Will Best Buy (BBY) Stock Break Into A New Range?

Now that we are comfortably on the other side of first-quarter earnings season, we can take some time to reflect on the latest results. It was a pretty solid season overall, and investors are continuing to trade with confidence. However, it was another tough batch of reports for brick-and-mortar retailers.

Nevertheless, there were a few diamonds in the rough scattered throughout the retail industry. One of those was electronics and home appliance retailer Best Buy BBY (also read: These 5 Retailers Just Crushed Q1 Earnings: What the Heck is Happening?).

After its impressive report, Best Buy is comfortably sitting near its 52-week high. As the stock continues to test its 52-week range, what could make it break even higher? Let’s take a close look.

Latest Earnings Results

Last week, Best Buy posted better-than-expected results on the top and bottom lines. The perennial EPS beater reported earnings of 60 cents per share, surpassing the Zacks Consensus Estimate of 40 cents and extending its out-performance streak to 18 quarters. This earnings figure also represented growth of 40% year-over-year.

Best Buy’s quarterly revenues of $8.53 billion were up 1% and surpassed our consensus estimate of $8.26 billion. Comparable-store sales were up 1.6% overall, while comparable-online sales increased 22.5%. Adjusted operating profit came in at $300 million, up 25% year over year, and adjusted operating margin was 3.5%--an improvement from the 2.8% seen in the prior-year quarter.

Zacks Metrics

This impressive performance has put Best Buy in the spotlight, so let’s check out some of the stock’s other fundamental metrics:

As we can see, BBY is currently a Zacks Rank #2 (Buy), and it has had favorable estimate revision activity recently. However, it should be noted that the above revisions were for Best Buy’s full-year earnings estimates.

For the current quarter, we have actually seen two positive revisions and two negative revisions within the past 30 days. In fact, the Zacks Consensus Estimate is actually a penny lower than it was 90 days ago.

For the next quarter, we have seen just one positive revision in that timeframe, while two negative revisions have come in. But looking way down the line, we have seen five positive revisions for Best Buy’s next fiscal year earnings.

So what does this all mean? Well, it means that the estimate revision activity paints an unclear picture for the company’s near-term performance, but it reflects well on its long-term potential.

Of course, we can look at other data too. Overall, BBY has an “A” grade in our weighted average VGM category, which has been boosted by its “A” grade for Value and its “B” for Growth.

Glancing back at the latest earnings data, we should note that Best Buy was able to post positive comps in the latest quarter—not an easy feat in today’s retail environment—and the company expects comps growth to continue throughout the year. Best Buy’s online growth was also impressive, and operating margin improvement is always a great thing.

If the company can post another solid earnings report, shares should break even higher. However, Best Buy won’t report again until August. Until then, investors should continue to monitor the overall strength of the market, as well as any news that could impact the stock. Any renewed confidence in the overall industry or specific news that customers are engaging well with Best Buy could send this stock into a new range.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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