Best Buy (BBY) Surprises With a Q4 Beat, Gross Margin Increase; Analysts Weigh In

March 24, 2011 8:27 AM EDT
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Price: $43.63 -2.55%

Rating Summary:
    7 Buy, 17 Hold, 5 Sell

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    Up: 23 | Down: 34 | New: 34
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Best Buy Co. (NYSE: BBY) posted better-than-expected fourth-quarter earnings Thursday, but guided for full year 2012 profit below the Street's expectations.

The big box electronics retailer reported fourth-quarter earnings of $1.98 per share, 13 cents better than the analyst estimate of $1.85 per share.

Revenue for the company fell to $16.25 billion in the three month period ended February 26 from $16.55 billion last year. The Street had been looking for $16.29 billion.

Comparable store sales, or sales at locations open at least one year, fell 4.6 percent in the quarter, compared to a 7 percent rise in the year-ago period.

Adjusted gross profit was 24.4 percent in the quarter, up from 24 percent last year.

“Overall demand for key consumer electronics products was a challenge for the industry last year,” said Brian Dunn, CEO of Best Buy. "We accomplished several key initiatives during the year that helped to both partially mitigate these challenges and build critical capabilities for profitable growth."

Looking forward, Best Buy sees full-year 2012 earnings in the range of $3.30-$3.55 per share on sales of $51-$52.5 billion, compared to the consensus of $3.56 per share and $52.17 billion respectively. In addition, the company sees comparable store sales of flat to a 3 percent decline.

Shares of Best Buy are up 23 cents to $32.08 in premarket trade on Thursday.

Analyst Comments:

Janney Capital Markets maintains a Buy rating on Best Buy and $46 price target, saying the company could be one of the best value stocks in 2011.

Goldman Sachs maintains a Neutral rating on Best Buy, saying "Results were not materially different from expectations, though margins were certainly on the lighter side. Guidance will likely strike the right balance with the Street today –
sufficiently conservative, but not enough such that the firm is capitulating on its margin structure, the primary worry for the stock. That said, management does need to answer to questions of margin durability."

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