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Will Best Buy’s Profitability Improve in the First Quarter?

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May. 22 2019, Published 7:07 a.m. ET

Expectations from Q1 earnings

Best Buy (BBY) delivered better-than-expected adjusted EPS in all the four quarters of fiscal 2019, which ended on February 2. The company’s adjusted EPS increased 12.4% to $2.72 in fiscal 2019’s fourth quarter and exceeded analysts’ estimate of $2.57. Best Buy’s fourth-quarter EPS benefitted from lower taxes and a lower share count as a result of share buybacks.

Best Buy plans to announce its results for the first quarter of fiscal 2020 on May 23. Best Buy expects its adjusted EPS in the range of $0.83 to $0.88 in the fiscal first quarter. Analysts expect Best Buy’s first quarter adjusted EPS to rise 4.9% to $0.86.

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Earnings outlook for fiscal 2020

In February, Best Buy forecasted full-year fiscal 2020 adjusted EPS in the range of $5.45 to $5.65. The company expects its gross margin to be flat in fiscal 2020 compared to fiscal 2019 as supply chain investments and higher transportation costs are expected to offset the higher margin from GreatCall, which was acquired in October 2018. GreatCall provides connected health services for aging customers.

It should be noted that Best Buy’s guidance was based on a US tariff of 10% on Chinese imports. But with the recent announcement of an increase in US tariffs to 25% on $200 billion worth of Chinese goods, it is likely that Best Buy will revisit its forecast for fiscal 2020.

Analysts currently expect Best Buy’s adjusted EPS to rise 6.4% to $5.66 in fiscal 2020.

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