Here's Why Best Buy (BBY) Must Be Investors' Favorite Pick
Shares of Best Buy Co., Inc. BBY have not only outperformed the Zacks categorized Retail-Consumer Electronics industry, but also the broader sector over the past one year. The stock has surged a whopping 59.9%, compared with the industry’s increase of 42.4%. The broader Retail-Wholesale sector gained 13.1% in the same time frame.
Further, this Zacks Rank #1 (Strong Buy) company’s prospects look promising buoyed by its sturdy performance, strategic initiatives and solid earnings surprise history. We believe that there is still much momentum left in the stock, which is quite evident from its VGM Score of “A” and long-term earnings growth rate of 11.9%.
Growth Initiatives
Best Buy banks on the ‘store-in-a-store’ concept as it is more viable and profitable to reach its target group. This strategy is proving a game changer as it facilitates the display of different brands under one roof ensuring a larger footfall. Management is leaving no stone unturned to attract consumers and attain incremental revenues, which is evident from its strategic action of opening over 1,400 "Samsung Experience Shops" within its stores. Moreover, the company rolled out “LG Store” across its 376 outlets in second-quarter fiscal 2017.
Best Buy’s “Renew Blue” program achieved tremendous success in fiscal 2016. Notably, the company reached $300 million and intends to improve its annualized operating income by $400 million over the next three years. However, these savings will be offset by incremental investments for future growth.
Further, the company is making extensive investments to upgrade its operations with special focus on developing omni-channel capacities and strengthening partnership with vendors. Alongside, Best Buy’s shareholder-friendly moves reflect the success of the company’s turnaround initiatives, which have helped it to improve the balance sheet.
Sturdy Performance
Now throwing light upon Best Buy’s performance, it has continued with positive earnings surprise streak for the 16th straight quarter, when it reported third-quarter fiscal 2017 results. Further, the stock has posted an average earnings surprise beat of 25.7% in the last four quarters. Moreover, it delivered a positive earnings surprise of 25.7%, 35.7% and 31.9% in the fist, second and third quarters of fiscal 2017, respectively.
Coming to its third-quarter performance, revenue beat the estimate for the third-straight quarter and both the top and bottom lines increased year over year. Further, management envisioned its fourth-quarter earnings per share in the range of $1.62–$1.67 compared with $1.53 delivered in the year-ago quarter. Consequently, the Zacks Consensus Estimate for the fourth quarter and fiscal 2017 has increased 5.7% to $1.66 and 7.6% to $3.27, respectively, in the past 90 days. However, we noted that of late estimates have been stable ahead of its earnings release.
Best Buy Co. Price and Consensus
Best Buy Co. Price and Consensus | Best Buy Co. Quote
Other Stocks You May Consider
Other favorably-placed stocks in the broader Retail-Wholesale sector include The Children's Place, Inc. PLCE, Tilly's, Inc. TLYS, both sporting a Zacks Rank #1 and Chico's FAS, Inc. CHS, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Children's Place, with a long-term earnings growth rate of 10.3%, has surged 53.6% in the past one year.
Tilly's, with a long-term earnings growth rate of 13%, has substantially increased 108.1% in the past six months.
Chico's, with a long-term earnings growth rate of 11.5%, has gained 29.6% in the past one year.
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Tilly's Inc. (TLYS): Free Stock Analysis Report
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