Earnings Digested 2Q14: Best Buy

I have written about Best Buy before: Best Buy: Why This Is One Of The Best Value Plays Around
I f you’ve read the article, you will come to the conclusion that I am bullish on the stock for buy and hold purposes. Therefore, I’ve been monitoring the company’s results, so let us see how the company fared in the 2nd quarter.
Sales dropped 4% to $8.9 million, while profits also shrank to $146 million. However, the diluted earnings per share for the 1st half of the year were $1.73, up from $0.54 a year ago.
Best Buy’s CEO argued that the market environment is not helping the company with soft demand for electronic products. On the other hand, the fact that the company is on track to deliver the $1 Billion in savings, is a promising sign that a recovery in demand for tech products will significantly add to the bottom line.
In my opinion, the 2Q14 results, sustain my view that the company is on track to normalize its earnings. We shouldn’t expect explosive growth, but an improvement in profits is likely.

Table 1 – Normalized earnings estimated

1

Best Buy is one of my favorite companies in 2014. I first wrote about this company in May. At the time the company was trading around $26, it has climbed around 20% since that time, beating the S&P500 by 14.5%

Graph 1 – Best Buy vs S&P500

2

Conclusion: The company is on track with its recovery. Although, the results are not brilliant, the competitive environment is also far from good. On the other hand, the stock had a huge depreciation and an improvement in the company’s markets will, most likely, bring better results and further stock appreciation.

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