Best Buy Vindicates Backers

Maybe some sellers were too quick to pull the trigger on Best Buy ( BBY).

The company, whose shares have fallen twice recently following earnings warnings from two of its peers, came out Thursday and backed its sales guidance, saying earnings will exceed current expectations.

Eden Prairie, Minn.-based Best Buy said sales were on plan for the fourth quarter, which ends Saturday, and that earnings will top its previous guidance of $1.35 to $1.40 per share. The current consensus is for earnings of $1.38, according to Thomson Financial/First Call.

After falling to a three-month low Wednesday, Best Buy shares rallied nearly 5% Thursday, rising $3.05, to $68.75. The company is scheduled to report fourth-quarter sales, and to comment on earnings trends, on March 7; it is due to report fourth-quarter and full-year earnings on April 2.

Investors in consumer electronics retailers, which had a bang-up holiday season, have become nervous lately, following earnings warnings from Circuit City ( CC) and Tweeter ( TWTR), a smaller chain that caters to the high-end consumer. While investors sold off Best Buy shares after each warning, the company has continued to have plenty of defenders on Wall Street. Circuit City was up modestly Thursday, while Tweeter was down 2%.

Most analysts said that the problems that plagued Circuit City and Tweeter, such as inventory shortages for some key products like flat-screen televisions, wouldn't likely affect Best Buy. That view seemed to be borne out by Thursday's comments from the company, but don't be suprised if electronics investors continue to act anxious.

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