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What's Coming For Best Buy?

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Shares of Best Buy Co Inc (NYSE: BBY) are down more than 2 percent on Wednesday afternoon, as the company readies to announce its first quarter (fiscal 2016) financial results on Thursday morning, before the market opens.

Like many other retailers, Best Buy’s earnings are quite cyclical, and peak in the fourth quarter every year.

The first quarter is usually one of the weakest, and this one is not expected to be an exception. For the first quarter of fiscal 2016, the Street is modeling consensus earnings of $0.29 per share on revenue of $8.518 billion (according to Estimize), while the crowd is slightly less bearish and anticipates earnings of $0.31 per share on revenue of $8.563 billion.

These results imply a 6 percent to 12 percent decline from earnings of $0.33 per share reported in the same quarter last year. Revenue is also expected to drop from last quarter’s $14.209 billion, as well as in relation to the $9.035 billion reported in the first quarter of fiscal 2015.

Of note, comparing results on a year-to-year basis is not applicable, as Best Buy has sold its China business over the past year. Previous figures include Chinese-based earnings and revenue.

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However, as it can be seen in the chart above, the company has a history of beating estimates so, the company might see flat year-over-year earnings after all.

The second chart here illustrates the evolution of sentiment over time; consensus estimates have been falling consistently for a few months and now stand at their lowest.

What Wall Street Thinks

Analysts at Wedbush predict below-consensus earnings of $0.26 per share on revenue of $8.24 billion. The firm expects “Best Buy’s numbers will come in below consensus estimates due in part to the closing of Canadian stores,” a recent Benzinga article reads.

Analysts at B. Riley are slightly more constructive on Best Buy.

The firm anticipates a “modest revenue decline” this quarter quarter, driven by forex weakness. However, they think that guidance will be of more relevance than “transient” first quarter earnings disruptions.

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