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Can Bed Bath & Beyond (BBBY) Pull an Earnings Surprise in Q2?


Bed Bath & Beyond Inc. BBBY is slated to release second-quarter fiscal 2017 results on Sep 19. The question lingering in investors’ minds is whether this home furnishings retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

The company delivered a negative earnings surprise of 12.1% in the last reported quarter. Further, the company lagged the Zacks Consensus Estimate by an average of 7.1% in the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

Bed Bath & Beyond Inc. Price and EPS Surprise

Bed Bath & Beyond Inc. Price and EPS Surprise | Bed Bath & Beyond Inc. Quote

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is 95 cents, reflecting a year-over year decline of 14.3%. We note that the Zacks Consensus Estimate has been stable in the past 30 days. On the positive side, analysts polled by Zacks expect revenues of $3.01 billion, up 0.6% from the year-ago quarter.

Factors at Play

Bed Bath & Beyond has been reeling under sluggish mall traffic, which has been hurting performance for quite some time. Also, increased net direct-to-consumer shipping costs along with higher coupon and advertising costs are hurting results.

Consequently, the company has put up a dismal show for the last several quarters. Evidently, the company’s earnings have missed the Zacks Consensus Estimate in six of the last 10 quarters. Moreover, the top line has lagged the consensus mark in nine of the trailing 11 quarters. In fact, the trend continued in first-quarter fiscal 2017 too, wherein both the top and bottom line lagged estimates.

Moreover, management retained previously issued dismal bottom-line outlook for fiscal 2017, as it expects better visibility after the fiscal second quarter. Thus, the company continues to envision current-year earnings per share to decline in the range of low-single digits percentage to 10%. However, it continues to anticipate gross margin decline in fiscal 2017, alongside SG&A deleverage due to payroll and payroll-related expenses as well as technology expenses.

Notably, Bed Bath & Beyond has underperformed the broader industry in the past month, reflecting a negative investor sentiment ahead of earnings. The company’s shares have plunged 5%, compared with the industry’s dip of 0.9%.

Nevertheless, the company’s focus on strategic initiatives like e-Commerce enhancement and improvement of customer services bode well. This is evident from its recent store realignment plan. Further, comps from customer-facing digital networks grew over 20% in the last reported quarter. These along with capital initiatives and constant shareholder-friendly moves should draw investors’ attention.

Though Bed Bath & Beyond is striving hard to spark a turnaround, the current dismal trends cannot simply be overlooked. So, let’s see what is in store for the company in the upcoming release.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Bed Bath & Beyond to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Bed Bath & Beyond has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 95 cents. While the company’s current Zacks Rank #2 raises optimism, we need to have a positive ESP to be sure of a beat.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Rite Aid Corp. RAD has an Earnings ESP of +33.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yum! Brands, Inc. YUM has an Earnings ESP of +2.31% and a Zacks Rank #3.

Costco Wholesale Corp. COST has an Earnings ESP of +0.29% and a Zacks Rank #3.

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