Oppenheimer: Bed Bath & Beyond's 4Q Could Be 'Ok, But Not Great'

In a report published Thursday, Oppenheimer analysts maintained an Outperform rating on Bed Bath & Beyond Inc BBBY, with a price target of $85. The company is scheduled to report its fourth quarter results on April 8. The analysts expect the 4Q results to be "ok, but not great," while the company's initial 2015 guidance is likely to miss the current Street estimates. "Our Q4 (Feb. 2015) EPS forecast of $1.80 is essentially in line with a Street figure of $1.81 and guidance for $1.78- $1.83. For FY15 (Feb. 2016) and FY16 (Feb. 2017) we look for earnings of $5.35 and $5.65 vs. current consensus forecasts of $5.44 and $5.85," the analysts wrote. Since mid-December last year, Bed Bath & Beyond's share price has climbed merely 8 percent as compared to a 12 percent gain in Oppenheimer's OpCo Hardlines coverage. However, the company's stock performed much better than S&P 500, which gained only and 2 percent during the same period. Bed Bath & Beyond has continued to witness gross margin pressure on account of various promotions, "an unfavorable sales mix shift" and online investments. "In Q4 (Feb. 2015), we expect gross margins to decline 60 bps to 39.9% from 40.5% last year," the report said. In the report Oppenheimer noted, "Recent sales weakness at GMCR and SODA likely suggest modest sales pressures or limited potential for comp upside at BBBY. Overall, Home Furnishing sales appear to have held up well lately." While citing continued headwinds in the near term, the analysts commented, "We have for some time looked very favorably upon the longer term fundamental prospects for Bed Bath & Beyond…Longer term, we look favorably upon the depressed valuation at which BBBY trades and the improving positioning of the chain online."