Best Buy Co Inc (NYSE: BBY) is having an overwhelmingly rough start to the trading session this morning, and for good reason. The company reported its earnings for the second quarter, blowing away expectations. However, there were some concerning line items that led to declines in the value of the stock. Today, we’ll talk about:
- The earnings report;
- what we’re seeing from BBY as a result; and
- what we’ll be watching for with regard to the stock ahead.
BBY Reports Earnings
As mentioned above, Best Buy is having a tough time after reporting second quarter earnings. While earnings smashed expectations, there were some big concerns. Here’s what we saw from the report:
- Earnings Per Share – In terms of earnings per share, BBY did incredibly well. During the quarter, analysts expected that the company would generate earnings in the amount of $0.82 per share. However, the company actually reported earnings in the amount of $0.91 per share, blowing away expectations.
- Sales Growth – During the quarter, the company saw strong sales growth. In store, growth came in at 6.2% while analysts expected to see 4.1% growth. However, one concern came from online sales. During the quarter, online sales grew by 10.1%. While that sounds great, the company’s growth rate in the same metric a year ago was 31.2%. The slowing growth suggests that a plateau in online sales may be on the horizon.
- Guidance – Another cause for concern came from guidance. During the third quarter, the company said that it is expecting to produce earnings of between $0.79 per share and $0.84 per share. However, analysts are expecting to see earnings a bit higher at $0.92 per share.
- Gross Profit – Finally, gross profit took a big hit. During the quarter, BBY reported that gross profit fell by 20 basis points, coming in at just 23.8% in the quarter.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news leads to moves. In the case of Best Buy, the news was overwhelmingly negative. Sure, earnings was a good point and so too was in-store sales. However, with online growth slowing and poor guidance, upset investors are showing their opinions by sending the stock tumbling. Of course, our partners at Trade Ideas were the first to alert us to the declines. At the moment (7:51), BBY is trading at $78.70 per share after a loss of $2.96 per share or 3.62% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on BBY. In particular, we’re interested in following the story surrounding the company’s work to bring stronger growth back to the online sector as well as improve gross margins. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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