Best Buy (NYSE:BBY) shareholders are set to enjoy a happy holiday period.

Shares of the electronics retailer surged to new highs on Tuesday following a strong third-quarter earnings report that saw same-store sales, revenue, and earnings per share all come in higher than Wall Street had expected.

Best Buy also lifted its full-year earnings forecast, suggesting that more good times are ahead for investors.

A person pointing to an upwardly sloping line.

Best Buy's Q3 results helped to drive its shares sharply higher on Tuesday. Image source: Getty Images.

Best Buy's revenue rose 1.8% year over year to $9.76 billion, driven by a 1.7% increase in same-store sales. Analysts had expected revenue of $9.70 billion and comp growth of 1.3%.

Best Buy's domestic growth was particularly strong. The company's U.S.-based operations saw revenue rise by 2.4% to $8.96 billion, with comps rising 2%.

Moreover, Best Buy's online initiatives continue to show progress. Its domestic online revenue jumped 15% to $1.4 billion. Online sales now account for 15.6% of the retailer's domestic revenue, up from 13.8% in the year-ago period.

CEO Corie Barry said that a broader array of online fulfillment options should continue to help drive sales during the all-important holiday shopping season. "Customers ordering online will get free next-day delivery on thousands of items all season long with no membership or minimum purchase required," Barry said. "They can also choose to pick up their products in a store within an hour of placing their order."

Best Buy is also working to "develop deeper relationships" with its customers. A greater focus on services such as in-home tech advisory and installation services is a key part of this strategy. In addition to boosting customer satisfaction scores, these services are also helping to lift sales; Best Buy's comparable sales in its services category leapt 12.9% in the third quarter.

Better still, Best Buy is becoming more profitable as it expands its sales base. Non-GAAP (adjusted) operating income improved to 4.2% of revenue, up from 3.5% in the prior-year quarter. That helped to drive adjusted earnings per share higher by 21.5%, to $1.13, which was well above analysts' estimates for adjusted EPS of $1.03.

Looking ahead

These strong results prompted Best Buy to raise its full-year financial forecast. Management now expects:

  • Revenue of $43.2 billion to $43.6 billion, up from previous guidance of $43.1 billion to $43.6 billion
  • Comparable sales growth of 1% to 2%, up from 0.7% to 1.7%
  • Non-GAAP EPS of $5.81 to $5.91, up from $5.60 to $5.75

Best Buy's stock surged on the news. As of 2:55 p.m. EST, shares were up more than 10%.

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