Whole Foods Market, Inc. (NASDAQ: WFM)'s
Q4 earnings update could “spark interest” from turnaround investors, with prospects of comps bottoming, cost cuts lending support
to outlook and an improvement in governance, Credit Suisse’s Edward J. Kelly said in a report. He maintains an Outperform rating on
the company, with a price target of $40.
Whole Foods reported its Q4 EPS at $0.28, ahead of Credit Suisse’s estimate of $0.23 and consensus expectation of $0.24. Comps
declined 2.6 percent, versus expectation of a 2.0 percent decline, “with negative traffic offsetting basket growth,” analyst Kelly
noted.
Apart from strong results, Whole Foods announced management
changes and a dividend hike. As part of its management changes, the company eliminated its dual-CEO leadership structure and
named co-founder John Mackey as the sole CEO, a Wall Street Journal article
reported.
Takeaway
Whole Foods announced better-than-feared guidance, suggesting that cost cuts could support earnings “through another year of
repositioning,” Kelly mentioned. Although quarter-to-date comps continue to be down 1.6 percent, comps have improved sequentially.
Moreover, the recently announced management changes indicate that the board is getting more involved.
Although there are ongoing concerns, “food retail turnarounds are never clean and WFM is unlikely to be any different,” the
analyst pointed out. He added, however, that Whole Foods had provided enough proof to believe that it was moving in a
positive direction. Moreover, the stock’s risk/reward seems compelling, and downside is supported by “valuation, potential
activist/M&A interest, and now minimal earnings risk with today's guidance.”
At last check, Whole Foods was up 3.47 percent at $29.50.
Latest Ratings for WFM
Date |
Firm |
Action |
From |
To |
Sep 2016 |
Barclays |
Initiates Coverage on |
|
Equal-Weight |
Sep 2016 |
Citigroup |
Maintains |
|
Neutral |
Jul 2016 |
Deutsche Bank |
Maintains |
|
Hold |
View More Analyst Ratings for
WFM
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