I have plans to initiate a position in regard to stocks mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from subscribers to Premium Membership). I have no business relationship with any company whose stock is mentioned in this article.
Today’s premium post looks at a new addition to The Model Portfolio.
The share price of Bed Bath & Beyond (NASDAQ: BBBY) has been in decline since the beginning of 2014 due to it lowering it’s earnings forecasts.
Bed Bath & Beyond has had to do this because like all US retailers it went through a less than stellar Christmas trading period – crucial to to the sector.
As a result BBBY announced in the beginning of January 2014 that fourth quarter earnings fell 11% as compared with the prior year and forecast earnings to increase by 4-6%, below market expectation of 9.8%.
BBBY blamed negative impact of severe winter weather that stores closed for a full day 464 times during the period as a result and were even more closures for a partial day.
Many different companies have downgraded their earnings forecasts for the recent quarter and even for the current fiscal year due to the server winter weather but there is only so many times retailers can blame bad weather for their woes.
Heavy discounting and coupon redemption meant that the Christmas trading period was tougher than in recent years for Bed Bath & Beyond with shoppers not buying until the week before Christmas.
BBBY are approximately half way through share repurchase program authorised in 2012 and have a further $861 million left to spend. This is a good use of cash at these lower prices and will help to lift EPS going forward so long as BBBY can maintain current earnings levels despite rumblings from commentators that the slower housing market will negatively impact sales.
Due to the cyclical nature of the business maintaining current earnings should be something that an experienced and astute management team ought to be able to accomplish in the run up to the Christmas trading period.
Bed Bath & Beyond is also a company with no long term debt and presents itself as a buyout candidate at these lower share prices.
With a market cap of $11 billion and a PE Ratio of 12, this is a Relatively Unpopular Large Company.
A position will be initiated today at the open, the current holdings page will be updated accordingly with the actual price.