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Best Buy (BBY) Q3 Earnings to Gain From Online Sales Surge

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Best Buy Co., Inc. (BBY - Free Report) is slated to report third-quarter fiscal 2018 results on Nov 16. Last quarter, the company exceeded the Zacks Consensus Estimate by 9.5%. Notably, it has surpassed earnings estimates in the trailing four quarters with an average beat of 27.2%. 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 deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is pegged at 79 cents, reflecting a year-over-year increase of nearly 27%. Notably, the consensus mark has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $9,352 million, up about 4.6% from the year-ago quarter.

Factors at Play

Shares of Best Buy, which have exhibited a bullish run on the bourses owing to strategic efforts, sturdy online sales growth and a solid earnings history, are likely to impress investors with solid financial numbers in the third quarter as well. The stock has gained 42.6%, outperforming the industry’s increase of 35.7% in a year.

The company is making extensive investments to upgrade operations with special focus on developing omni-channel capabilities and strengthening partnership with vendors. Sound promotional strategies and improvement in merchandise margins along with robust expense management are likely to drive the company’s results. In the past few quarters, the company had reported a massive gain in online comparable sales on the back of improved traffic, conversion rates and higher average order values.

Management had earlier projected third-quarter enterprise revenues in the range of $9.3-$9.4 billion and comparable sales growth of 4.5-5.5%. The company also estimated adjusted earnings in the range of 75-80 cents a share.

Best Buy is also likely to spend nearly $700 million in fiscal 2018, up from the previous estimate of $650 million to boost e-commerce operations and improve supply chains to counter competition. However, analysts believe that an increase in investment may strain margins. Moreover, the challenging retail landscape and waning store traffic may weigh on the company’s performance.

What the Zacks Model Unveils

Our proven model shows that Best Buy is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. The company has an Earnings ESP of +0.35%, which indicates a likely earnings surprise. Further combined with the company’s Zacks Rank #3, which icreases the predictive power of ESP, the chance of an earnings beat is pegged higher. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies you may want to consider as these too have the right combination of elements to beat on earnings this quarter:

American Eagle Outfitters, Inc. (AEO - Free Report) has an Earnings ESP of +1.30% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +1.27% and a Zacks Rank of 3.

Wal-Mart Stores, Inc. (WMT - Free Report) has an Earnings ESP of +0.96% and a Zacks Rank #3.

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