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Earnings Previews: Best Buy, Dollar Tree

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In late-morning trading on Monday, the Dow Jones industrials were up 0.04%, the S&P 500 down 0.19% and the Nasdaq 0.21% lower.

After U.S. markets closed on Monday, Zoom Video easily beat the consensus earnings per share (EPS) estimate and surpasses the consensus revenue estimate in the bargain. Zoom also raised adjusted EPS and revenue guidance for the year. Sentiment on the stock is being driven by some analysts’ lukewarm outlook due to slowing growth in the company’s enterprise division. The stock traded down 7.6% Tuesday morning.

Before U.S. markets opened on Tuesday, Lowe’s also beat estimates on the top and bottom lines but issued downside guidance for full-year earnings and sales. Shares traded up 2.8%.

Palo Alto Networks and VFC are on deck to report quarterly results later on Tuesday. Then the following morning, look for reports from Kohl’s and Xpeng.

Snowflake and UiPath are on deck to report results after U.S. markets close Wednesday, but the big report then will come from Nvidia. Here is our look at what is driving the stock and what analysts expect the company to report.

Here is a look at what to expect when the following two companies report quarterly results before markets open on Thursday.

Best Buy

Over the past 12 months, shares of technology retailer Best Buy Co. Inc. (NYSE: BBY) have slipped by about 1.6%. Shares reached a 52-week high in early February but have dropped by about 21% since then.

The company’s report is expected to add more weight on the share price as demand for tech gear and appliances remains soft thanks to the macroeconomic environment. Best Buy recently reduced the price of its high-end membership loyalty plan and introduced a lower-cost plan in an effort to drive customer loyalty. Now, Best Buy just has to keep membership plans from cutting into gross margins. And then there is that sweet dividend yield flowing from the low share price.

Analysts have adopted a wait-and-see approach to Best Buy. Of 30 brokerages covering it, 22 rate the stock at Hold and 6 have a Buy or Strong Buy rating. At a recent share price of around $71.40, the upside potential based on a median price target of $80.00 is 12.1%. Based on a high price target of $110.00, the upside potential is 54.1%.

For the company’s fiscal 2024 first-quarter revenue, analysts are forecasting $9.53 billion, which would be down 35.4% sequentially and by 10.5% year over year. Adjusted EPS are forecast at $1.10, down 56% sequentially and 29.9% lower year over year. For the full 2024 fiscal year ending in January, current estimates call for EPS of $6.20, down 12.4%, on sales of $44.57 billion, down 3.7%.

The stock trades at 11.5 times expected 2024 EPS, 10.2 times estimated 2025 earnings of $6.98 and 9.2 times estimated 2026 earnings of $7.72 per share. Its 52-week trading range is $60.78 to $93.32. Best Buy pays an annual dividend of $3.68 (yield of 5.22%). Total shareholder return for the past year is 3.06%.

Dollar Tree

Off-price retailer Dollar Tree Inc. (NASDAQ: DLTR) has added around 21% to its share price over the past 12 months. After posting the 52-week low one year ago, the shares popped, and, though the stock has fluctuated within a pretty wide range, shares currently trade about 10% below the 52-week high posted in late July. The number to watch here is gross margin. Dollar Tree increased its prices in an effort to keep sales and margins in the black. But how has that affected traffic? There are a lot of moving parts here.

Analysts are bullish on the stock. Of 28 brokerages covering it, 13 rate Dollar Tree at Hold, and 13 others have a Buy or Strong Buy rating. At a share price of around $157.00, the upside potential based on a median price target of $162.00 is 3.2%. At the high price target of $195.00, the upside potential is 24.2%.

First-quarter 2024 revenue is forecast at $7.27 billion, down 5.8% sequentially but up 5.4% year over year. Adjusted EPS are forecast at $1.54, down 24.7% sequentially and by 35.0% year over year. For the full 2024 fiscal year ending in January, analysts expect Dollar Tree to post EPS of $6.63, down 8%, on sales of $30.31 billion, up 7%.

Dollar Tree stock trades at 23.7 times expected 2024 EPS, 19.9 times estimated 2025 earnings of $7.91 and 17.2 times estimated 2026 earnings of $9.11 per share. The stock’s 52-week range is $126.27 to $175.68. The company does not pay a dividend, and the total shareholder return for the past year was 20.91%.

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