Best Buy’s earnings this morning were a mixed bag, and the shares were a bit confused in the pre-market. First they were down substantially, but have since recovered most of the decline.
Overall the company appears to be doing fine and is well placed to take advantage of a potential economic recovery. While they missed analyst estimates by a pretty wide margin of five cents, they raised full-year guidance to $2.70 – $3.00 due to improving consumer trends they see. This seems to line up with the latest retail data that came out today.
As we’ve seen with a lot of companies recently, Best Buy expanded margins in the latest quarter through cost control despite the fact that comparable sales fell 3.1% in the US. Still, total revenue grew due to store expansion, the company says they’re taking market share, and the balance sheet remains strong due to low levels of debt.
Since Best Buy (BBY) earns most of their money during the Christmas season, the guidance upgrade is probably more significant than the recent quarter’s miss.
Despite the fact that the shares have over doubled year to date, they interestingly still appear to be at a historically low PE of about 14 times. As per Value Line, average annual PE has gone from 12 to 31 times over the previous sixteen years. Yet the stock is obviously at a tricky price level given the run-up.