Bed Bath & Beyond Earnings Preview

Bed Bath & Beyond (NASDAQ: BBBY) is scheduled to report fiscal third-quarter 2011 results Wednesday, December 21, after the markets close. Though the stock is trading near a multiyear high, analysts' sentiment has been waning over the past three months. Investors will be looking for another in the company's series of earnings beats. The analysts' forecast calls for per-share earnings that increased 15.9% from the same quarter of last year to $0.88. That estimate is unchanged from 60 days ago. So far, the consensus full-year EPS estimate is for a 19.6% increase from last year. Note that analysts have underestimated the company's earnings results in the past ten quarters. Analysts also expect the company to report that revenues for the quarter rose 7.2% from a year ago to $2.4 billion. Revenue has risen in the past four quarters. Full-year revenues are expected to be 7.8% higher year over year. The Company Bed Bath & Beyond operates more than 1,100 stores in North America that offer domestic merchandise and home furnishings. Its banners include Bed Bath & Beyond, Christmas Tree Shops, Harmon and Harmon Face Values, and buybuy BABY. The New Jersey-based company was founded in 1971 and now is an S&P 500 component with a market cap of $14.9 billion. During the three months that ended in November, the company increased its full-year profit guidance along with posting better-than-expected second-quarter results, which prompted two analysts to raise their EPS estimates. Performance The company has a long-term earnings per share growth forecast of 15.3% and a return on equity of 22.9%. The forward earnings multiple is less than the industry average P/E ratio, and the PEG ratio is less than the industry average as well. The operating margin is better than the industry average. The consensus recommendation of analysts who follow the stock is to buy it, and they have a mean price target on shares that is about 9% higher than the current share price. The share price has dropped about 5% from a recent 52-week high and is more than 26% higher than a year ago. It is still above the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed competitors such as Williams-Sonoma (NYSE: WSM) and Target (NYSE: TGT), as well as the S&P 500. Action Items: Bullish: Investors interested in exchange traded funds with a stake in Bed Bath & Beyond might want to consider the following trades:

SPDR S&P Homebuilders (NYSE: XHB) is about 31% higher than the 52-week low.
PowerShares Dynamic Retail (NYSE: PMR) is more than 20% higher than the 52-week low.
PowerShares Dynamic Consumer Discretionary (NYSE: PEZ) is almost 17% higher than the 52-week low.

Bearish: Traders may prefer to consider these alternative positions in the same sector:

Kirkland's (NASDAQ: KIRK) is up about 61% from the 52-week low.
Pier 1 Imports (NYSE: PIR) is up more than 54% from the 52-week low.

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