Have You Offloaded Whole Foods (WFM) From Your Portfolio?
Zacks Investment Research | Aug 28, 2016 09:10PM ET
Whole Foods Market, Inc. (NASDAQ:WFM) is one such stock that is struggling to find a place in investors’ portfolio. Why is it so? Share price of this natural and organic foods supermarket chain operator, has declined roughly 8.3% year to date, and is now hovering close to its 52-week low of $28.07. Moreover, the company currently carries a Zacks Rank #4 (Sell). This implies that analysts covering the stock are not convinced about Whole Foods’ performance in the near future. As a result, the Zacks Consensus Estimate too has witnessed a downtrend.
Why is the Stock Out of Favor Now?
After registering back-to-back earnings beat in the first two quarters of fiscal 2016, Whole Foods reported in line earnings in the third quarter. The company posted quarterly earnings of 37 cents a share that met the Zacks Consensus Estimate but declined sharply from 43 cents delivered in the year-ago quarter. Management now envisions earnings per share in the band of 23−24 cents for the fourth quarter of fiscal 2016, down from 30 cents reported in the prior-year period.
Whole Foods saw its comparable-store sales (comps) decline 2.6% in the third quarter of fiscal 2016. During the first three weeks of the fourth quarter, comps dropped 2.4%. Comps had declined 3% and 1.8% in the second and first quarters of fiscal 2016, respectively, and 0.2% in the final quarter of fiscal 2015.
Stiff competition has been weighing upon the company’s performance. More and more companies are entering as well as expanding their presence in the Organic & Natural food business. This may dent the company’s sales and margins. In fact, management expects comps to drop 2% during fourth-quarter fiscal 2016.
Which Way are Estimates Treading?
Analysts polled by Zacks are less constructive on the stock. Over the past 60 days, the Zacks Consensus Estimate of $1.51 and $1.53 for fiscal 2016 and fiscal 2017 has declined 1 cent and 5 cents, respectively. Moreover, the Zacks Consensus Estimate for the fourth quarter has dropped 1 cent to 24 cents over the same time frame.
WHOLE FOODS MKT Price, Consensus and EPS Surprise
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