Second-quarter earnings season essentially is over, though we still are seeing a few stragglers post results. Two of these companies nicely beat expectations on Tuesday, which was more of a rarity in the second quarter than usual. I hold both these stocks within covered call positions, so I'll highlight their solid quarters.
The first is Best Buy (BBY) , the well-known electronic retailer. Best Buy reported earnings of $1.54 a share, a quarter above expectations. Revenue did decline nearly 13% on a year-over-year basis to just north of $10.3 billion, but that was expected. Indeed, sales came in $80 million above the consensus.
Best Buy has done a solid job of expanding its online offerings, with about 31% of all its domestic sales now going through its online channel. That is twice as much as before the pandemic. Lower sales this quarter partly reflect a slowing economy.
It should be noted that Best Buy faced tough comps. Evidently, quite a bit of Covid stimulus money ended up buying consumer electronics in 2021. There was bound to be a falloff as that largess dried up. The rest of 2022 is going to be challenging for the retailer space. However, a lot of bad news seems priced into Best Buy's shares. I still like Best Buy as a covered call candidate as there is good liquidity in the options around this equity.
Even more impressive was the quarter that American Woodmark (AMWD) posted Tuesday. This company operates in another tough part of the economy, as American Woodmark supplies building components such as cabinetry to the remodeling and new-home construction markets in the United States. The company reported earnings per share of $1.71 for the quarter, more than 40 cents above the consensus. Revenue rose more than 22% from the same period a year ago to just over $540 million, more than $25 million over expectations.
Increased sales and increased efficiencies completely offset the higher material and logistics costs that so many companies are dealing with in 2022. Price hikes stuck during the quarter and free cash flow improved nicely, too. American Woodmark's balance sheet is in good shape and management used cash flow to pay down more than $20 million of debt in the quarter. While the housing market is likely to remain under considerable duress for a few quarters, plenty of caution seems to be priced into American Woodmark's shares at less than 9x earnings. The company is obviously executing well.
