4Q17 EPS expectations
Analysts are expecting Bed Bath & Beyond (BBBY) to post EPS (earnings per share) of $1.40 in 4Q17, which represents a fall of 23.9% from $1.84 in 4Q16. The decline in its EBIT (earnings before interest and tax) margin and a higher effective tax rate are expected to offset the positive effects of revenue growth and share repurchases to lower the company’s EPS in 4Q17.
Analysts are expecting Bed Bath & Beyond’s EBIT margin to be 8.5% compared to 12.2% in 4Q16. It’s expected to fall due to lower gross margins, an increase in SG&A (selling, general, and administrative) expenses, and D&A (depreciation and amortization) costs. The gross margin is expected to fall due to a decline in merchandise margins and an increase in shipping and coupon expenses. SG&A expenses are expected to rise due to increases in payroll-related and advertising expenses. D&A expenses are expected to rise due to technology-related investments. For 4Q17, analysts are expecting the effective tax rate to be 35.6% compared to 35% in 4Q16.
Since the beginning of 2017, BBBY has repurchased 6 million shares for $207.3 million. By the end of 3Q17, the company had $1.5 billion available under its share repurchase program. Share repurchases drive the company’s EPS by lowering the number of shares outstanding.
For the next four quarters, analysts are expecting BBBY to post EPS of $2.82, which represents a fall of 22.3% from $3.63 in the corresponding four quarters of the previous year.
Next, let’s look at BBBY’s valuation multiple.