, Inc. (FL - Free Report) . All these stocks carry the same rank as Best Buy. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Burlington Stores delivered an average positive earnings surprise of 16.1% in the trailing four quarters and has a long-term earnings growth rate of 18.4%.

Zumiez delivered an average positive earnings surprise of 32% in the trailing four quarters and has a long-term earnings growth rate of 15%.

Foot Locker delivered an average positive earnings surprise of 3.1% in the trailing four quarters and has a long-term earnings growth rate of 9.9%.

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