Please ensure Javascript is enabled for purposes of website accessibility

Why Best Buy Stock Dropped Today

By Steve Symington – Updated Aug 28, 2018 at 4:01PM

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

The electronics retailer's light third-quarter outlook overshadowed an otherwise solid report.

What happened

Shares of Best Buy (BBY -1.20%) were down 5% as of 3:30 p.m. EDT Tuesday after the electronics retailer announced solid fiscal second-quarter 2019 results but followed with underwhelming forward guidance. 

More specifically on the former, Best Buy's quarterly revenue grew 4.9% year over year to $9.38 billion, helped by 6.2% enterprise comparable-sales growth. That translated to a 31.9% increase in adjusted earnings per share, to $0.91. Analysts, on average, would have settled for earnings of $0.83 per share on revenue of $9.28 billion.

Red line with arrow indicating losses with stock market data in the background


So what

"We are happy to report strong top- and bottom-line results for the second quarter that exceeded our expectations," added Best Buy chairman and CEO Hubert Joly. "Our comparable sales growth was helped by the favorable environment in which we operate and driven by how customers are responding to the unique and elevated experience we are building."

For the current quarter, however, Best Buy told investors to expect revenue of $9.4 billion to $9.5 billion, with adjusted earnings per share of $0.79 to $0.84. By contrast, consensus estimates predicted earnings of $0.92 per share on revenue near the high end of Best Buy's outlook.

Now what

Even so, given its relative outperform in the first half, Best Buy also raised its full fiscal-year guidance to call for comps growth of 3.5% to 4.5% (up from 2% before) and adjusted earnings per share of $4.95 to $5.10 (up from $4.80 to $5.00 previously). Still, most on Wall Street were already anticipating fiscal 2019 earnings of $5.02 per share, or near the middle of Best Buy's freshly raised target. 

That's certainly not to say this was a bad quarter, and there's always the chance that Best Buy could overdeliver relative to its guidance when the time comes. But with shares already up nearly 20% year to date leading into this report, that guidance was enough to entice some people to take their profits off the table today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

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