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What to Expect From Bed Bath & Beyond (BBBY) in Q2 Earnings?

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Bed Bath & Beyond Inc. is slated to release second-quarter fiscal 2018 results on Sep 26.

The company delivered a positive earnings surprise in each of the preceding three quarters, with an average trailing four-quarter beat of 2.3%. For the impending quarter, the Zacks Consensus Estimate of 49 cents moved up by a penny over the last seven days but reflects a year-over-year decline of 34.7%.

Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise

Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise | Bed Bath & Beyond Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Bed Bath & Beyond has been gaining from its solid transformation efforts and other customer-centric initiatives. Also, the company is witnessing robust sales at its customer-facing digital networks, which is expected to continue in fiscal second quarter. Management remains focused on strategically expanding its store count besides increasing the productivity of existing stores to suit customer preferences.

The company’s focus on expanding, renovating and relocating stores to adapt to the changing market conditions is encouraging as well. In fact, it aims to open more of Buybuy BABY and Cost Plus World Markets stores to boost profitability. Further, the company's capital initiatives and constant shareholder-friendly moves bode well. Bed Bath & Beyond expects to allocate more than half of the capital spending toward technology-related projects to support omni-channel capabilities. All these endeavors are likely to drive higher sales and profitability.

Notably, analysts polled by Zacks project revenues of $2.96 billion, up 0.7% from the year-ago quarter number.

However, Bed Bath & Beyond has been witnessing soft comparable-store sales (comps) for a while now due to decline in number of transactions in stores. Also, soft comps projection for the fiscal year might hurt comps growth in the to-be-reported quarter.

Bed Bath & Beyond’s eight-quarter long trend of strained gross and operating margins is an added headwind in the fiscal second quarter. Gross margin in the last reported quarter was marred by higher direct-to-customer shipping expenses and rise in coupon expenses due to increased average coupon amounts. This, along with a rise in SG&A expenses negatively impacted operating margin in the quarter. For fiscal 2018, the company expects gross margin contraction due to investments in customer value proposition and constant shift to the digital channels. Though operating margin is expected to be lower than that in fiscal 2017, it is expected to decline for the fiscal.

 


 

In the past month, shares of the company have gained 4.1%, underperforming the industry’s 6.6% rally.

Given the mixed sentiments, let’s see whether the company’s solid strategies can break the dismal margins trend in the fiscal second quarter.

A Glance at Zacks Model

Our proven model does not conclusively show that Bed Bath & Beyond is likely to beat earnings estimates in the fiscal second 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Bed Bath & Beyond has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of -4.41% make surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

America's Car-Mart, Inc. (CRMT - Free Report) has an Earnings ESP of +4.55% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amazon.com, Inc. (AMZN - Free Report) has an Earnings ESP of +8.93% and a Zacks Rank #2.

Fastenal Company (FAST - Free Report) has an Earnings ESP of +0.75% and a Zacks Rank of 3.

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