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BB&T Analyst Downgrades Bed Bath & Beyond To Underweight: Here's Why

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BB&T Capital Markets issued a company note on Bed Bath & Beyond Inc. (NASDAQ: BBY) after expectations of declining operating margins and low EPS growth. BB&T downgraded Bed Bath and Beyond from Hold to Underweight, while a price target is unavailable.

Analysts Anthony Chukumba and Daniel Cannata wrote, "We are downgrading Bed Bath & Beyond to an Underweight from a Hold rating, while lowering our FY'16 diluted EPS estimate to $5.05 from $5.28. We expect the company's top-line growth to continue to be anemic and profit margins to continue to decline for the foreseeable future. We also think BBBY's EPS accretive share repurchases are likely to slow, and are uncomfortable with the company's corporate governance."

Chukumba and Cannata gave three key points of why they see weakness in Bed Bath & Beyond in the near term.

1. Technology

BB&T believes that Bed Bath and Beyond's online capabilities are still inferior to their competition as there is a shift to consumers doing a large amount of shopping online.

2. Profitability

Due to increased amounts of discounting and emphasis on coupons to spur traffic to stores, analysts believe that Bed Bath & Beyond will experience declining operating margins.

3. Declining share repurchases

BB&T believes that as free cash flow deteriorates the share repurchases that have been the primary source of EPS growth may decrease in the coming years.

Latest Ratings for BBBY

Sep 2016CitigroupMaintainsSell
Sep 2016UBSMaintainsNeutral
Jun 2016Credit SuisseMaintainsNeutral

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Posted-In: Anthony Chukumba BB&T Capital Markets Daniel CannataAnalyst Color Downgrades Analyst Ratings


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