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Summary

  • Whole Foods Market, Inc. (WFM) is slated to report 2Q 2014 earnings after the bell on Tuesday, May 6th.
  • Adjusted Earnings Per Share: The current Street estimate is $0.41 with a range of $0.39-$0.43.
  • Revenues: Analysts expect an increase of 10.3% y/y to $3.34 bln (range $3.28 bln to $3.43 bln).

By Craig Bowles

Overview

Whole Foods Market, Inc. (NASDAQ:WFM) is slated to report 2Q 2014 earnings after the bell on Tuesday, May 6th. 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

Key measures:

  • Adjusted Earnings Per Share: The current Street estimate is $0.41 with a range of $0.39-$0.43. (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: Analysts expect an increase of 10.3% y/y to $3.34 bln (range $3.28 bln to $3.43 bln).

Earnings Per Share, Revenues, and Comparable Store Sales Guidance (FY2014):

  • Earnings Per Share Guidance (FY2014): Current guidance of $1.58-$1.65 compares to a street estimate of $1.62 (range $1.58-$1.64).
  • Revenue Guidance (FY2014): Guidance is 11% to 12%, so the high end was reduced by 1% in each of the last two earnings reports. Analysts expect an increase of 11.2% y/y to $14.37 bln (range $14.16 bln to $14.46 bln).
  • Comparable Store Sales (FY2014): Guidance is 5.50% to 6.20%. Analysts expect 5.8% but are slightly more pessimistic with a high estimate of 6.0% following the guidance reductions from 8% a few quarters ago.
  • Insiders have sold 616,751 shares over the last six months. Institutions own 85% of the shares.
  • Whole Foods is compared to 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 8.79%. Options are pricing in an implied move of 7.01% on earnings.

Recent News

  • 04/28: Whole Foods' competition from Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) isn't as big a worry as many think due to the growing organic market and customer loyalty, according to a post on Motley Fool.
  • 04/14: BB&T Capital downgraded Whole Foods to Hold from Buy after a 16% price cut in the Boston area which could result in lower profits, according to a post on TheEconomicDaily.com.
  • 04/09: UBS raised its price target for shares of Whole Foods to $70 from $62, according to a post by The Mideast Times.
  • 03/03: Barron's article, "Healthy Sales by Whole Foods Insiders" pointed out that insider selling is being led by Co-CEO and co-founder John Mackey who sold $2.1 million in shares, according their Inside Scoop.

Technical Review

Whole Foods has backed off since the $65.49 all-time high reached in October but has seasonally put in an April/June low. Last year's April low was $40 when the stock previously tested below the 200-day moving average, so anything above that keeps the trend intact. More immediate support is $47.50 with resistance at $55. (Chart courtesy of StockCharts.com)

Summary

Whole Foods' stock has come under pressure amid increased competition and insider selling. The company beat estimates by 1-2c three of the last four quarters but missed by 2c on the last release. Estimates have come down 2c from three months ago but traders are in agreement with analysts, so anything above estimates would be a surprise. Comp store sales were running ahead of analyst expectations early in the quarter but analysts appear jaded by the previous guidance reductions.

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Source: Earnings Preview: Whole Foods Q2 2014