Best Buy Inc. - Value

Will holiday cheer rain down on the electronics retailers this year? Best Buy Inc. (BBY) is scheduled to report third quarter results in the middle of the holiday season but is coming off of a 36.4% earnings beat in the fiscal second quarter. It is trading at just 12.4x forward estimates.

While electronic gadgets remain hot products with consumers, Best Buy still has tough competition from online retailers like Amazon.com as well as the discounters like Wal-Mart and Target.

In the second quarter, however, revenue rose 3% to $11.3 billion from $11 billion a year ago.

Earnings per share were 60 cents, or 16 cents better than the Zacks Consensus of 44 cents. It was the third earnings surprise in the last 4 quarters. The company made just 37 cents in the year ago quarter.

Zacks Consensus Estimates Climb

On Sep 14, in order to reflect share repurchases, Best Buy raised its full year guidance by 10 cents to the range of $3.55 to $3.70 per share.

Analysts are pretty bullish on the company, but not as much as the company appears to be. The fiscal 2011 Zacks consensus has risen to $3.58 from $3.35 per share following its earnings beat and the guidance revision.

This is earnings growth of 13.9% but it is still on the low end of the company's guidance range.

Growth is expected to continue into fiscal 2012, but at a slightly slower rate of just 9.3%. 1 estimate has been revised higher in just the last week for fiscal 2012. The 2012 Zacks Consensus is up 17 cents in the last 60 days to $3.58 per share.

Fiscal 2011 diluted EPS guidance increased by 10 cents to $3.55 to $3.70 to reflect impact of share repurchases completed in the first fiscal half (the new guidance range excludes the impact of potential share repurchases that may be completed in the second fiscal half).

Is Best Buy Still a Value Stock?

I last reviewed Best Buy as a value stock in January 2010. A lot has happened in the economy since then.

But Best Buy still remains a value stock. Not only is its P/E of 12.4 under the usual value cut off of 15, but it has a price-to-book ratio of 2.8, which is also within value parameters.

It also has a PEG ratio of just 0.95, indicating there is value.

Best Buy's return on equity (ROE) is a strong 21.2% compared to its peers at 15.5%.

Best Buy is a Zacks #2 Rank (buy) stock. It will report third quarter results on Dec 14.

Read the Jan 7, 2010 article.

Update to Previous Value Zacks Rank Buy Stocks

The dark times of the great recession have passed for the specialty retailers. Cabela's Inc. (CAB) recently reported record third quarter revenue as it surprised on the Zacks Consensus for the fourth quarter in a row. Despite hitting new highs on the results, the stock is still a value, trading at just 14x forward estimates. Read the full article.

Infrastructure has become a key component in this recovery as government officials are focusing on it as a means to create jobs and stimulate growth. MasTec Inc. (MTZ) is reaping the benefits as it reported record revenue for the third quarter and raised 2010 guidance all the while still trading at just under 15x forward estimates. Read the full article.

Solar companies are suddenly hot again but even with a big surge in share prices many of them are still dirt cheap. ReneSola Limited (SOL) is trading with a forward P/E of just 7. With big earnings growth, it also is a rare value and growth stock. Read the full article.

Westlake Chemical Corporation (WLK) blew by the Zacks Consensus Estimate by 44% in the third quarter as earnings per share doubled compared to a year ago. Sales prices and volumes were both jumping as the chemical sector remains hot. Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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