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Can BBY Exceed Estimates for a 15th Straight Quarter?

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August 22, 2016
Best Buy releases earnings report amid future profitability concerns among investors.

Best Buy (BBY) just celebrated 50 years in business with a 50-hour sale and when the electronics giant reports earnings ahead of the bell Tuesday, investors and many analysts hope to learn how the electronics retailer plans to compete for the next half century.

In Q1, BBY warned investors that Q2 sales would be flat and earnings weak because of a hit to its services division and an earthquake in Japan in April that was slowing digital-imaging product availability. But beyond that, many analysts say they’re looking for more color on what’s ahead in the holiday season and next year.

Is the 4K TV cycle nearing its end, as one analyst suggests? Can a new wave of electronics sell well at BBY, as another analyst submits?

Analysts reporting to Thomson Reuters have a consensus forecast of earnings per share at $0.43, off 12% from last year’s profit of $0.49 a share. Revenues for the quarter are expected to reach $8.4 billion, down slightly from $8.5 billion in the year-ago period. BBY has outpaced Wall Street’s earnings expectations for 14 straight quarters.

Short-term options traders have priced in a 4% potential share price move in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform from TD Ameritrade.

Options activity has picked up in recent sessions with volume in calls at the 33- and 36-strikes. There’s been activity in puts at the 31-strike in the weeklies. The implied volatility is at the 47th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

FIGURE 1: PULLING BACK AHEAD OF EARNINGS.

BBY shares rallied from $29 to just over $35. Data source: Standard & Poor’s. Image source: the thinkorswim® platform by TD Ameritrade. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.