A month has gone by since the last earnings report for Best Buy (BBY Quick QuoteBBY - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Best Buy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Best Buy's Q3 Earnings Miss Estimates, Comparable Sales Dip 2.9% Y/Y

Best Buy reported third-quarter fiscal 2025 results, wherein both revenues and earnings missed the Zacks Consensus Estimate. Both the top and bottom lines also declined year over year.

An Insight Into Quarterly Performance

Adjusted earnings of $1.26 per share lagged the Zacks Consensus Estimate of $1.30. The bottom line fell 2.3% from $1.29 per share in the year-ago period.

Enterprise revenues dipped 3.2% from the prior-year quarter's level of $9,445 million. The figure missed the consensus estimate of $9,631 million. Enterprise comparable sales dropped 2.9% year over year. 

Gross profit dropped slightly year over year to $2.22 billion while the gross margin expanded 60 basis points (bps) to 23.5%. 

Adjusted operating income was $351 million, down from $369 million in the year-ago quarter. The adjusted operating margin dipped 10 bps to 3.7%. 

Adjusted selling, general and administrative (SG&A) expenses of $1.9 billion were flat year over year. SG&A, as a percentage of sales, increased 70 bps to 19.8%.

Domestic and International Operations

The Domestic segment’s revenues fell 3.3% to $8,697 million. This year-over-year decline was induced by a comparable sales decrease of 2.8%. From a merchandising perspective, the key contributors to the comparable sales decline were appliances, home theater and gaming. The decline was offset by growth in the tablets, computing and services categories.

The segment’s online revenues of $2.73 billion dropped 1% on a comparable basis. As a percentage of total domestic revenues, online revenues were 31.4% compared with 30.6% last year.

The segment’s gross margin increased 70 bps to 23.6% due to enhanced financial results from the services category, including its membership offerings. This was partly offset by reduced profit-sharing revenues from its private label and co-branded credit card arrangement and low product margin rates. The segment’s adjusted operating income was $338 million. The figure was lower than $352 million recorded last year. As a percentage of sales, the metric was flat year over year at 3.9%.

In the International segment, revenues slipped 1.6% year over year to $748 million. This decrease was due to the adverse impact of foreign exchange rates and a 3.7% decline in comparable sales. This is partly offset by revenues from Best Buy Express stores that opened in Canada in fiscal 2025. The segment’s adjusted operating income was $13 million or 1.7% of revenues, lower than the $17 million or 2.2% reported in the year-ago quarter.

This segment’s gross margin increased 40 bps to 22.5% due to growth in the higher-margin services category.

Financial Snapshot

Best Buy ended the quarter with cash and cash equivalents of $643 million, long-term debt of $1.1 billion and a total equity of $3.1 billion.

In the fiscal third quarter, Best Buy returned about $339 million to its shareholders through dividends of $202 million and share repurchases of $137 million. Year to date through the fiscal third quarter, Best Buy returned $892 million through dividends of $607 million and share repurchases of $285 million. Management intends to spend roughly $500 million on share repurchases during the current fiscal year.

In addition, the company’s board has authorized a regular quarterly dividend of 94 cents per share in cash, payable Jan. 7, 2025, to shareholders of record as of Dec.17, 2024.

What to Expect From Best Buy in Fiscal 2025?

Management revised the view for fiscal 2025 while reiterating guidance for adjusted operating margin. For fiscal 2025, Best Buy now anticipates revenues to be in the range of $41.1-$41.5 billion, lower than the prior guidance of $41.3-$41.9 billion. Best Buy envisions comparable sales to decline in the band of 2.5-3.5% compared with the prior estimate of a 1.5-3% decline. The company reported consolidated revenues of $43.5 billion and a comparable sales decline of 6.8% in fiscal 2024.

The company reiterated its guidance for an adjusted operating margin of 4.1-4.2% compared with 4.1% in fiscal 2024. This indicates a slight expansion from fiscal 2024 on a 52-week basis.

Management now foresees adjusted earnings per share to be between $6.10 and $6.25 compared with the prior forecast of $6.10-$6.35. Capital expenditure is anticipated to be $750 million.

For fourth-quarter fiscal 2025, Best Buy forecasts comparable sales to be flat to decline 3% year over year and adjusted operating margin in the bracket of 4.6-4.8%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Best Buy has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Best Buy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.