Best Buy Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Best Buy (NYSE: BBY  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Best Buy has suffered greatly from the shift toward online commerce and its impact on the big-box electronics industry. Let's take an early look at what's been happening with Best Buy over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Best Buy

Analyst EPS Estimate	$1.53
Change From Year-Ago EPS	(38%)
Revenue Estimate	$16.32 billion
Change From Year-Ago Revenue	(2.1%)
Earnings Beats in Past 4 Quarters	2

Source: Yahoo! Finance.

Will Best Buy finally move forward?
Analysts have seen a mixed picture for Best Buy in recent months, having added a penny to their earnings-per-share estimates for the just-ended quarter but having slightly cut their full-year fiscal 2014 projections for the company. The stock, though, has soared nearly 50% as shareholders hope for an easy exit through a takeover bid.

Best Buy has been the highest-profile victim of the showroom phenomenon, whereby customers come into its stores to see products in person, only then to buy them online at cheaper prices. Although retailers across the spectrum have felt the pressure from Amazon.com and other online sellers, the high-priced nature of electronics makes the stakes especially high for Best Buy.

But Best Buy has seen better conditions recently, with promotion of mobile devices and its own direct-to-consumer sales channel resulting in strong holiday traffic. It's also fighting back by offering a price-match policy that will include not just retail locations but also online sites, including Amazon. The strategy will inevitably compress margins on the sales that Best Buy is able to make, but the company hopes that customers will at least make the purchases at Best Buy rather than going elsewhere, losing every bit of business for the big-box company.

Hanging over investors, though, is what co-founder Richard Schulze will do. After Schulze discussed making a buyout bid for the whole company, some now believe he'll settle for adding to his existing stake. That won't give shareholders the immediate payoff they would have gotten, but it would allow them to benefit if Best Buy continues to recover.

In Best Buy's quarterly report, look closely to see how much discounting the retailer had to do to drive traffic over the holidays. Best Buy is fighting hard, but it still faces an uphill battle in fending off its strong competition.

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