By: Craig Bowles
Whole Foods Market, Inc. (NASDAQ:WFM) is slated to report 1Q 2014 earnings after the bell on Wednesday, February 12. The earnings release is expected at approximately 4:00 p.m. EST with a 5:00 to 5:30 p.m. webcast available through Whole Foods Investor Relations. The company represents grocery and health food industries on the S&P 500 Index.
Outliers & Strategy
- Adjusted Earnings Per Share for 1Q 2014: The current Street estimate is $0.44 with a range of $0.41-$0.47. (Source: Yahoo! Finance). Whole Foods has beaten estimates an average of 1c over the last four quarters with the 2Q 2013 report beating by 2c.
- Revenues for 1Q 2014: Revenues are seen increasing 11.4% y/y to $4.29 bln (range $4.23 bln to $4.36 bln).
- Earnings Per Share Guidance (FY2014): Current guidance of $1.65-$1.69 compares to a street estimate of $1.69 (range $1.65-$1.71). Original 2014 guidance by the company was $1.69-$1.72, so they've come off slightly and analysts have followed.
- Revenue Guidance (FY2014): Guidance was lowered 1% across the board in November. Sales are now expected to grow by 11% to 13%, down from a range of 12% to 14%, while same-store sales should rise by 5.5% to 7%, below the previous guidance of 6.5% to 8%.
- Institutions own 85% of the shares but have lightened up 9.4% in the current quarter versus the previous quarter.
- Whole Foods is compared other grocery store companies with quarterly results possibly impacting Kroger (NYSE:KR) and Safeway (NYSE:SWY).
- Whole Foods shares have a 1-day average price change on earnings of 7.72%. Options are pricing in an implied move of 6.99% on earnings.
- 02/06: Whole Foods has to worry about minimum wage hikes but also is being protested in Chicago among which is the Chicago Teachers' Union president, according to a post in the Chicago Sun Times.
- 02/03: Whole Foods purchased seven Dominick's leases in Chicago from Safeway.
- 02/03: Piper Jaffray upgraded Whole Foods Market to Overweight from Neutral but has the same price target of $61 as Sterne Agee who had previously downgraded the company.
- 01/28: Barron's article, "Whole Foods' Deceleration Is Natural" sited Sterne Agee's opinion that structural concerns are exaggerated but had previously downgraded the company to Hold from Buy.
Whole Foods recently found support at $51 below which is a support area around $45. The stock has to move above $55 to get back above the 200-day moving average. The stock underperformed relative to the market in January, so could move up 3% just to get back to an even relative performance. A positive earnings report would help push the stock back above $55 and put the momentum crowd at ease. On the negative side, the stock is running the risk of having inverted moving averages. $51 is important support. MACD at the bottom of the chart is turning up as is RSI at the top, so the technicals are setup well for a good reaction if the company produces positive news on Wednesday. (Chart courtesy of StockCharts.com)
Whole Foods' stock was at all-time highs in November when the company suddenly lowered guidance for all measures of revenue by 1%. The stock fell 22% before finding January's low at $51, so the company doesn't need more negative news from Wednesday's earnings report or investors will rethink the relatively lofty valuations placed on the grocer. A beat by 2c on earnings with better than expected revenue should provide more bounce. Conversely, comp store sales coming in below 6.25% might be blamed on the weather but could be seen as reaffirming a less positive reality.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.