Q3 Preview: Analysts See Bed Bath & Beyond (BBBY) with Another Beat on K-Cups, Soda Machines

Bed Bath & Beyond (Nasdaq: BBBY) is holding on fairly well Wednesday heading into its third-quarter earnings release.

After the market closes, Bed Bath & Beyond is expected to report earnings of 89 cents per share on revenue of $2.35 billion. Should Bed Bath & Beyond at least meet expectations, earnings would be a 20 percent gain over the same period last year.

Shares of Bed Bath & Beyond gained 6.4 percent to $60.51 at the end of November. The stock is 1.2 percent better since then, and up 24.6 percent on the year.

Last quarter, Bed Bath & Beyond reported cash of $7.26 and a book value of $16.29 per share. Excluding cash, and the stock is currently going for 12.4 times next year's earnings expectations, compared with 11.6 times for Target (NYSE: TGT), and 11.7 times at Wal-mart (NYSE: WMT).

Data from Bloomberg has 18 analysts with a Buy rating on Bed Bath & Beyond, 11 at Hold, and 1 with a Sell-equivalent call. The Street's price target consensus is $67.50, with a low of $62 and high of $74. Bed Bath & Beyond shares have traded within a range of $44.79 to $63.63 over the last year.

Notably, the analyst price target average suggests nearly 10 percent of upside.

Analyst Comments

• Goldman Sachs sees earnings of 90 cents per share, but said a number in the mid-90 cent range looks achievable "based on reasonable margin assumptions, with no upside to sales." Despite the call, Goldman says its outlook bakes in some conservatism based on cotton prices leading to increase in home textile prices.
  
  Goldman also commented, "But, we do believe the firm’s string of beats is likely to abate after 3Q2011, based on the same analytical framework, and forecasts embed the appropriate sequential bounce from 3Q to 4Q."
  
  
• Deutsche Bank is modeling for EPS of 85 cents, with 3.5 percent gain in comps. The firm is bullish stemming from recent trends, saying, "Home furnishing trends improved to include 3.9% growth in the three months ending November, and would represent an acceleration from 1.0% last quarter and in fact the best quarterly industry sales growth since 2Q06. Although we estimate that BBBY accounts for only 10% share of the total industry historically, BBBY’s comps have correlated well to this data."
  
  
• Wedbush sees EPS of 88 cents, and a 5.0 percent increase in comps. Wedbush comments, "We expect the company’s results to reflect improvements in the home furnishings sector, including strong recent results from Williams-Sonoma and Pier 1 Imports. BBBY’s most similar competitor HomeGoods (a 375-store division of TJX Companies) reported that comps accelerated to 8%, 7%, and 6% during September, October, and November, respectively, which bodes very well for Bed Bath."
  
  Another key area will be higher traffic on sales of such items like Green Mountain (Nasdaq: GMCR) K-Cups and SodaStream's (Nasdaq: SODA) soda machines and accessories.
  
  
• Collins Stewart is looking for earnings of 89 cents per share. Collins says, "Despite BBBY’s 22%+ market share in the fragmented home-furnishings category, we believe the company still has significant room to grow sales and EPS through both e-commerce and its brick-and-mortar operations."
  
  Collins said Bed Bath & Beyond;s cash position might afford it stronger buybacks, or a possible dividend initiation.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Bed Bath & Beyond's past performance at Streetinsider's Bed Bath & Beyond's Income Statement.

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