Please ensure Javascript is enabled for purposes of website accessibility

Best Buy Stock Rockets Higher After Blowout Quarter

By Timothy Green – May 25, 2017 at 11:22AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Revenue and profit surged, and the retailer boosted its guidance for the full year.

What happened

Shares of consumer electronics retailer Best Buy (BBY 3.10%) soared on Thursday after the company handily beat analyst estimates for first-quarter revenue and earnings. The retailer also raised its guidance for the full year, leading investors to drive the stock up nearly 19% by 11:30 a.m. EDT.

So what

Best Buy reported revenue of $8.53 billion, up 1% year over year and $220 million higher than the average analyst estimate. Comparable sales grew by 1.6%, compared to a 0.1% decline during the prior-year period, driven in part by a 22.5% increase in domestic online sales.

The inside of a Best Buy store.

Image source: Best Buy.

Non-GAAP EPS came in at $0.60, up from $0.43 in the prior-year period and $0.20 better than analysts were expecting. Gross margin was 23.6%, up 60 basis points year over year after excluding gains from legal settlements. Best Buy cited higher margins in appliances and home theater products as the main drivers, partially offset by margin pressure in mobile and strong sales of low-margin gaming products.

Best Buy CEO Hubert Joly discussed the company's strategy: "We are energized about our opportunities and the strategy we are pursuing. We believe we are uniquely positioned to help our customers in a meaningful way with our combination of multi-channel assets -- including our online, store and in-home capabilities, and I love how our teams are mobilized to deliver on our mission and Build the New Blue."

Now what

The better-than-expected first quarter prompted Best Buy to boost its guidance for the full year. The company now expects to produce revenue growth of 2.5% and non-GAAP operating income growth between 3.5% and 8.5%. This is up from previous guidance calling for revenue growth of 1.5% and non-GAAP operating income growth between 1% and 3%. A change in the non-GAAP treatment of certain charges is partly responsible for the higher profit guidance.

With revenue and profit on the rise despite intense competition from online retailers, and with the company increasing its guidance for the full year, there was a lot to like about Best Buy's first-quarter report. The stock carved out a new all-time high on Thursday, with investors betting that the company won't fall victim to the problems plaguing countless other retailers.

Timothy Green owns shares of Best Buy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Best Buy Co., Inc. Stock Quote
Best Buy Co., Inc.
BBY
$67.44 (3.10%) $2.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.