Bed Bath & Beyond shares jump on upgrade

The Associated Press

Shares of Bed Bath & Beyond Inc. jumped Wednesday after the retailer's stock was upgraded to "Buy" by a Nomura analyst.

THE SPARK: Analyst Aram Rubinson upgraded his rating on the company from "Neutral," saying that things are different for the retailer these days. While Rubinson has long admired the company as one of the retail industry's best merchants, he said it has not been inspiring in recent years.

The analyst gave it a "Neutral" rating more than a year ago on concerns about its merchandising, margins, overreliance on the Keurig single-cup coffee system, and other issues.

However, Rubinson said Wednesday that the company's shares are now attractively valued by comparison to its peers and the rest of the market. And while the company still faces some risk due to a level of uncertainty in the housing market that is tied to its business, he believes the potential upside outweighs the downside on the stock.

The analyst increased his 2013 earnings-per-share forecast to $5.15 from $5.11 and 2014 forecast to $5.90 from $5.88. The 2013 estimate is well above market consensus. Analysts polled by FactSet, on average, are anticipating earnings of $5.01 per share and $5.60 per share, respectively.

Rubinson also lifted his price target on the stock to $82 from $72, implying he expects shares to rally about 22 percent.

THE BIG PICTURE: The Union, N.J.-based company, which runs Bed Bath & Beyond, Cost Plus World Market and several other retail chains, reported in April that its fiscal fourth-quarter profit increased nearly 7 percent with help from recent acquisitions.

Bed Bath & Beyond has bought up a number of businesses to help beef up its growth potential, including distributor Linen Holdings and home goods chain World Market in 2012. It operated more than 1,400 locations in March.

SHARE ACTION: Shares of the company jumped $1.67, or more than 2 percent, to $68.65 by midafternoon Wednesday. Its stock is in the upper-end of its 52-week trading range of $54.33 to $75.84.