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The Home Depot, Inc. (HD) and Best Buy Co., Inc. (BBY) – These Retailers Crushed Earnings Estimates. Are They Still a Buy?

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There are a ton of investors buying into Best Buy Co., Inc. (NYSE:BBY)’s turnaround, but I’m not as convinced. I’m especially not convinced after the stock has surged nearly 170% year to date. That said, today it recorded its first profitable quarter in a year and did so by crushing estimates. Excluding items, Best Buy Co., Inc. (NYSE:BBY)’s EPS came in at $0.32, which was far ahead of last year’s $0.04 result and analyst estimates of $0.12.

Best Buy’s revenue of $9.3 billion managed to beat estimates, but was a slight decline from last year’s revenue numbers. The better-than-expected profit was largely from its cost-cutting measures, which is fine but can only take the company so far. Best Buy needs to find a way to grow revenues, which it has struggled to do as Amazon continues to thrive online. One way to grow said revenues would be to defend its turf against Amazon and grow its online presence. Best Buy Co., Inc. (NYSE:BBY) managed to accomplish that during its last quarter and increased its online sales by 10.5%. That was unfortunately partially mitigated by its comparable in-store sales dropping 0.6%.

There are a lot of people who believe Best Buy Co., Inc. (NYSE:BBY) will return to full health, but I remain very skeptical. I think Amazon will keep a lid on Best Buy’s revenues going forward, and that could put a ceiling on Best Buy Co., Inc. (NYSE:BBY)’s future growth. The stock seems ahead of its turnaround, and with its stock price soaring around 170% year to date, it already trades at a P/E ratio of 15 compared to retail juggernaut Wal-Mart at 14 — based on this year’s earnings. I missed Best Buy’s recent run-up and I won’t be jumping on the bandwagon anytime soon, because there are better investment opportunities in the market.

The article These Retailers Crushed Earnings Estimates. Are They Still a Buy? originally appeared on Fool.com and is written by Daniel Miller.

Fool contributor Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Home Depot. The Motley Fool owns shares of Amazon.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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