Analysts Temper Bed Bath & Beyond Expectations

By Chris Lange Published Jan 9, 12:50PM EST

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Bed Bath & Beyond Inc. (NASDAQ: BBBY) reported its third-quarter results Thursday after the market close and analysts have already begun to weigh in. The company reported $1.23 in earnings per share (EPS) and $2.94 billion in revenue, compared to Thomson Reuters consensus EPS estimates of $1.19 on $2.97 billion in revenue. In the third quarter of the previous year, the retailer had $1.12 in EPS and revenue of $2.86 billion.

Guidance for the fourth quarter was given in the range of $1.78 to $1.83 in EPS. Thomson Reuters has the consensus EPS estimate at $1.80.

Over the course of the second quarter, Bed Bath & Beyond bought back roughly $1 billion in stock, which was almost four times the size of the first quarter’s $273 million in share repurchases. The $1.1 billion accelerated share repurchase program, which commenced in July 2014, was completed in December 2014. As of November 29, 2014, the remaining balance of the $2.0 billion share repurchase program was approximately $1.8 billion.

Merrill Lynch expected earnings per share to come in at $1.17, but the firm attributes the bottom-line beat to a lower tax rate of 32.3%, compared to its estimate of 36.5%. Sales fell just outside the lower end of the guidance, increasing only 2.7% to $2.94 billion, compared to the range of 2.8% to 3.7%. The fourth-quarter EPS guidance remains the same in a range of $1.78 to $1.83. Merrill Lynch maintained its target price of $55, based on an earnings multiple of 10 for 2015, and it maintained an Underperform rating.

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Argus reiterated a Buy rating and raised its price target to $85 from $82, based on the strong share repurchases and higher earnings. The independent research firm indicated that it remains confident in the management team at Bed Bath & Beyond. Argus also sees the 2012 acquisition of Cost Plus as an opportunity for the company to add value for the shareholders.

S&P Capital IQ downgraded its rating to Hold from Buy and raised its price target to $80 from $72. The earnings were in line with the firm’s estimates. The firm increased the full-year 2015 EPS estimate to $5.07, as a result of the benefits from an improving economy, greater housing activity, higher employment, greater consumer confidence and lower gas prices. However, profit growth should be weighed down by technology investments and competition.

Canaccord Genuity maintained a Buy rating for Bed Bath & Beyond shares and lowered its price target to $88 from $91.

Shares of Bed Bath & Beyond were down almost 7% at $74.04 in the noon hour Friday. The stock has a consensus analyst price target of $67.90 and a 52-week trading range of $54.96 to $79.62. The market cap is near $14 billion.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.