SunTrust raised its price target on Best Buy Co Inc (NYSE: BBY) Wednesday from $43 to $45 and maintained a Buy rating.
Analyst David G. Magee noted that the company's fourth quarter EPS of $1.48 beat estimates "as management achieved its goal of gaining market share while improving EBIT margins."
While the "cautious" guidance given in January for the first half of 2015 was not changed, "the business stabilized enough last year for BBY to get more aggressive with its strong balance sheet...including a special dividend and the resumption of its buyback," according to Magee.
The firm maintained its full year 2015 EPS at $2.55 and introduced its 2016 EPS estimate of $2.90, which assumed comp growth of 1.4 percent, along with continued expense leverage.
Magee highlighted as positives the "myriad of initiatives" that paid-off during the holiday shopping season along with operational investments that will be partially offset by cost-cutting.
Another positive was the company's more aggressive use of its balance sheet, which, in Magee's opinion, indicated that Best Buy had "reached a high enough level of stability and visibility that a ultraconservative balance sheet posture is no longer necessary."
On the downside, Magee felt that the company "still seems to be in the middle innings of necessary investment despite regaining share while improving margins."
Magee concluded, "Our sense is that the competitive playing field continues to intensify with faster discounter participation in new product introductions...and overall profitability continues to be challenged by the decline in high margin warranty demand."
Best Buy closed at $39.79 Wednesday, up 1.56 percent.
Latest Ratings for BBY
| Mar 2015 | Wedbush | Upgrades | Underperform | Neutral |
| Mar 2015 | JP Morgan | Maintains | Overweight | |
| Mar 2015 | Citigroup | Maintains | Buy |
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