Investors are going to keep a close eye on Bed Bath and Beyond (NASDAQ: BBBY) Wednesday afternoon when the company reports its fiscal third quarter numbers. Going into tomorrow's earnings announcement, analysts are expecting the company to post third quarter earnings of 33 cents per share. During its third quarter last year the company matched analyst estimates for 52 cents per share, so hitting its 33 cent estimate this year would mean a drop of 36% year over year.
Last month, the company pre-announced its quarterly numbers and stated that it expected earnings would fall somewhere between 31 and 35 cents a share. This estimate was down from the company's previous guidance of 41 to 47 cents per share.
Of course, one of the main reasons for the company's lower guidance was overall weakness in the economy, but it also faced increased competition from the liquidation sale at its main rival, Linens 'n Things. As Linens 'n Things was preparing to close its doors, its inventory was put on massive discount, and Bed Bath and Beyond was hurt by consumers flocking to buy the highly discounted prices over at Linens 'n Things. I, personally, did a lot of holiday shopping at Linens 'n Things, as did many people that I know.
Despite the short term migration of consumers to the Linens 'n Things liquidation, in the long run, the stores liquidation is going to benefit Bed Bath and Beyond, and at least one analyst, David Magee, from Robinson Humphrey is very positive on the stock. Magee stated that he feels BBBY is one of the few retailers we should expect to see an increase in earnings growth this upcoming year.
On Monday, the stock was downgraded by Goldman Sachs due to its recent sharp rise in price. Goldman analyst Matthew Fassler lowered his rating on the stock to a "neutral" from a "buy". Fassler had put a "buy" rating on the stock back in November, and shares have been moving strongly higher since that time. Goldman has a $28 price target on the stock, which is currently trading up 1.8% today to $26.01.
For a better idea of just how strong the stock has been over the past month, let's take a look at a 6 month chart:
I will post final earnings numbers Wednesday afternoon after they are announced.
How do you think earnings are going to turn out? Should we expect to see the company beat, match or fall short of the 33 cents analysts are predicting?
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
1-07-2009 @ 12:35PM
Harsh Prateek said...
I expect the BBBY to post an earning of 21-23 cents per share given the weak economy and competition from rival Linen&Things. But at ~$25 already on Jan7th, I dont see it going further down