Has anyone not yet heard of Bed Bath & Beyond
The company, whose ubiquitous blue cardboard coupons seem to arrive in my mailbox every month, is quickly becoming the Gap
Analysts are expecting only so-so results tomorrow: a 13% increase in sales, barely paced by a 12.5% rise in profits per diluted share. While that's nothing to write home about, those results would nonetheless beat the recent numbers posted by competitors such as Target
Bed Bath & Beyond is performing so well, in fact, that it's now swimming in $1 billion in cash and equivalents, and looking for new ways to successfully deploy it. In October, the company announced that its board authorized using $400 million worth of its hoard to buy back stock. If fully exploited, this authorization could reduce the company's share count by as much as 3.2% at today's share price. It might not be the most original idea, but it does promise to reward shareholders better than "diworsifying" into, say, auto parts.
Don't expect those buybacks to help improve earnings per share in tomorrow's results, however. The company tried to put that expectation to bed, stating explicitly that it did not expect any such boost to occur in either Q3 or Q4 of this year. Based on that comment, this Fool suspects that Bed Bath & Beyond's board announced the buyback not because it thought its shares were undervalued at the then-current price of $39 and change, but because it had recently seen its shares fall toward $37, and wished to be ready to capitalize on any recurrence. With the shares now trading closer to $42 than $37, I suspect the company will report that few, if any, buybacks occurred this quarter.
Not that the company needs them to "meet its numbers." Bed Bath & Beyond has handily bested earnings estimates in each of the past four quarters. But even it fails to do so tomorrow, if its shares fall as a result, I'd suggest you keep that recent $37 level in mind when contemplating a buy-in price.
To contrast Bed, Bath and one of its competitors, try reading:
Bed Bath & Beyond and Gap are Motley Fool Stock Advisor picks.
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Fool contributor Rich Smith does not own shares of any company named above.