We expect Whole Foods Market, Inc. (WFM), one of the leading natural and organic foods’ supermarkets, to beat expectations when it reports first-quarter fiscal 2015 results on Feb 11. In the last quarter, the company had reported a positive earnings surprise of 9.4%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Whole Foods is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Whole Foods has the right combination of the two key components.
Zacks ESP: Whole Foods currently has an Earnings ESP of +2.22%. This is because the Most Accurate estimate stands at 46 cents, while the Zacks Consensus Estimate is pegged at 45 cents.
Zacks Rank: Whole Foods carries a Zacks Rank #2 (Buy).
Whole Foods’ Zacks Rank #2 and ESP of +2.22% make us reasonably confident of a positive earnings beat.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
What is Driving the Better-than-Expected Earnings?
Whole Foods is gaining market share on account of national marketing and branding campaigns, and product launches. We believe that effective inventory management and improved store-level performance are helping the company to generate improved sales. Moreover, the company has been revamping its pricing strategy and focusing more on value offerings.
In the trailing four quarters, Whole Foods has outperformed the Zacks Consensus Estimate by an average of 0.7%.
Other Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements:
The J. M. Smucker Company (SJM) has an Earnings ESP of +1.33% and a Zacks Rank #3 (Hold).
Kraft Foods Group, Inc. (KRFT) has an Earnings ESP of +1.37% and a Zacks Rank #3.
Campbell Soup Company (CPB) has an Earnings ESP of +1.45% and a Zacks Rank #3.
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