Lehman Raises Best Buy Estimates

Analyst Alan Rifkin says the consumer-electronics chain upped its guidance, amid improving margins and cost controls

Lehman Brothers raised its estimates on Best Buy (BBY ).

Analyst Alan Rifkin says Best Buy's new guidance reflects improving gross margins, diligent cost control, and strong momentum in sales comparisons. He notes Best Buy is benefiting from strong gross profit rates, and now forecasts a 70-basis-point improvement in the second quarter. Rifkin says gross margin is improving via company-specific initiatives, which he thinks is sustainable in the second half of the year.

In light of the new company guidance, Rifkin raised his Street-high estimates. He upped the 30 cents second-quarter earnings per share estimate to 40 cents; raised the $2.25 fiscal 2004 (Feb.) estimate to $2.35; and raised the fiscal 2005 estimate of $2.60, to $2.75. Rifkin says Best Buy remains his top pick, and reiterates his overweight rating.

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