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Will Best Buy’s First-Quarter Earnings Beat Expectations?

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Stock movement ahead of results

Best Buy (BBY) stock has risen 30% on a YTD basis as of May 20, outperforming the 13.3% rise in the S&P 500 Index. The consumer electronics retailer plans to announce its results for the first quarter of fiscal 2020 on May 23. The first quarter of fiscal 2020 ended on May 4. Best Buy stock surged 14.1% on February 27 as the company announced better-than-expected results for fiscal 2019’s fourth quarter, which ended on February 2.

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Best Buy stock fell 5.9% on May 13 as the trade war tensions between the US and China escalated. Best Buy’s guidance for fiscal 2020 assumed a tariff rate of 10% on Chinese imports. However, on May 10, President Donald Trump increased the tariffs from 10% to 25% on $200 billion of Chinese goods. President Trump also threatened to impose 25% tariffs on an additional $325 billion of Chinese imports. In retaliation, China has increased duties to 25% on $60 billion of US goods effective June 1. Best Buy will likely revise its guidance to reflect the impact of higher tariffs.

Analysts’ recommendations

On April 24, Jefferies raised its rating for Best Buy stock to “buy” from “hold” and increased its price target to $88 from $72. As of May 20, Best Buy stock was rated a “hold” by 17 out of 27 analysts covering the retailer. Nine analysts had a “buy” recommendation, while one analyst has a “sell” rating.

Under CEO Hubert Joly, Best Buy implemented several strategic initiatives to improve its same-store sales and productivity. Corie Barry, Best Buy’s chief financial and strategic transformation officer, will replace Hubert Joly as the CEO effective at the company’s annual shareholder meeting scheduled on June 11. Hubert Joly will then take the role of executive chair of the board of directors.

Analysts expect Best Buy’s revenue to rise 0.3% to $9.1 billion and adjusted EPS to increase 4.9% to $0.86 in the first quarter of fiscal 2020. The 12-month price target of $77.41 for Best Buy stock reflects an upside potential of about 12%. However, this price target will likely be revised based on the company’s first-quarter results and outlook, which will be announced on Thursday.

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