Stock shoppers, start your engines. Best Buy (NYSE:BBY) reports its Q4 and full-year 2006 numbers tomorrow before market-open.

What analysts say:

  • Buy, sell, or waffle? Not one, but two baker's dozens of analysts track Best Buy. A bare majority give the stock -- what else? -- a buy rating. Eleven rate it a hold; one, a sell.
  • Revenues. Fourth-quarter revenues are predicted to climb 14% versus last year, to $10.5 billion.
  • Earnings. Quarterly profits are expected to increase 25% year over year, to $1.29 per share.

What management says:
Early last month, Best Buy issued a press release that, in addition to raising earnings guidance for this quarter, was chock-full of interesting news about the company's successes. Best Buy is expecting to report same-store sales gains of 6% to 7% in Q4, and "strong" revenue growth overall. In contrast to its customers, Best Buy says it's been keeping tight reins on its own spending, which should result in strengthening margins.

What management does:
Let's see how the company's been doing so far.

Margins %

8/04

11/04

2/05

5/05

8/05

11/05

Gross

23.4

23.1

23.7

24

24.3

24.6

Op.

5.4

5.3

5.3

5.4

5.4

5.1

Net

3.3

3.3

3.6

3.7

3.8

3.6
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Well, it looks like gross margins have been rising -- but as far as controlling costs goes, Best Buy needs to prove itself tomorrow. After holding its rolling operating margins near 5.4% for the past 18 months, the company fumbled the ball last quarter. It let costs get out of control, with selling, general, and administrative (SG&A) expenses rising 22% year over year -- more than double the rate of sales growth.

One Fool says:
All of this talk about margins makes it pretty obvious what I'd like to see out of Best Buy tomorrow morning: some restraint on the spending front. The company has a fine history in this regard, with the exception of last quarter. And with management publicly committing itself to reining in costs just a few weeks ago, I'd say it's highly probable that tomorrow's numbers will bear that out.

Competitors:

  • Circuit City (NYSE:CC)
  • Sears Holdings (NASDAQ:SHLD)
  • Wal-Mart (NYSE:WMT)

Best Buy is a Motley Fool Stock Advisor pick. To find out what else is on Tom and David Gardner's Wall Street wish list, try a free 30-day guest pass.

Fool contributor Rich Smith has no interest, short or long, in any company named above.