After Fed Chairman Jerome Powell hinted that the central bank would begin bond tapering this year, the major benchmark indices—Nasdaq Composite and S&P 500—hit their all-time highs earlier this week. Furthermore, with considerable improvements in employment and record GDP growth, the Fed believes the economy is well on the recovery path.
This, along with stellar corporate earnings, provided support for valuations and created a basis for stock prices to go up. With the second-quarter reporting season coming to a close, the S&P 500 is on course to achieve its highest quarterly earnings growth rate since the fourth quarter of 2009.
With economic activities returning to pre-pandemic levels, many companies have raised their outlook. Best Buy Co. Inc. (BBY) and Box Inc. (BOX) are the two companies that have raised their growth forecast and are well-positioned to gain significantly in the near term.
Best Buy Co. Inc. (BBY)
BBY sells technology products in the United States and Canada. Domestic and International are the two operational segments of the Richfield, Minn.-based company. BBY offers its products through shops and online under the BestBuy, BestBuy Business, BestBuy Express, BestBuy Health, CST, Geek Squad, GreatCall, Lively, Magnolia, Pacific Kitchen, and Home brands, as well as the domain names bestbuy.com and greatcall.com.
Last month, BBY launched its e-transportation category online and in selected stores. The collection comprises e-bikes, scooters, mopeds, and accessories from industry leaders such as Unagi, Bird, Segway-Ninebot, SUPER73, SWFT, etc.
BBY’s revenue increased 19.6% year-over-year to $11.85 billion in its fiscal second quarter, ended August 1, 2021. The company’s operating income increased 40.3% from its year-ago value to $797 million over this period. In addition, its net income increased 69.9% year-over-year to $734 million, while its EPS grew 75.8% from the prior-year quarter to $2.9. The company raised its enterprise comparable sales forecast to 9% to 11% versus the previous growth outlook of 3% to 6% for the second half of its fiscal year 2022.
The $9.43 consensus EPS estimate for the current year represents a 19.2% improvement year-over-year. Furthermore, BBY has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The $50.98 billion consensus revenue estimate for the current year represents a 7.9% increase from the same period last year. Over the past year, the stock has advanced 5.1% in price. Also, it has gained 16.8% so far this year.
BBY's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BBY has also rated an A grade for Momentum, and a B for Quality and Sentiment. Within the B-rated Specialty Retailers industry, it is ranked #5 of 40 stocks.
To see additional POWR Ratings for Growth, Value, and Stability for BBY, click here.
Note that BBY is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Box Inc. (BOX)
BOX is a cloud content management platform that allows organizations to manage and share their material from any location and on any device. It provides cloud content management online, mobile, and desktop apps to create custom applications and industry-specific features. BOX is based in Los Altos, Calif.
In July, BOX launched Box Sign, its native e-signature capability available at no additional cost to users with Business and Enterprise subscriptions. Through Box Sign, the company aims to offer limitless signatures and a robust set of APIs, allowing organizations to digitize and modernize the way agreements are maintained and controlled in the cloud.
During the second quarter, ended July 31, 2021, BOX’s revenue increased 11.5% year-over-year to $214.49 million. The company’s non-GAAP operating income increased 47% year-over-year to $44.17 million over this period. Its non-GAAP gross profit surged 13.1% from its year-ago value to $44.17 million. Its cash and cash equivalents grew 31% from the prior-year quarter to $779.42 million. BOX expects its revenue to range from $856 million - $860 million in the second half of its fiscal year 2022.
The company’s EPS is expected to grow 15.7% year-over-year to $0.81 in its fiscal year 2021. Analysts expect BOX’s revenue to increase 11.4% year-over-year to $858.33 million in the current year. The stock has advanced 31.4% in price over the past year and 42.8% year-to-date.
BOX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. BOX also has an A grade for Quality, and a B for Growth and Value. The stock is ranked #5 of 75 stocks in the Technology - Services industry.
Beyond the POWR Ratings grades I have just highlighted, you can see the BOX ratings for Stability, Sentiment, and Momentum.
Click here to check out our Cloud Computing Industry Report for 2021
BBY shares were trading at $116.53 per share on Wednesday afternoon, up $0.02 (+0.02%). Year-to-date, BBY has gained 18.23%, versus a 21.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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