Best Buy Ready to Feast at Digital TV Sweet Spot

Updated from 11:13 a.m. EDT

Solid earnings guidance Wednesday from Best Buy(BBY) could mark the beginning of a trend several analysts believe will finally awaken its sleepy shares: high-definition television for the masses.

"I don't think it's a question of whether it's going to happen," said Colin McGranahan, a retail analyst with Bernstein & Co. "It's more of a question of when."

Sales of digital televisions and music players helped lift earnings at the Minneapolis-based chain to $150 million, or 46 cents a share, in the three months to Aug. 28. That compares with earnings of $139 million, or 42 cents a share, last year. Revenue rose 13% to $6.1 billion, reflecting a 4.3% jump in same-store sales and 75 additional stores in the 2004 period.

Best Buy's most recent quarter included a charge of 7 cents a share for asset impairment, leaving operating net a penny above the Thomson First Call consensus estimate of 52 cents a share. Analysts had been forecasting revenue of $6.06 billion in the quarter. The stock, which has been mired around $50 for close to a year, was up $2, or 4%, to $52.29 Wednesday.

For the third quarter, Best Buy forecast earnings of 41 cents to 47 cents a share, saying month-to-date sales are on track despite the hurricanes in the Southeast. The company reiterated its prediction for same-store sales growth of 3% to 5% in the third and fourth quarters and said full year-earnings should be $2.80 to $2.93 a share, including the second-quarter charge, on revenue of $27.5 billion.

Analysts had been forecasting earnings of 44 cents a share in the third quarter and $2.90 a share in the year, according to Thomson First Call. The full-year revenue consensus is $27.44 billion.

"Our revenue guidance reflects the continued strength we see in digital televisions, MP3 players, notebook computers, home theater and digital imaging, as well as improvement we expect to see in DVD movies and the appliances category," the company said in a statement.