Analyst Explains Why Bed Bath & Beyond (BBBY) Stock is Rallying Despite a Big EPS Loss

September 29, 2022 9:05 AM EDT
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Price: $3.34 --0%

Rating Summary:
    4 Buy, 18 Hold, 13 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 7 | Down: 30 | New: 17
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Bed Bath & Beyond (NASDAQ: BBBY) shares are up about 5% despite the company reporting worse-than-expected earnings for its second quarter.

Bed Bath & Beyond reported a loss per share of $3.22, much worse than the analyst estimate that called for a loss per share of $1.80. Revenue for the quarter came in at $1.44 billion versus the consensus estimate of $1.47 billion.

More worryingly, BBBY reported capex of $121.6 million while analysts were looking for $69.8 million. At the end of Q2, Bed Bath & Beyond has $135.3 million in cash and cash equivalents, again significantly lower than the expected $245.5 million.

The company said it expects to record capex of about $250 million on a full-year basis. It maintained its outlook for the fiscal year of 2022.

“The Company anticipates breakeven operating cash flow by the end of fiscal 2022,” BBBY said in a statement.

For Vital Knowledge analysts, the results were “mostly inline” while an aggressive approach towards reducing excess inventory is seen as a “small victory.” Investors may see results as a near-term positive “given how awful the results have been out of this company,” analysts added.

Goldman Sachs analyst Kate McShane said she would be interested to hear more from BBBY on the upcoming earnings call, specifically about QTD trends, inventory status, any change in vendor or consumer behavior regarding inflation, etc.

Goldman has a Sell rating and a $2 per share price target on BBBY stock.

By Senad Karaahmetovic

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