Morgan Stanley Reiterates Underweight on Bed Bath & Beyond (BBBY) Following 4Q Beat

Morgan Stanley maintained an Underweight rating and $40.00 price target on Bed Bath & Beyond (NASDAQ: BBBY) following the company's 4Q earnings report. BBBY reported a $0.05 EPS beat, driven by 4Q comps. However, 2016 financial guidance
implies that fundamentals will be no better, but most likely worse, than 2015.

Analyst Simeon Gutman commented, "2016 EBITDA, EPS, and FCF estimates all likely come down in our view. If the stock holds on to its modest after-market gains (+2-4%), it would imply that investors are paying a higher multiple for a business that seems to be in the same predicament that it's been in for the past few years. Namely, that BBBY is enduring a dilutive omni-channel shift while the core business faces secular pressures. Buying the stock here, one would have to believe either that 2016 investments subside ($0.40 worth) and the savings flow into 2017 or that some of the structural headwinds/omni-channel pressures BBBY is facing abate. We do not see these items changing and would not underwrite that type of inflection, especially since underlying sales growth is decelerating. In addition, the 2016 outlook is back-end weighted and it appears that Q1 is off to a weak start given the lack of comp/EPS guidance. We maintain an Underweight rating."

For an analyst ratings summary and ratings history on Bed Bath & Beyond click here. For more ratings news on Bed Bath & Beyond click here.

Shares of Bed Bath & Beyond closed at $48.81 yesterday.

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