Whole Foods Earnings: Traders Should Play the Momentum

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Whole Foods Market (WFMI) is one of those rare stocks in the after-hours that finds a direction post-earnings and keeps going that same way in the following day's regular session. More than 80% of the time it posts an earnings-driven after-hours downside move, it heads deeper in the red the next day. When it gains in the off-hours, more than 70% of the time it finds more robust upside momentum the following day. So, if traders are long or short tonight they can reap big returns come Thursday.

WFMI is scheduled to report Q1 results after the bell tonight (Wednesday, Feb. 9), and analysts polled by Thomson Reuters are expecting a profit of $0.46 per share on revenue of $2.98 billion.

WFMI has developed a steady pattern of widening price moves between the sessions following its after-hours earnings-related events, extending its move after 20 of its past 26 earnings-related events. In the near-term, the pattern favors widening as well, doing so in the last six consecutive quarters.

Looking deeper into the performance data, WFMI has seen an earnings-driven after-hours decline in 11 of the 26 quarters we've tracked, and in nine of those events it has seen its evening downside widen in the following day's regular session (82% of the time).

On the plus side, WFMI has recorded an after-hours earnings-driven gain in 15 of the 26 quarters we've tracked. It has seen its gain move higher the following day in 11 of those quarters (73% of the time).

On Nov. 3, 2010, WFMI leaped 8.8% in after-hours trading after beating Q4 estimates and setting a strong outlook for its 2011 guidance. The stock was a bullish upside mover the following day, closing the Nov. 4 regular session up 15.1%.

On Aug. 3, 2010, WFMI declined 5.6% in after-hours trading after beating revenue expectations and setting its guidance in-line to higher when compared to estimates. It headed deeper south the next day, closing the Aug. 4 regular session down 8.4%.

On May 12, 2010, WFMI advanced 5.2% in after-hours trading after beating Q1 expectations and raising its outlook. The stock firmed higher the following day, closing the May 13 regular session up 5.6%.

On Feb. 16, 2010, the stock gained 7.4% after a Q1 beat and improved 2010 projections. Shares jumped 12.5% the next day.

On Nov. 4, 2009, WFMI slumped 8.4% in after-hours trading after reporting in-line results but also guiding for full year earnings below expectations. The stock headed deeper south the following day, ending the Nov. 5 regular session down 15.4%.

On Aug. 4, 2009, the stock advanced 12.8% after a Q3 beat. The gain widened to 15.6% the following day.

On May 13, 2009, WFMI gained 6.2% in after-hours action after topping Q2 expectations. The stock lost a good portion of its gain the next day, ending up 2.7% in the May 14 regular session.

On Feb. 18, 2009, WFMI advanced 7.3% in after-hours trading after beating Q1 expectations. The stock soared higher the following day, closing the Feb. 19 regular session up 37.2%.

On Nov. 5, 2008, the stock jumped 16.4% after reporting in line with sales and beating with EPS. The gain was dramatically cut the next day, shares ended up 1.6%.

On Aug. 5, 2008, the stock fell 17.5% after a Q3 miss. The loss was narrowed slightly, to 12.5% the next day.

On May 13, 2008, the stock fell 7.9% after WFMI missed with Q1 profit. The loss swelled to 13.9% the next day.

On Feb. 19, 2008, WFMI edged down 0.1% in after-hours trading after beating on Q1 sales, meeting on earnings, and reaffirming guidance. The stock added to its downside on Feb. 20, ending the regular session down 1.7%.

On Nov. 20, 2007, WFMI gained 1.3% in evening trading after beating Q4 expectations and setting guidance in line to above the Street. The stock saw its upside evaporate the next day as WFMI ended the Nov. 21 regular session down 1.9%.

On July 31, 2007, the stock jumped 8.6% in the evening hours after WFMI reported in line with revenue and tops with EPS. The gain was pared slightly, to 6.7%, the next day.

On May 9, 2007, the stock fell 8.3% after reporting Q2 results shy of estimates. The stock fell 10.1% the next day.

On Feb. 21, 2007, the stock was up 5.1% in the evening hours after missing with sales but topping with EPS. The gain fattened to 14% the next day.

On November 2, 2006, WFMI skidded 14.4% in night trading on in-line Q4 results. Shares sank further the next day, closing the regular session down a steep 23%.

On July 31, 2006, WFMI tumbled 7.2% in after-hours trading after the company missed Q3 sales expectations and guided its revenue view in line to lower than estimates. It slid further in the Aug. 1 regular session, losing 11.7%.

On May 3, 2006, shares gained 4.8% after the company reported ahead by a penny with its latest earnings and in line with sales. The gain swelled to 13.3% the next day.

On Feb. 8, 2006, WFMI shares were down 3.2% in night trading after the latest earnings missed the Street by a penny and guidance was untouched. The loss fattened to 9.4% the next day.

On November 9, 2005, WFMI dropped 4.0% in evening trading after reporting a decline in Q4 earnings from a year ago. Sales were roughly in line with estimates and above the year ago level. WFMI also raised its 2006 sales guidance that night. However, shares still stayed weak the next day, ending the regular session down 4.8%.

On July 28, 2005, WFMI gained 11.1% in night trading on better-than-expected Q3 earnings. The shares widened their gains slightly, ending the next day's regular hours trading up 11.6%.

On May 4, 2005, WFMI jumped 5% after reporting better-than-expected Q2 revenue and topping the First Call consensus estimate by 3 cents. It widened its price move in the May 5 regular session, surging 7.5%.

On Feb. 9, 2005, WFMI jumped 5.2% after reporting Q1 EPS that beat the Street target by 5 cents. Sales were also higher than expected. The stock showed even more strength in the Feb. 10 regular session, surging 6.8%.

On Nov. 10, 2004, the stock added 1.3% after topping Q4 revenue estimates and matching the EPS target. It surged 9.7% in the Nov. 11 regular session.

On July 28, WFMI plunged 5.3% after besting Q3 revenue targets but coming in a penny shy on EPS. It narrowed its downside marginally in the July 29 regular session, closing down 5.1%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.