Can Whole Foods Continue To Expand And Fight Off Competition?

| About: Whole Foods (WFM)

Whole Foods Market Inc. (NASDAQ:WFM) is set to report FQ1 2014 earnings after the market closes on Wednesday, February 12th. Whole Foods is a upscale supermarket chain that sells natural and organic products. Last quarter WFM missed its revenue target worrying investors that it may be losing its edge to lower priced competitors in the expanding natural and organic foods market. While the rate of growth may not be as strong as previously suspected, Wall Street still forecasts Whole Foods to report year over year growth of 13% on EPS and 11% sales growth this quarter. Here's what investors expect from Whole Foods this quarter.

The information below is derived from data submitted to the platform by a set of Buy Side and Independent analyst contributors.

(Click Here to see All Estimates for Whole Foods)

The current Wall Street consensus expectation is for WFM to report 44 cents EPS and $4.294B revenue while the current consensus from 20 Buy Side and Independent contributing analysts is also 44 cents EPS and $4.310B revenue. This quarter the buy-side as represented by the community is expecting WFM to report in-line with Wall Street on EPS but exceed on revenue.

Throughout the previous six quarters the consensus from has been more accurate than Wall Street in forecasting WFM's EPS 5 times but has struggled to be more accurate on revenue. By tapping into a wider range of contributors including hedge fund analysts, asset managers, independent research shops, students and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a smaller differential than usual for WFM.

This quarter analysts are expecting profit and revenue to be up compared to FQ1 2013. The distribution of estimates published by analysts on the platform range from 41 cents to 47 cents EPS and $4.275B to $4.398B in revenues. This quarter we're seeing a moderate distribution of estimates for WFM compared to recent quarters.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market could mean greater volatility post earnings.

Throughout the quarter the EPS consensus from Wall Street remained flat at 44 cents while the Estimize EPS consensus slipped from 45 cents to 44 cents. Over the same time period Wall Street lowered its revenue expectation from $4.388B to $4.294B while the Estimize forecast inched higher from $4.304B to $4.310B. Timeliness is correlated with accuracy and decreasing revenue expectations at the very end of the quarter are often a bearish indicator.

The analyst with the highest estimate confidence rating this quarter is anmikyoso who projects 44 cents EPS and $4.308B in revenue. In the Winter 2014 season anmikyoso rated as the 31st best analyst and is also ranked 31st overall among over 3,800 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case anmikyoso is expecting WFM to report in-line with the Street on EPS but agrees with the Estimize community that the company will exceed on revenue.

This quarter the bar has been set high for Whole Foods by the community. The Estimize consensus is forecasting Whole Foods to report in-line with Wall Street on EPS but exceed by a small margin in sales. Whole Foods is set for a quarter of double digit yoy growth and the only questions investors are asking are how quickly can the company expand and can it continue to fight off increasing competition.

Disclosure: None.