Can Best Buy continue strong earnings trend?

Best Buy is due to announce its second-quarter results on Tuesday 26 August. Analysts are estimating earnings per share of $0.31 and revenue of $8.98 billion.

A Best Buy store
Source: Bloomberg

Best Buy is trading at $31.33; the stock is up 23% since it reported it first-quarter figures in May, in which the three-month revenue slightly missed expectations but the EPS exceeded estimates. The strong earnings are proof that the chief executive officer Hubert Joly’s turnaround plan is working. Since Mr Joly joined nearly two years ago he has closed underperforming stores, cut the headcount and boosted the cash reserve. In addition to this, the share price has risen 76% during his tenure.

Best Buy’s consumer electronics department business has felt the pinch from its competitors like Amazon and Wal-Mart. The company expects like-for-like sales for electronics to decline in the coming quarter, and traders will be looking for a positive outlook heading into Christmas.

Equity analysts are very bullish on the stock. Out of the 29 recommendations 17 are buys, 11 are holds and only one is a sell.

The stock has bounced off the $29 level a number of occasions. If it takes out $32.24, it could fill the gap up to $36.41.

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