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Best Buy’s Third-Quarter Earnings Growth Drivers

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Double-digit earnings growth

Best Buy’s (BBY) EPS, excluding one-time items, came in at $0.93 and grew 19.2% on a year-over-year basis. The company easily beat analysts’ adjusted EPS expectation of $0.85. The consumer electronics retailer has stayed ahead of analysts’ earnings expectations for four consecutive quarters.

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Earnings growth drivers

Aside from higher revenue, a lower tax rate also boosted the company’s bottom-line growth. A lower adjusted effective tax rate benefitted the third quarter’s adjusted EPS by $0.09. Best Buy’s effective tax rate, on an adjusted basis, was 22.7%, compared to 30.4% in the third quarter of the last fiscal year.

A lower share count resulting from share repurchases contributed $0.08 to Q3 of fiscal 2019’s adjusted EPS. Best Buy repurchased 15.4 million shares for $1.14 billion in the first nine months of fiscal 2019. The company plans to repurchase shares worth $1.5 billion in fiscal 2019.

Earnings outlook

Following the performance in the third quarter, Best Buy raised its fiscal 2019[1. Fiscal 2019 ends on February 2, 2019] adjusted EPS outlook to $5.09–$5.19, compared to the previous $4.95–$5.10. The new EPS guidance reflects expected growth of 15%–17% compared to fiscal 2018.

The company expects fiscal 2019’s fourth-quarter adjusted EPS in the $2.48–$2.58 bracket, compared to $2.42 in the fourth quarter of fiscal 2018.

We’ll look at Best Buy’s margins in the next part of this series.

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