Bed Bath & Beyond Earns 52 Cents a Share

I was somewhat right about Bed Bath & Beyond‘s (BBBY) earnings report. The company earned 52 cents a share for its May quarter. My range of 52 to 54 cents a share was more than Wall Street’s consensus of 48 cents a share.
I was also right that the big news would be the company’s outlook for this quarter. BBBY said to expect earnings for the August quarter to range from 59 to 63 cents a share. Wall Street was expecting 63 cents per share.
For the full-year, BBBY said it expects profit growth of 15%. Last year, the company made $2.30 a share so that translates to earnings of $2.65 per share for this year. That’s five cents below Wall Street’s view. In April, BBBY’s original forecast was for EPS growth of 10% to 15% for this year, so there’s really no downgrade at all. In fact, I think $2.65 is probably on the low side.
The stock was off sharply in the after-hours market yesterday but it seems to have recovered somewhat. This news really isn’t that bad; I’d say it’s closer to fine-tuning than poor guidance. The good news is that profit margins continue to improve. This is the fifth straight quarter that year-over-year net margins are up.
For the last four quarters, BBBY’s net margin is just over 8%. That’s a huge improvement from under 6% just a few quarters ago. To give you some perspective, that kind of margin growth turns a sales increase of 12% into profit growth of close to 50%.
Here’s a look at the trailing four-quarter EPS going back a few years. The red line is the company’s forecast.

The company has clearly recovered from the recession. To many people make the mistake of lumping BBBY in with housing stocks. Their business is affected by housing but it’s not so heavily dependent on the overall health of that sector.
My view is that if you can get this stock below $40, you’re getting a good deal.
Here are the earnings results going back a few years:

Quarter	Sales	Gross Profit	Operating Profit	Net Profit	EPS
May-99$356,633	$146,214	$28,015	$17,883	$0.06
Aug-99	$451,715	$185,570	$53,580	$33,247	$0.12
Nov-99	$480,145	$196,784	$50,607	$31,707	$0.11
Feb-00	$569,012	$238,233	$77,138	$48,392	$0.17
May-00	$459,163	$187,293	$36,339	$23,364	$0.08
Aug-00	$589,381	$241,284	$70,009	$43,578	$0.15
Nov-00	$602,004	$246,080	$64,592	$40,665	$0.14
Feb-01	$746,107	$311,802	$101,898	$64,315	$0.22
May-01	$575,833	$234,959	$45,602	$30,007	$0.10
Aug-01	$713,636	$291,342	$84,672	$53,954	$0.18
Nov-01	$759,438	$311,030	$83,749	$52,964	$0.18
Feb-02	$879,055	$370,235	$132,077	$82,674	$0.28
May-02	$776,798	$318,362	$72,701	$46,299	$0.15
Aug-02	$903,044	$370,335	$119,687	$75,459	$0.25
Nov-02	$936,030	$386,224	$119,228	$75,112	$0.25
Feb-03	$1,049,292	$443,626	$168,441	$105,309	$0.35
May-03	$893,868	$367,180	$90,450	$57,508	$0.19
Aug-03	$1,111,445	$459,145	$155,867	$97,208	$0.32
Nov-03	$1,174,740	$486,987	$161,459	$100,506	$0.33
Feb-04	$1,297,928	$563,352	$231,567	$144,248	$0.47
May-04	$1,100,917	$456,774	$128,707	$82,049	$0.27
Aug-04	$1,273,960	$530,829	$189,108	$120,008	$0.39
Nov-04	$1,305,155	$548,152	$190,978	$121,927	$0.40
Feb-05	$1,467,646	$650,546	$283,621	$180,980	$0.59
May-05	$1,244,421	$520,781	$150,884	$98,903	$0.33
Aug-05	$1,431,182	$601,784	$217,877	$141,402	$0.47
Nov-05	$1,448,680	$615,363	$205,493	$134,620	$0.45
Feb-06	$1,685,279	$747,820	$304,917	$197,922	$0.67
May-06	$1,395,963	$590,098	$148,750	$100,431	$0.35
Aug-06	$1,607,239	$678,249	$219,622	$145,535	$0.51
Nov-06	$1,619,240	$704,073	$211,134	$142,436	$0.50
Feb-07	$1,994,987	$862,982	$309,895	$205,842	$0.72
May-07	$1,553,293	$646,109	$154,391	$104,647	$0.38
Aug-07	$1,767,716	$732,158	$211,037	$147,008	$0.55
Nov-07	$1,794,747	$747,866	$203,152	$138,232	$0.52
Feb-08	$1,933,186	$799,098	$259,442	$172,921	$0.66
May-08	$1,648,491	$656,000	$118,819	$76,777	$0.30
Aug-08	$1,853,892	$739,321	$187,421	$119,268	$0.46
Nov-08	$1,782,683	$692,857	$136,374	$87,700	$0.34
Feb-09	$1,923,274	$785,058	$231,282	$141,378	$0.55
May-09	$1,694,340	$666,818	$142,304	$87,172	$0.34
Aug-09	$1,914,909	$773,393	$222,031	$135,531	$0.52
Nov-09	$1,975,465	$812,412	$245,611	$151,288	$0.58
Feb-10	$2,244,079	$955,496	$370,741	$226,042	$0.86
May-10	$1,923,051	$775,036	$225,394	$137,553	$0.52

Posted by Eddy Elfenbein on June 24th, 2010 at 9:34 am

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