Summary
Fiscal Q3 earnings as expected but management forecasts EPS growth sooner than anticipated.
The valuation is low but management doesn't plan to boost the share buybacks.
I see the online competition as an important challenge to the EPS growth.
Bed Bath & Beyond (BBBY) reported Q3 earnings and the market seems to appreciate as the stock price rose by about 6%.
Besides the results in line with expectations, management surprised the market by raising the guidance for fiscal 2019. If the company delivers as communicated, the trend of declining EPS will end sooner than anticipated.
In this context, the market valuation at 6.5x the expected fiscal 2018 EPS is low. But management isn't taking advantage of the situation by accelerating the share buybacks.
Management stays prudent despite the optimistic guidance, which would explain the lack of confidence of the market. The increasing online competition is also a threat to the anticipated EPS growth.
