) is set to report its first-quarter 2013 results on Apr 25. Last
quarter, this food and drug retailer posted a huge positive
earnings surprise of 23.68%. Let's see how things are shaping up
prior to the announcement.
Safeway's Growth Profile in the Last Quarter
Safeway's "Just for U" loyalty program was a positive catalyst
driving profitability and market share. Based on the loyalty
program, management expects ID sales to accelerate in 2013. In
addition, the 2013 guidance, which reflects the revival of strong
business momentum and prospects of improved execution, boosted
investor enthusiasm. We believe that Safeway is set on a high
We remain concerned about the highly leveraged balance sheet
of Safeway. The company continues to operate with a high debt
level of $5.2 billion at the end of 2012 as against the year-ago
figure of $4.6 billion. As a result, the company's leverage stood
at 1.8 at the end of 2012 compared with 1.2 at the end of
Safeway also witnessed margin contraction due to higher
expenses related to the launch of its loyalty program and change
in sales mix in the last reported quarter. Notably, the company
undertook cost saving initiatives to brace margin pressure.
Our proven model does not conclusively suggest that Safeway is
likely to beat earnings estimate this quarter. This is because a
stock needs to have a positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) as well as a Zacks Rank #1, 2 or 3 for this to happen. This,
however, is not the case for Safeway as seen below:
Zacks Earnings ESP:
The Most Accurate Estimate stands at 35 cents and the Zacks
Consensus Estimate is at 36 cents. This comes to a difference of
Zacks Rank #1 (Strong Buy):
Safeway carries a Zacks Rank #1 (Strong Buy).
Although the company has a Zacks Rank #1, a combination with
negative ESP makes surprise prediction difficult.
Other Stocks to Consider
Here are some other companies that may be considered as our
model shows they have the right ingredients to post an earnings
beat this quarter:
), Earnings ESP of +1.14% and a Zacks Rank #1 (Strong Buy)
The Hillshire Brands Co.
), Earnings ESP of +18.75% and a Zacks Rank #2 (Buy).
), Earnings ESP of +1.05% and a Zacks Rank #3 (Hold).
HILLSHIRE BRAND (HSH): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
SAFEWAY INC (SWY): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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