Writing on the Wall: Analysts Warn Against Bed Bath & Beyond Inc. (BBBY) Following Guidance Cut

Bed Bath & Beyond Inc. BBBY is falling after the company announced revised third quarter guidance yesterday, slashing its diluted EPS estimate down to $1.07 to $1.10 from its previous range of $1.14 to $1.21. Furthermore, the company now expects net sales for fiscal third quarter to increase 0.3%, compared to its previous estimate range of 1.8% to 4.0%.

Following the disappointing guidance, Laura Champine of Cantor Fitzgerald reiterated her Hold rating on the stock but lowered her price target from $53 to $50. The analyst explains, "New guidance for 3Q:15 EPS is in line with our recently lowered expectations, but SSS was even lighter at -0.4% vs. our estimate of +1.5%. The total sales missed our estimates by a much lesser amount, which could be due to timing of new store launches and e-commerce that management said exceeded our estimate of 25% growth."

Champine is lowering her full year 2016 EPS estimate from $5.05 to $5 due to lower anticipated same store sales growth. This estimate is below the FactSet consensus of $5.16. The analyst continues to expect the company's margins to decrease from "continued heavy couponing" and lofty shipping expenses. As a result, the analyst lowered her gross margins estimate.

Laura Champine has a 38% success rate recommending stocks with an average loss of 5.9% per rating.

Separately, Denise Chai of Merrill Lynch reiterated an Underperform rating on Bed Bath & Beyond, cutting her price target from $49 to $44. On the heels of the company's revised guidance, Chai warns of continued share price plunges, inflated consensus expectations. She also warns that operating income may continue to fall.

Denise Chai has a 58% success rate recommending stocks with a 6% average return per rating.

According to TipRanks, one analyst is currently bullish on BBBY, 2 are bearish, and 5 remain neutral. The average 12-month price target between these 8 analysts is $59, marking a 21% potential upside from current levels.