With shares of Bed Bath & Beyond (NASDAQ:BBBY) trading at around $56.15, is BBBY an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Be very quiet. Don’t even click the mouse. Just listen intently. If there are no background noises around you, then you will be able to hear the crickets. You’re able to hear crickets when someone is talking (or writing) about something that isn’t interesting or entertaining. This might come as a surprise to you, but not many people care about Bet Bath & Beyond when it comes to investment analysis. However, you’re here. Therefore, you’re special! Either that or you’re really bored. Whatever the case may be, welcome my friend. It’s nice to have you here. There are plenty of seats available. Luckily, there are no beds available. Now let’s see how long you can last.
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Bed Bath & Beyond hasn’t benefited from the “housing recovery” as much as many other companies. However, while many analysts see this as bad news, Bed Bath & Beyond shouldn’t be one of the first companies to benefit from a housing recovery anyway. All the items in an old home can be transported to a new home. It’s not like The Home Depot (NYSE:HD), where the company will benefit because repairs and upgrades are necessary, or at least priorities.
Bed Beth & Beyond missed revenue expectations and beat earnings expectations last quarter. These types of mixed results can be difficult to read. That’s why it’s best to pay attention to guidance. In this case, guidance was lowered. Bed Bath & Beyond sees a Q4 earnings range between $1.60 and $1.67 next quarter. The previous consensus was for $1.75. Some of the recent disappointment for Bed Bath & Beyond comes from weak margins related to World Market and Linen Holdings. Same-store sales also only came in at 1.7 percent, which is being partially blamed on Hurricane Sandy. Other negatives are costs to improve e-commerce, an increase in coupons, relocations, refurbishments, and restructuring.
It’s not all bad news, though. Bed Bath & Beyond has a share repurchase program of $2.5 billion, operating cash flow is $1.26 billion, and analysts heavily favor the Buy side. Let’s take a look at some more important numbers before forming an opinion.