Earnings Preview: Best Buy (BBY) Looks To Keep Momentum In Q1

Shares of Best Buy (NYSE: BBY) are trading marginally higher ahead of the company's first quarter earnings release, expected Tuesday morning. Shares are up 0.75% to $41.51 today, a $0.31 increase.

BBY is expected to report an EPS of $0.50 on revs of $10.94 billion. The estimate is a 47% premium to the $0.34 EPS estimate expected last year. Speaking of which, BBY posted a Q109 EPS of $0.42 ex-items, on revs of $10.1 billion, producing a mixed result for the quarter.

Shares of the company have gained 15% through the quarter, and are currently trading up 3.7% YTD. BBY stock hit a high of $48.83 and a low of $36.28 through the quarter.

Data from Bloomberg shows that 17 analysts have a Buy rating on the stock, 13 have a Hold, and none suggest to Sell the shares. The analyst price target simple average is $49.12, with a high of $56 and a low of $38.

Analyst Ratings Through the Quarter
In early March, Goldman Sachs upgraded the company from Neutral to Buy, increasing their price target from $44 to $47. Goldman noted "optionality on product cycle recovery, macro recovery, and capital allocation," and that the stock is trading at one of the lowest multiples in its peer group. Goldman later increased their price target on the shares from $47 to $49\ citing "embedded optionality from the successful execution of the firm's high margin attachments strategy and stronger TV sales as the product cycle and pricing firms."

FBR Capital downgraded BBY from Market Perform to Underperform, following the company's solid Q4 results. The firm maintained their $36 price target.

Wedbush maintained a Neutral rating, while increasing their price target from $44 to $47. The Wedbush analyst said, "We are increasing our FY:11 estimates for revenue to $53.4 billion from $53.3 billion, and for EPS to $3.65 from $3.50, to reflect management’s guidance and the company’s positive execution and momentum."

UBS increased their price target from $50 to $52 on the stock, while maintaining a Buy rating on the shares.

In late March, Societe Generale upgraded BBY from Sell to Hold.

Summary
This will be the first quarter that Best Buy will include that sales of Apple's (Nasdaq: AAPL) iPad tablet device in their earnings report. The device is a hot item, and should add handsomely to the company's bottom-line considering that CEO Steve Jobs estimates that the company is selling one iPad every three seconds. BBY reported that they had actually run out of inventory in early April.

Goldman Sachs is confident about Best Buy going into their Q110 earnings. The firm notes that they are confident "in BBY's ability to sell services and content as Internet-enabled TVs go mainstream; as we wrote recently, third-party industry players believe that BBY has the clout to capture a piece of this revenue stream... We continue to rate BBY Buy, despite a choppy quarter. Consensus has remained surprisingly stable since we cut our estimates on June 2, but there have been some other reductions, and we believe the Street is braced for a tougher result. We see a favorable risk/reward, given modest valuation, a potent TV cycle, and capital allocation opportunity."

Piper Jaffray lowered their Q110 EPS estimate from $0.51 to $0.49, and lowers their domestic comp sales growth estimate from 5% to 3%. They believe international comps will grow 7%. They see robust sales in notebook computers, smartphones, and appliances, but are bearish on the company's TV supply in smaller screen sizes. The company made their estimate changes ex-any buybacks. Piper has an Overweight rating with a price target of $53 on the shares.

Wedbush sees BBY posting an EPS of $0.53 on revs of $10.8 billion. They see domestic comps up 2.5%, int'l comps up 2%, and total comps up 2.4%. Domestic sales should be helped by ongoing economic recovery through the quarter with a slight "uptick in consumer spending." International sales come from stabilization in Canada and growth in China, offsetting any downside from the Euro. They believe that Apple is major contributor to bringing BBY back into the limelight. They also believe that BBY is becoming a stronger competitor to RadioShack (NYSE: RSH). Wedbush has a Neutral rating and $47 price target on the shares.

Best Buy Co. Inc. is expected to release their Q110 earnings on Tuesday, June 15, 2010, at approximately 8:00am EDT. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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