) is set to report third-quarter fiscal 2014 results on Jan 9.
Last quarter, it posted 18.2% positive surprise. Let's see how
things are shaping up for this announcement.
Factors to Consider This Quarter
We are encouraged by Supervalu's turnaround initiatives which
helped counter persistent weakness and deliver healthy first-half
fiscal 2014 results. We expect another good quarter from
Supervalu as it is scheduled to report the third-quarter
Save-a-Lot stores remain the major growth driver of Supervalu
and it is in the process of revamping these stores. The company
is focusing on the 'fresh from farm' department in these stores
as the category has reported decent sales in the past. The fresh
saw-cut meat program, organized at all the Save-a-Lot stores,
also helped the company post better comps in the first half of
The company embarked on a fair price promotion strategy (bring
down price to competitive level) in fiscal 2013. Although the
strategy has been quite well received and we expect the program
to help the company gain market share in the longer term, we are
concerned that it may pressurize margins in the coming
Moreover, Supervalu is facing intense competition from other
supermarket giants to whom it is losing market share. We are
particularly concerned about Germany-based discount chain Aldi,
which has announced its plans to open 650 locations in the United
States by 2018. This may prove to be detrimental to Supervalu's
comps in the coming quarter.
Our proven model does not conclusively show that Supervalu is
likely to beat earnings this quarter. A stock needs to have both
and a Zacks Rank #1, 2 or 3 to surpass earnings estimate.
However, that is not the case here due to the following
ESP for Supervalu is 0.00%.
Supervalu's Zacks Rank #3 (Hold) when combined with a 0.00% ESP
makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5
(Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows that they have the right combination of elements to
post an earnings beat this quarter:
American Express Company
) with an Earnings ESP of +1.59% and a Zacks Rank #2 (Buy).
Dollar Tree, Inc.
) with an Earnings ESP of +2.80% and a Zacks Rank #3.
) with an Earnings ESP of +1.84% and a Zacks Rank #3.
AMER EXPRESS CO (AXP): Free Stock Analysis
DOLLAR TREE INC (DLTR): Free Stock Analysis
MACYS INC (M): Free Stock Analysis Report
SUPERVALU INC (SVU): Free Stock Analysis
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