Updated to correct a sales category in the 10th paragraph.
Shares of Best Buy (BBY) are again going haywire after the company's earnings report, as a combination of low Wall Street expectations and clever tactics by the company's executives drummed up another decent quarter and outlook.
The electronics retailer's stock exploded as much as 9% in premarket trading on Thursday as third-quarter earnings came in at 62 cents a share, thumping analyst projections for 47 cents. Net sales rose 1.4% from the prior year to $8.9 billion, beating estimates for $8.85 billion.
Best Buy executives, per the new normal for the company, used a heavy dose of stock repurchases and tight expense control to confound its many critics. The company repurchased 5.4 million shares for a total of $201 million during the quarter, which helped to boost earnings by 5 cents a share. So far this year, Best Buy has bought back 15.7 million shares for a total of $517 million. Meanwhile, Best Buy managed to hold expenses relatively unchanged vs. last year even as sales increased at stores and online, which had the effect of improving operating profit.
To say Wall Street was caught flat-footed on Best Buy -- once again -- may be an understatement.
"We believe that the setup for Best Buy is more difficult this quarter, as expectations are higher," said Credit Suisse analyst Seth Sigman ahead of the results. "Our data, combined with Best Buy's continued market share gains suggests there may be modest upside to the company's third-quarter same-store sales, but the market has assumed that, and we still see some questions about lapping a strong fourth quarter last year."