Bed Bath & Beyond set for bumper Q3

The domestic retailer will announce its third-quarter figures on Thursday 8 January.

Bed Bath & Beyond logo
Source: Bloomberg

The share price of Bed Bath & Beyond has been rising steadily since July. An upturn in the US housing market and an increasing in consumer spending attributed to the strong performance. The retailer started 2014 off on a negative note as harsh weather conditions weighed on sales, and fragile consumer confidence only compounded the problem. In the first six months of 2014, the company saw 28% wiped off its share price.

In July, the firm announced a $2 billion share buyback scheme which is scheduled to finish in February. At the time off the announcement some traders questioned if a stock repurchase scheme was wise but the CEO, Steven Temares, pointed to the company’s strong ‘cash flow generation’. The acid test for the stock will come next month when the buyback scheme is wound down.

The company’s investment in online services, store expansion, and improvement in customer services has left it in a good position to take advantage of the rise in consumer sentiment and the uptick in the US housing market. Across the board, the US figures from Black Friday sales were not great so the festive shopping season at Bed Bath & Beyond may underwhelm traders. Regardless of how well the firm performed over the Christmas period, investors will want a commitment to achieve its year-end results.

The company will report its full-year numbers in April, and analysts are expecting revenue of $11.93 billion and earnings per share of $5.04. These forecasts equate to a 3.7% rise in revenue and a 5.2% increase in EPS.

For Bed Bath & Beyond’s third-quarter figures, traders are expecting revenue of $2.97 billion and EPS of 119 cents. Last year’s third-quarter revenue and EPS were $2.87 billion and 112 cents respectively. Second-quarter numbers were better than expected. Revenue came in at $2.94 billion and EPS was 117 cents, while dealers were anticipating $2.89 billion and 114 cents respectively.

The announcement of the second-quarter results caused the stock to post its biggest daily rise since April 2012.

Investment banks are bullish on the stock, and out of the 30 recommendations, nine are buys, 16 are holds and five are sells. The average target price is $72.62, which is 4.2% below the current price. Analysts are more bullish on Williams-Sonoma Inc, and out of the 32 ratings, 14 are buys, 17 are holds and one is a sell. The average target price is $77 which is 3.3% above the current price.

The number of short positions on Bed Bath & Beyond has fallen to its lowest level in seven months, and there has been a 22% decline in traders shorting the stock since the second-quarter results were reported.

A good set of results could push the stock to $80, which would fill the gap created last January. If the company fails to meet estimates the stock could drift back to $72.

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