NEW YORK (TheStreet) -- Bed Bath & Beyond (BBBY - Get Report) shares were surging 5.4% to $66.08 early Wednesday following better-than-expected second-quarter earnings, as the the housewares retailer offered more discounts and coupons brought shoppers in the door and online.

The Union, N.J.-based company reported net income of $224 million, or $1.17 a share, down from year-earlier earnings of $249.3 million. The per-share earnings, however, beat analysts' expectations of $1.14 a share. Bed Bath & Beyond's comparable-store sales for the quarter ended Aug. 30 rose 3.4% vs. growth of 3.7% in the second quarter of last year. Net sales rose 4.3% to 2.94 billion, surpassing expectations of $2.89 billion in quarterly sales.

Bed Bath & Beyond repurchased about $1 billion in common stock during the quarter, representing approximately 16.9 million shares.

The company forecast third-quarter earnings per share between $1.17 and $1.21. It also said it expects fourth-quarter earnings per share of between $1.78 and $1.83 and full-year earnings of between $5 and $5.08.

Here's what analysts had to say.

Brian Nagel, Oppenheimer (Perform; $69 PT)

We look on the Q2 (Aug.) results that Bed Bath & Beyond reported last night as better but not suggestive of a significant positive turning point for the chain. In our view, the pop higher in shares post-market might prove premature. Comp-store sales rose an above-plan 3.4%. Gross margins, however, remained soft. Excluding the benefit of the company's recent ASR, FY14 (Feb. 2015) guidance is now modestly lower. Management definitely sounds more constructive on its plans for an omni-channel business model. Our rating on BBBY remains Perform.

Management indicated that the 2Q comp increase was a function of increases in both transactions and ticket. The comp - which includes store and e-commerce sales - reflected a 50% increase in web sales in conjunction with a modest increase in comparable store sales. On a two year basis, comps increased 7.1% vs. 3.8% in 1Q. In our view, this compares relatively favorably with reported results from other publically traded home furnishings retailers. ... Gross margins were negatively impacted by higher coupons together with increases in net customer shipping expenses and changes to the company's free shipping threshold, among other things. SG&A was below our expectations at 25.99%, or up 36 bps y/y, vs. our expectation for a 47 bp increase, driven in large part by higher technology expenses.

We are not surprised that shares were up in aftermarket trading, given that Bed Bath & Beyond's results were significantly better than our expectations. We continue to view Bed Bath as a well-managed operator within the home goods space and remain mindful of the company's strong track record for returns.

Laura Champine, Canaccord Genuity (Hold; $66 PT)

We are raising our FY14 EPS estimate for BBBY by $0.04 to $5.08, versus prior consensus of $5.02. The increase is entirely driven by share buyback greater than previously expected. We are raising EPS estimates for the next two years while lowering net income forecasted. Our FY14 estimate reflects a 30bps reduction in our gross margin forecast as the company continues to feel the impact of elevated couponing levels and higher direct-to-consumer shipping costs. We remain on the sidelines at this time despite a better SSS result than we expected in Q2, with 3.4% growth outpacing our estimate of +2%. Although financial engineering can create substantial EPS growth for BBBY, we'll feel better recommending the stock once margins bottom. Our DCF model boosts our PT to $66 - basically in line with the current price.

Matthew Fassler, Goldman Sachs (Sell; $66 PT)

BBBY took the opportunity to leverage a better than expected quarter to try redirecting the company's narrative, highlighting an intensified focus on omnichannel, disclosing some ecommerce-related metrics for the first time, and highlighting a more shareholder-friendly approach, as evidenced by its most recent ASR. While the spirit of these comments is constructive, they do not alter the reality of the need for continued investment in pricing and omnichannel spending that should pressure margins further.

We maintain our Sell rating, based on our view that this is one of the few retailers in our coverage with a highly visible path to margin compression over time.

TheStreet Ratings team rates BED BATH & BEYOND INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate BED BATH & BEYOND INC (BBBY) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BBBY's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Specialty Retail industry and the overall market, BED BATH & BEYOND INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • BED BATH & BEYOND INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BED BATH & BEYOND INC increased its bottom line by earning $4.81 versus $4.58 in the prior year. This year, the market expects an improvement in earnings ($5.01 versus $4.81).
  • 38.80% is the gross profit margin for BED BATH & BEYOND INC which we consider to be strong. Regardless of BBBY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.04% trails the industry average.

--Written by Laurie Kulikowski in New York.

Follow @LKulikowski

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.