Best Buy Earnings Preview: First Quarter 2009

Best Buy [[BBY]] is expected to report their first quarter 2009 results before the market opens on Tuesday, June 16. Based on our analysis, we at are expecting BBY to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $10.28 billion and EPS of $.39. This would represent a 14% increase in revenues from last year’s $8.99 billion in the same period. The current analyst consensus estimates calls for revenues of $10.10 billion and EPS of $.34. On March 26, the company provided full year revenue guidance of $46.5 – $48.5 billion and EPS of $2.50 – $2.90.


While analysts estimates have been creeping up as we see more evidence of improvements in the economy, we still believe there is an opportunity for Best Buy to deliver a strong beat this quarter. Management mentioned that last quarter ended stronger than it began and all evidence would indicate that those trends have only grown stronger over the last few months.


Best Buy continues to gain market share and has benefited from stronger than anticipated consumer demand. The liquidation of Circuit City doesn’t appear to have had any significant impact on Best Buy’s results. In addition, the company has already made significant adjustments to its cost structure. This allowed Best Buy to deliver much stronger than anticipated fourth quarter results and we see the same story playing out in the upcoming first quarter results as well.


Share Performance

Since the beginning of the year, Best Buy’s shares have soared over 36%. In 2008, BBY’s shares fell almost 47% as the stock poorly under-performed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 12.5x consensus 2010 EPS estimates. This is below the relative valuations of their peer group. Although Best Buy’s stock has already appreciated significantly in 2009, we still believe that compelling valuation levels and the opportunity to deliver strong first quarter results could drive this stock higher in the coming weeks.


Recommendation: Buy with a $42 price target.


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