Bed Bath & Beyond, Inc. (BBBY) recently posted its fourth-quarter 2010 results. Results came in stronger on the heels of double-digit growth in sales and higher margins.
Street analysts had more than a week to ponder on the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts' estimate revisions as well as the Zacks Rank.
Quarterly Review
The company’s earnings rose 30.2% to $ 1.12 per share from the year-ago earnings of 86 cents per share, handily surpassing its earnings guidance range of 91 cents to 95 cents per share. Bed Bath & Beyond also outpaced the Zacks Consensus Estimate of 97 cents a share. The company has reported eight consecutive quarters of improving trends.
For fiscal year 2010, earnings rose 33.5% to $ 3.07 per share from $ 2.30 per share in the prior year, easily outshining its earnings guidance range of $ 2.86 to $ 2.90 per share. Bed Bath & Beyond also outpaced the Zacks Consensus Estimate of $ 2.92 a share.
Bed Bath & Beyond's fourth-quarter top line jumped 11.6% to $ 2,505.0 million from $ 2,244.0 million in the year-ago quarter. The company has been witnessing increasing trends in comparable-store sales.
After falling 0.6% in the second quarter of fiscal 2009, comparable-store sales were positive in the subsequent quarters. In the quarter under review, comparable-store sales climbed 8.5%. The company also beat the Zacks Consensus Estimate of $ 2,387.0 million.
For a full coverage on third quarter earnings, read: Bed Bath & Beyond Beats Estimate
Agreement of Analysts
Estimate revision trends depict a positive sentiment among analysts for the upcoming fiscal years 2011 and 2012 as well as for the sequentially following two quarters. Over the last 7 days, all 19 analysts covering the stock have revised their estimates upward, while none moved in the opposite direction for fiscal 2011.
A similar trend has been noticed for fiscal 2012, where 9 of the 21 analysts covering the stock have lifted their estimates with no downward movement in estimates in the last 7 days.
For the first and second quarters of 2011, analysts’ expectation remains, respectively, positive and lukewarm. For the first quarter, 9 out of 17 analysts have raised their estimates, while 2 have made downward revisions. For the second quarter, 7 out of 17 analysts providing quarterly numbers have increased their estimates, while only 1 moved in the opposite direction.
Magnitude of Estimate Revisions
The magnitude of estimate revisions for Bed Bath & Beyond depicts an optimistic outlook of analysts for the upcoming fiscal years and quarters. Over the last 7 days, estimates for fiscal 2011 and 2012 have increased 20 and 17 cents, respectively. For the first and second quarters of fiscal 2011, estimates have increased by 2 cents and 1 cent each.
Our Recommendation
Currently, Bed Bath & Beyond holds a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. However, in the long term, we have a 'Neutral' recommendation on the stock.
Bed Bath & Beyond represents a strong brand with solid growth opportunities. Industry consolidation, cross merchandising opportunities, future growth potential for newer concepts, and strong balance sheet and cash flow should continue to augur well for the company. Further, Bed Bath & Beyond is well positioned to benefit from recent positive housing turnover trends, which should support sales for home furnishing retailers in fiscal 2011.
Bed Bath & Beyond operates in a highly fragmented industry and faces competition from larger retailers, such as Target Corporation (TGT) and Wal-Mart Stores Inc. (WMT) as well as from departmental and specialty stores. Despite its strong fundamentals, Bed Bath may find it difficult to execute and implement new business strategies which, in turn, will impact its operations adversely.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
BED BATH&BEYOND (BBBY): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
Zacks Investment Research
Be the first to comment