Best Buy Gives The 'All-Clear' Signal (BBY, CC)

Electronics, entertainment, and appliance retail giant Best Buy Co, Inc. (NYSE: BBY) has just posted earnings.  This last quarter was a 10% rise to $1.71 EPS in a revenue gain to $13.418 Billion.  First Call had estimates at $1.65 EPS on $13.19 Billion in revenues.

The company is also forecasting a roughly 7% rise in its next fiscal year earnings to $3.25 to $3.40 EPS.  It also forecast revenues of $43 to $44 Billion on a comparable store sales gain of 1% to 3%.  First Call has Fiscal February-2009 estimates at $3.31 EPS on $43 Billion in revenues.

For the last quarter, its comparable store sales year over year were actually down 0.2% and total revenues grew by 4%.  Both numbers would have been higher, with the total gain at 9%, had it not been for the lost week compared to the same quarter in 2007.

The company has a remaining authorization of $2.5 billion for the repurchase of its common stock with no stated expiration date.

In the past this wouldn’t have been good enough to please growth investors, particularly as earnings are down slightly from previous reports.  But this appears to be viewed as an "all clear" sign with a scenario that isn’t deteriorating more rapidly for the company.  Best Buy stock is up almost 7% at $46.40 in pre-market trading, and its 52-week trading range is $38.75 to $53.90.  When we did our weekend preview of these earnings for Best Buy, its shares were at $40.56.  That is nearly a 15% change since last Friday.

This is being viewed with such relief this morning that even Circuit City (NYSE: CC) shares are trading up over 3% in pre-market indications.

Jon C. Ogg
April 2, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at [email protected]; he does not own securities in the companies he covers.