Bed Bath & Beyond (BBBY) Issues Q1 Beat-and-Raise; Analysts Weigh In

Shares of Bed Bath & Beyond (Nasdaq: BBBY) are trading up 4.11 percent or $2.22 to $56.28 in mid day of trading today following the release of its first quarter fiscal year 2012 results.

The company reported its first quarter results better than expected with sales totaling $2.11 billion and earnings of 72 cents per share. The Street was forecasting sales of $2.08 billion and earnings of $0.63 cents per share.

Same-store-sales were up around 7 percent for the first quarter, slightly down from a gain of 8.4 percent in the first quarter last year.

Bed Bath & Beyond finished the quarter with a total of 1,142 stores: 984 Bed Bath & Beyond stores, 66 Christmas Tree Shops stores, 47 buybuy BABY stores and 45 stores under the names of Harmon or Harmon Face Values.

EPS Guidance for the second quarter was released with a range of 77 to 82 cents per share, which was in-line with the Street’s estimate of 82 cents. The company also announced that it was raising its full year 2011 EPS growth estimate range from 10 - 15 percent to 15 - 20 percent.

Analysts weigh in on results:

• Goldman Sachs estimate called for EPS of $0.65 and claims that the company beat its estimates across the board. As a result the firm raised its 2011 EPS estimate from $3.50 to $3.75, its 2012 from $4.05 to $4.27, and its 2013 from $4.55 to $4.83. For the second quarter Goldman has set its EPS estimate at $0.87. To go in-line with its new estimates and the company’s performance, the firm raised its price target by $3 to $63, maintains Neutral coverage rating.
  
  Goldman commented, “BBBY has been able to defray product cost pressures – which by our models should be driving gross margin lower – through innovative vendor negotiations and merchandising adjustments (packaging, sourcing locale, product composition). Our new estimates still incorporate some margin pressure – why would BBBY not experience some measure of this here? – but recent experience suggests this view is unnecessarily modest.”
  
  
• Wells Fargo was forecasting earnings of 61 cents per share for the quarter with a 4.5 percent increase in sales. The firm believes the overall strength in the company is solid and will be stable for some time. To go in-line with market trends, the firm raised its second quarter EPS estimate from 81 to 86 cents, its full year 2011 from $3.55 to $3.72, and its full year 2012 from $4.08 to $4.25. As a result of the estimate increases, Wells Fargo increased its valuation range from $51 - $53 to $52 - $55, but reiterated its Market Perform rating.
  
  Wells Fargo noted, “The liquidation of Bed Bath's primary specialty competitor, Linens 'N Things, and the recovery in the home furnishings market provided a near-term opportunity to improve sales and margins, but masks the longer-term trend: The specialty retail channel is losing share in the house wares category as selection and low prices have become more ubiquitous, particularly on the Internet. That said, with a solid balance sheet and massive share buyback in place, this is unlikely to manifest itself as an immediate concern.”
  
  
• Wedbush was estimating that BBBY would report its first quarter results with sales increasing 8.8 percent and EPS of 62 cents. For the second quarter, the firm forecasts EPS of 85 cents and comps up 5 percent. For 2011 and 2012 Wedbush is raising its EPS estimates from $3.48 and $3.87 to $3.70 and $4.20. The firm is maintaining its Outperform rating on shares of BBBY while bumping its price target up from $63 to $67.
  
  Wedbush stated, "We assign a premium multiple to our projected long-term growth rate in the low to mid teens because we believe BBBY is a compelling story, and we expect a return to strong operating margins in the low to mid teens."
  
  
• Deutche Bank expects that the company will beat its second quarter guidance as it has in almost every quarter over the past 10 years. Following the company’s strong first quarter results, the firm is raising its 2011 and 2012 EPS estimates from $3.48 and $3.88 to $3.59 and $4.02. Deutche is reiterating its Hold rating on the shares, while raising its price target on from $55 to $56.
  
  
• KeyBanc was forecasting that sales would have came in up 5 percent with EPS of $0.62 for the first quarter. Due to the company’s solid performance and market trends, the firm is raising its 2011 and 2012 EPS estimates from $3.56 and $4.03 to $3.67 and $4.10. KeyBanc is reiterating its second quarter EPS estimate of 84 cents, but is raising its third and fourth quarter estimates from 83 cents and $1.27 to $0.84 and $1.28. The firm is maintaining its Hold rating on shares of BBBY.
  
  KeyBanc commented, “While margin expansion was encouraging, we nonetheless believe gross margin is likely to be pressured by higher input costs and unfavorable mix shift as we move further into 2011. Furthermore, we believe sales growth, though robust, will continue to moderate from its torrid pace in 2010.”

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