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What's in the Cards for Best Buy (BBY) in Q2 Earnings?

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Best Buy Co., Inc. (BBY - Free Report) is slated to report second-quarter fiscal 2018 results on Aug 29. In the previous quarter, the company exceeded the Zacks Consensus Estimate by 50%. Notably, it has surpassed earnings estimates in the trailing four quarters, with an average beat of 33.8%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Best Buy will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 63 cents, reflecting a year-over-year increase of nearly 11%. We note that the Zacks Consensus Estimate has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $8,661 million, up about 1.5% from the year-ago quarter.

Factors at Play

Sound promotional strategies, improvement in merchandise margins along with robust expense management is likely to drive the Best Buy results higher in the second quarter of fiscal 2018. Moreover, the company is making extensive investments to upgrade operations with special focus on developing omni-channel capabilities and strengthening partnership with vendors.

In the past few quarters, the company had reported massive gain in online comparable sales on the back of improved traffic, conversion rates and higher average order values, which is expected to boost results in the quarter to be reported.

For second-quarter fiscal 2018, management anticipates Enterprise revenues between $8.6 billion and $8.7 billion, and comparable sales increase of 1.5-2.5%. Management also projects earnings in the range of 57-62 cents a share. Also in the fiscal second quarter, the company expects domestic comparable sales to rise in the range of 1.5-2.5%, while international comparable sales are projected to be in the range of flat to up 3.0%.

However, the challenging retail landscape, aggressive promotional strategies and waning store traffic may hurt the stock.

Best Buy Co., Inc. Price, Consensus and EPS Surprise

 

Best Buy Co., Inc. Price, Consensus and EPS Surprise | Best Buy Co., Inc. Quote

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Best Buy is likely to beat on earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Best Buy has an Earnings ESP of -1.29%. The company’s Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) has an Earnings ESP of +1.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez Inc. (ZUMZ - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank #3.

RH (RH - Free Report) has an Earnings ESP of +2.88% and a Zacks Rank #3.
 
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