Bed Bath & Beyond Q3 Analyst Roundup

Shares of Bed Bath & Beyond Inc. BBBY fell Friday following its Q3 results as investors appeared to expect more from the company.

After releasing Q3 results on Thursday, the stock closed at $74.05, down 6.80 percent.

Analysts commented on the results and some highlights are below along with current ratings and price targets.

Nomura - Neutral, $76 price target

“Bed Bath & Beyond reported 3Q14, with EPS of $1.23, including $0.04 of benefits from non-recurring items such as credit card litigation fees. Excluding these items, EPS was in line with consensus and slightly below our estimate. The company continues to make progress against its ability to meet customer demand both in-store and in the online/mobile channel. Gross margin declined 80bp in the quarter, affected by coupon expense and shipping expense from a lower Free Shipping threshold. We are maintaining our 2014E and 2015E EPS. We are increasing our target price to $76, which reflects a multiple largely in line with its historical average (14x next year earnings).”

Barclays - Overweight, $87 price target

“Gross margins were below our expectations, registering 38.4 percent or ~(80) bps y/y, vs. our expectations for a (40) bp decrease. Gross margins were negatively impacted by higher coupons redemptions that were partially offset by a decrease in the average coupon amount. Management also noted that gross margins were impacted by increases in direct-to-customer shipping expenses, although this pressure should abate in February once the company anniversaries its $49 free shipping threshold. On an adjusted basis, we estimate ongoing SG&A of 26.7 percent, or up ~60 bps y/y, vs. our expectation for a 45 bp increase, driven in large part by higher technology and advertising expenses...We are maintaining our 4Q EPS estimate of $1.80. We are maintaining our 2015 EPS estimate of $5.55 and our 2016 EPS of $6.10.”

Deutsche Bank - Hold, $57 price target

“Operating margins are now 13.1 percent on a LTM basis, down 130 bps from this time last year and down from a peak of 16.6 percent in 1Q12. We continue to see pressure ahead on both the gross and cost line. Gross margins continue to be impacted by pricing pressure, showing up in more couponing, and absorbing shipping costs as online sales increase. Expenses are being impacted by a myriad of initiatives designed to keep the company competitive in an ever evolving environment. We think BBBY is making the right investments and has a lot of room to do so in its still healthy 13 percent margin structure. But, over time, we see that continuing to fall. BBBY’s margins will likely remain the envy of most in retailing as the company is still very profitable. But, perhaps just a bit less so in the future.”