Best Buy shares surge after beating expectations and raising forecast

Best Buy shares surged more than 4% in premarket trading after reporting earnings and revenue that beat analysts’ expectations while also raising its earnings guidance.

Here’s what Best Buy reported compared to what analysts were expecting, based on a survey of analysts by Refinitiv:

• Earnings per share, adjusted: $1.13 vs. $1.03 expected
• Revenue: $9.76 billion vs. $9.70 billion expected
• Same-store sales growth: 1.7% vs. 1.3% expected

In the third quarter ended Nov. 2, Best Buy said net income grew to $293 million, or $1.10 per share, from $277 million, or 99 cents per share, a year earlier.

Excluding items, Best Buy earned $1.13 per share compared with the $1.03 analysts were expecting, according to a Refinitiv survey.

Best Buy said revenue grew to $9.76 billion, from $9.59 billion, last year, and higher than the $9.70 billion analysts expected. 

Sales at stores open at least 12 months rose 1.7%. Analysts were expecting a 1.3% gain.

The company raised its forecast for fiscal 2020 adjusted earnings to a range of $5.81 to $5.91 per share from a prior estimate of $5.60 to $5.75 per share. Analysts were expecting Best Buy to earn $5.74 per shares in 2020, excluding items.

Shares of the retailer cratered after earnings last quarter as investors reacted to the potential impact of the looming Dec. 15 tariffs on the company’s business.

The electronics retailer said last quarter that although it has tried to factor the tariffs into its guidance, uncertainty is looming. Some of Best Buy’s products were hit with tariffs that went into effect on Sept. 1, and more could be hit with the 15% duty on Dec. 15, including mobile phones, laptops and gaming consoles.

Despite these headwinds, the once-embattled electronics retailing giant said it expects to grow same-store sales in fiscal 2020 under Barry’s leadership.

Best Buy has outpaced consumer electronic retail sales by an average of 5% going back to 2016, but its tariff exposure is creating uncertainty, Piper Jaffray analysts Peter Keith said in a note on Friday. Although no one knows “the final outcome of trade discussions,” the removal of the Dec. 15 levy would “remove notable overhang” for Best Buy.

Analysts at Wedbush said that the duties that took effect on Sept. 1 and June 15 could “significantly alter Black Friday purchase decisions” because of related price increases on tariffed items.

The fourth quarter is crucial for Best Buy, like most retailers, because of the holiday season. The National Retail Federation forecasts that holiday sales during November and December will grow between 3.8% and 4.2% compared to last year’s holiday season.

In April, Corie Barry stepped into the CEO post. Her predecessor, Hubert Joly, now executive chairman, had orchestrated a turnaround at Best Buy after years of losing business to online retailer Amazon. Barry, who had been Best Buy’s CFO, said she plans to double down on its existing strategies.

Shares of Best Buy were up 40% year-to-date at market close on Monday, bring its market value to $19.6 billion.

Read the full press release here.

Correction: A previous version of this story misstated the fiscal year. Best Buy reported earnings for third quarter of fiscal 2020.