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.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.