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Category: Stock Market and Best Buy
Date: 29 November 2019 Stock Price: $80.74 We take a look at the 3rd quarter earnings release of their 2020 fiscal year of Best Buy, a company that is largely focused on selling consumer electronics.
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About Best Buy Co.
Best Buy Co., Inc. is an American multinational consumer electronics retailer headquartered in Richfield, Minnesota. It was originally founded by Richard M. Schulze and James Wheeler in 1966 as an audio specialty store called Sound of Music. In 1983, it was re-branded under its current name with an emphasis placed on consumer electronics. (Wikipedia)
Overview of Best Buy's 3rd quarter 2020 earnings report
The data below refers to the latest quarter unless specified:
- Revenue: $9.764 billion (up from $9.590 billion from the same quarter of the previous year)
- Revenue increased by 1.8% over the last 12 months
- Revenue increased by 1.8% over the last 12 months
- Cost of goods sold: $7.403 billion (up from $7.266 billion for the same quarter of the previous year)
- Cost of goods sold increased by 1.8% over the last 12 months
- Cost of goods sold increased by 1.8% over the last 12 months
- Net income: $293 million (up from from $277 billion for the same quarter of the previous year)
- Diluted earnings per share: $1.10 (up from $0.99 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 265.2 million (down -5.04% from 279.3 million for the same quarter of the previous year)
- PE ratio of Best Buy: 18.4
- Cash and cash equivalents: $1.205 billion
- Cash and cash equivalents per share: $4.53
- Cash and cash equivalents makes up 5.6% of Best Buy's current market capital
- Cash and cash equivalents makes up 7.1% of Best Buy's total assets
- Merchandise inventories: $7.569 billion
- Merchandise inventories makes up 44.7% of Best Buy's total assets
- Merchandise inventories makes up 44.7% of Best Buy's total assets
- Total stockholders' equity of Best Buy': $3.125 billion
- Shareholders' equity per share: $11.78
- Best Buy is trading at 6.8 times its stockholders equity per share
- Accounts receivable: $1.056 billion
- Accounts receivable makes up 6.2% of Best Buy's total assets
- Accounts receivable grew by 14.7% over the last year which is concerning as it looks like customers are taking longer to pay back money owed to Best Buy
Best Buy Co's management commentary on their 3rd quarter 2020 earnings and guidance
MINNEAPOLIS--(BUSINESS WIRE)-- Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week third quarter ended November 2, 2019 (“Q3 FY20”), as compared to the 13-week third quarter ended November 3, 2018 (“Q3 FY19”).
“Our teams delivered another strong quarter of top- and bottom-line growth,” said Corie Barry, Best Buy CEO. “We are delivering on our purpose to enrich lives through technology by providing customers the products and solutions they want and need, combined with fast and convenient fulfillment. We are excited about our progress and opportunities as we execute on our Building the New Blue strategy, designed to develop deeper relationships with our customers and uniquely position us over the long term.”
Barry continued, “In the near term, we are excited about our holiday plans. Our teams have once again put together a best-in-class assortment, prepared an amazing set of deals and ensured we have great inventory availability. Customers ordering online will get free next-day delivery on thousands of items all season long with no membership or minimum purchase required. They can also choose to pick up their products in a store within an hour of placing their order.”
Barry concluded, “I want to thank our employees for the strong execution in the third quarter, and in advance for all your hard work this week and throughout the holidays. Whether you work in one of our stores, spend your time making house calls to our customers’ homes or work in a distribution center or the corporate office, you are a critical part of what makes Best Buy so special.”
Dividends and Share Repurchases
In Q3 FY20, the company returned a total of $499 million to shareholders through share repurchases of $368 million and dividends of $131 million. On a year-to-date basis, the company has returned a total of $1.09 billion to shareholders through share repurchases of $696 million and dividends of $398 million. The company expects to spend near the high end of its previously communicated range of $750 million to $1 billion of share repurchases in FY20.
“Our teams delivered another strong quarter of top- and bottom-line growth,” said Corie Barry, Best Buy CEO. “We are delivering on our purpose to enrich lives through technology by providing customers the products and solutions they want and need, combined with fast and convenient fulfillment. We are excited about our progress and opportunities as we execute on our Building the New Blue strategy, designed to develop deeper relationships with our customers and uniquely position us over the long term.”
Barry continued, “In the near term, we are excited about our holiday plans. Our teams have once again put together a best-in-class assortment, prepared an amazing set of deals and ensured we have great inventory availability. Customers ordering online will get free next-day delivery on thousands of items all season long with no membership or minimum purchase required. They can also choose to pick up their products in a store within an hour of placing their order.”
Barry concluded, “I want to thank our employees for the strong execution in the third quarter, and in advance for all your hard work this week and throughout the holidays. Whether you work in one of our stores, spend your time making house calls to our customers’ homes or work in a distribution center or the corporate office, you are a critical part of what makes Best Buy so special.”
Dividends and Share Repurchases
In Q3 FY20, the company returned a total of $499 million to shareholders through share repurchases of $368 million and dividends of $131 million. On a year-to-date basis, the company has returned a total of $1.09 billion to shareholders through share repurchases of $696 million and dividends of $398 million. The company expects to spend near the high end of its previously communicated range of $750 million to $1 billion of share repurchases in FY20.
Best Buy CFO Matt Bilunas commented, “The updated FY20 guidance we are providing today reiterates our prior revenue expectations and raises the non-GAAP EPS range to reflect the strong Q3 profitability as well as improved expectations for Q4. Our outlook continues to include our best estimate of the impact of tariffs on goods from China, both implemented and planned.”
FY20 Financial Guidance
Best Buy is updating its full-year FY20 financial outlook to the following:
Best Buy is providing the following Q4 FY20 financial outlook:
FY20 Financial Guidance
Best Buy is updating its full-year FY20 financial outlook to the following:
- Enterprise revenue of $43.2 billion to $43.6 billion, which compares to prior guidance of $43.1 billion to $43.6 billion
- Enterprise comparable sales growth of 1.0% to 2.0%, which compares to prior guidance of 0.7% to 1.7%
- Enterprise non-GAAP operating income rate slightly up from the 4.6% rate in FY19, which compares to prior guidance of flat to slightly up from the 4.6% rate in FY192
- Non-GAAP effective income tax rate of approximately 23.3%, which compares to prior guidance of approximately 24.0%2
- Non-GAAP diluted EPS of $5.81 to $5.91, which compares to prior guidance of $5.60 to $5.752
Best Buy is providing the following Q4 FY20 financial outlook:
- Enterprise revenue of $14.75 billion to $15.15 billion
- Enterprise comparable sales growth of 0.5% to 3.0%
- Non-GAAP effective income tax rate of approximately 24.0%2
- Diluted weighted average share count of approximately 261 million
- Non-GAAP diluted EPS of $2.65 to $2.752
Best Buy Co (NYSE: BBY) stock price history
The image below, obtained from Google, shows the stock price history of Best Buy Co for the last 5 years. 5 years ago the stock was trading at around $35.60 and its currently trading at $80.74. That's a 126% return provided to Best Buy stockholders over the last 5 years. The stock of Best Buy is trading at a lot closer its 52 week high of $83.63 than it is to its 52 week low of $47.72 which to us is a clear indication that the short sentiment and momentum of Best Buy's stock is positive.
Recent coverage of Best Buy Co.
Below an extract of coverage on Best Buy as obtained from TheStreet.com
Best Buy
Best Buy just reported a strong quarter, posting adjusted earnings per share of $1.13, better than analysts expected $1.03. Revenue was $9.76 billion, beating Wall Street expectations of $9.71 billion. Management raised its full year 2020 EPS guidance to a range between $5.81 and $5.91, above the previous range of $5.60 to $5.75.But here's where Best Buy is showing it can capitalize on the holiday quarter.
"We are promising free next-day delivery on thousands of items all season long with no membership or minimum purchase required," said CEO Corie Sue Barry on the company's earnings call. In retail, same-day and next-day delivery is key to capturing consumer market share. But it usually requires scale, capacity, cash and expertise to make that happen competitively. But one key asset a company needs to accomplish that is a strong online presence. Best Buy reported online comparable sales growth of 15% for the quarter. Plus, the company says 80% of online orders are ready to be picked up in stores 30 minutes after the order. The risk with Best Buy? The stock rose 12% to $83.54 Tuesday after the earnings
Read the full article here
Best Buy
Best Buy just reported a strong quarter, posting adjusted earnings per share of $1.13, better than analysts expected $1.03. Revenue was $9.76 billion, beating Wall Street expectations of $9.71 billion. Management raised its full year 2020 EPS guidance to a range between $5.81 and $5.91, above the previous range of $5.60 to $5.75.But here's where Best Buy is showing it can capitalize on the holiday quarter.
"We are promising free next-day delivery on thousands of items all season long with no membership or minimum purchase required," said CEO Corie Sue Barry on the company's earnings call. In retail, same-day and next-day delivery is key to capturing consumer market share. But it usually requires scale, capacity, cash and expertise to make that happen competitively. But one key asset a company needs to accomplish that is a strong online presence. Best Buy reported online comparable sales growth of 15% for the quarter. Plus, the company says 80% of online orders are ready to be picked up in stores 30 minutes after the order. The risk with Best Buy? The stock rose 12% to $83.54 Tuesday after the earnings
Read the full article here
Best Buy Co. (NYSE: BBY) latest stock valuation
So what are Best Buy stock worth based on their latest earnings report and fiscal guidance? Our valuation models provide a target price on Best Buy stock of $84.30 (up slightly from our 2nd quarter 2019 earnings report valuation of Best Buy). We therefore believe the stock of Best Buy is undervalued and offers long term fundamental investors and value investors a good buying opportunity into Best Buy shares. Tariffs and the impact it will have on the group's top and bottom line affected our valuation of Best Buy. We adjusted our valuation downwards by 15% to take significant tariff impacts into account in our valuation.
We usually recommend that long term fundamental and value investors look to buy a stock at least 10% below our target price (full value price) which in this case is $84.30. We therefore believe a good entry point into Best Buy is at $75.90 or below.
We usually recommend that long term fundamental and value investors look to buy a stock at least 10% below our target price (full value price) which in this case is $84.30. We therefore believe a good entry point into Best Buy is at $75.90 or below.