Best Buy (NYSE: BBY) Stocks are finally rising! Best Buy shares, which have lagged the stock market for much of the past year, surged 16.5% by 10:15 a.m. ET after reporting a big earnings beat on Thursday morning.
Analysts had expected Best Buy to earn just $1.16 a share on sales of just over $9.2 billion, but Best Buy reported earnings of $1.34 a share on sales of just under $9.3 billion.
Best Buy's second quarter results
That's the good news. Now, the bad news. Best Buy may have exceeded expectations, but… Existing store sales Still, sales were down 2.3% year over year, while total sales were down 3.1% year over year. CEO Corey Barry said of the sales trends that consumers are “looking for value and sales events,” which doesn't seem to bode well for margins.
But surprisingly, despite customer trends, Best Buy actually did Improved margins by 30 basis points last quarter Gross profit margin (23.5%) and operating margin (4.1%) increased 50 basis points.
The result: Although sales were down slightly, Best Buy's profits still grew a healthy 7 percent.
Best Buy is stock Best Buy?
Can Best Buy maintain its momentum?
Switching to guidance, management now expects the retail environment to be “stabilized,” which isn't as good news as it sounds. Previously, Best Buy had predicted that sales could fall 3% this year, but do not have Revenues aren't going to fall at all, but now that we're two-thirds of the way through the year, management has accepted the fact that revenues will fall between 1.5% and 3% this year.
As a result, full-year sales forecasts have been revised downward and now stand at about $41.6 billion.
Meanwhile, Best Buy raised its guidance for “non-GAAP diluted EPS” (which is equivalent to actual GAAP earnings for the second quarter). The company's earnings estimate is between $6.10 and $6.35 (or about $6.22 at the midpoint), suggesting that Best Buy's stock is selling for about 16.3 times earnings.
Considering analysts' long-term earnings growth forecasts of 10.7% and Best Buy's generous dividend yield of 4.3% (i.e., 15% of total earnings), that's enough to make Best Buy stock a “buy.”
Should I invest $1,000 in Best Buy right now?
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Rich Smith The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Best Buy. The Motley Fool recommends the company. Disclosure Policy.
Why Best Buy shares surged 16.5% Originally published on The Motley Fool
