Q4 Preview: Will Best Buy's (BBY) Relationship with Apple (AAPL) Keep the Ball Rolling?

Best Buy Co. (NYSE: BBY) is trading higher Wednesday, up about 1.11% this afternoon, ahead of the its fourth-quarter earnings report, expected out before the market opens Thursday.

Best Buy is expected to report EPS of $1.85 on sales of $16.29 billion.

Last quarter, the Richfield, MN-based retail giant posted EPS of $0.54 with revs of $11.9 billion, both missing consensus marks. Looking back to Q410, Best Buy produced EPS of $1.82 on revs of $16.6 billion, both beating Street expectations.

Shares fell 24% through the quarter, to $32.24 at the end of February. The stock is down 1.8% since then, while closing out 2010 about 11.8% better.

Valuing Best Buy simply, it is trading at 8.8x FY12 EPS estimates, compared to 37.2x for Amazon.com (Nasdaq: AMZN) and 10.6x at Wal-Mart (NYSE: WMT).

Data from Bloomberg has 12 analysts with a Buy on Best Buy, 13 with a Hold, and one suggesting to Sell. The analyst price target average is $39.90, with a high of $46 and low of $35. Shares have traded in a range of $48.24 - $30.65 over the last 52-weeks.

Summary
Goldman Sachs sees an opportunity for a bounce on results. The firm models for tough comps in TVs and PCs, increasing competition from Amazon, pricing transparency threatening margins over time, all being offset by a pullback in unprofitable markets, and smart capital allocation discipline.

Goldman expects EPS of $1.89 for the quarter. The firm has a Buy on the shares, with price target of $36.

J.P. Morgan is looking for EPS of $1.92. Commenting: "Based on our monthly TV tracker released on March 7th and continued weak news from the PC supply chain, we believe domestic comps softened sequentially following negative 5% comps in December (historically 50%+ of 4Q domestic). As such, we now forecast domestic comps down 6%. Moreover, we believe negative trends in these categories will persist in the near term (and they in total represent more than 40% of sales including attachments). The partial counterbalance is ongoing strong wireless, which combined with the weakness in PC represent a solid positive gross margin mix shift (35% for wireless and modest for PCs ex. Attachments)."

J.P. Morgan is Neutral on Best Buy, with a price target of $37.

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