Earnings Preview : Best Buy Co. Q4 2009
Tuesday, March 09, 2022 12:05 PM

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Best Buy Company (NYSE: BBY) is expected to release the company's 4th quarter financial results and hold a conference call on March 25, 2010. The quarter and fiscal year for Best Buy end at the end of February.

Best Buy operates in a single business segment, selling personal computers and other home office products, consumer electronics, entertainment software, major appliances and related accessories principally through its retail stores. They operate retail stores and commercial Websites under the brand names Best Buy, Media Play, On Cue, Sam Goody, Suncoast, Magnolia Hi-Fi and Future Shop. They also operate in three segments: Best Buy, Musicland and International.

The 4th quarter is the big quarter for Best Buy, encompassing the holiday season, and providing over 50% of the year's net earnings. The consensus estimate for the 4th quarter earnings is $1.79 per share on $16 billion in revenues. The level of earnings confidence is pretty high with the estimates ranging from $1.72 to $1.85 from the 27 analysts that follow BBY. During the 4th quarter of 2008, the company earned $1.61 per share on $14.7 billion of sales.

Over the last four quarters Best Buy has generally fared better than the estimated earnings. For the fourth quarter of 2008, the consensus was surpassed by 11¢ per share or 15%. In the first and third quarters of 2009 the earnings were 20% better than the estimates, but in the second quarter the profits came up a nickel or 12% short of the consensus. With the release of the 2008 4th quarter earnings, Best Buy management forecast 2009 earnings of $2.50 to $2.90 per share. Now that 2009 has drawn to a close, it appears the earnings will be $3.10 for the year, plus or minus a few pennies.

Best Buy is the world's largest electronics retailer and the company's results are a good indicator of consumer spending and the state of the retail economy. The company's earnings results could also have an effect on some of Best Buy's biggest competitors like Walmart (NYSE: WMT), Costco (NASDAQ: COST) and Amazon (NASDAQ: AMZN). The economic recession did have an effect on these companies, but it appears the top retailers have not had their earnings crater and are poised to resume earnings growth along with the economy. Costco reported in February and missed the estimates by 2¢ while Walmart bested the consensus by a nickel in January.

Since the share price recovered from the 2008-2009 bear market last spring, BBY has been in a $35 to $45 per share trading range. Countering a continued decrease in the historical share price volatility the implied volatility as indicated by BBY option pricing has been ticking up over the past few weeks, but not a big enough move to indicate that option traders are looking for any kind of earnings surprise. At this point in time the market seems to be complacent about the earnings for Best Buy and a surprise in either direction may catch some market participants off-guard.


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