SUPERVALU (SVU) Q3 Earnings: Will the Stock Disappoint?

SUPERVALU Inc.SVU is scheduled to report third-quarter fiscal 2017 results on Jan 11. The company posted in-line results in the last quarter.

In the trailing four quarters, the company reported an average positive earnings surprise of 6.44%.

SuperValu Inc. Price, Consensus and EPS Surprise

SuperValu Inc. Price, Consensus and EPS Surprise | SuperValu Inc. Quote

Let's see how things are shaping up prior to this announcement.

Factors to Consider

SUPERVALU has been in troubled waters for the past one year due to tough competitive pressure, deflationary environment in the food industry and soft sales in the retail segment. The company's shares have declined 21.2% in the past one year, underperforming the Zacks categorized Food-Miscellaneous Diversified industry that witnessed an increase of 10% in the same time frame. Further, it posted weaker-than-expected sales in the Retail and Save-A-Lot segments in second-quarter fiscal 2017. The trend is expected to continue in the to-be reported quarter as well.

Furthermore, the Save-A-Lot segment is affected negatively by deflationary environment as well as unfavorable comparisons with the previous year. Moreover, SUPERVALU is experiencing lower revenues due to declining fees from its Transition Services Agreements (TSAs) with Albertson's LLC and New Albertson's, Inc. which may result in lower profits.

However, SUPERVALU has undertaken several sales and margin boosting initiatives, which may help counter persistent weakness and deliver higher top line. Amid the competitive environment, the company has taken initiatives to expand its existing customer base by inking several supply and distribution agreements with retailers such as Fresh Market Inc., American Foods Basket and Marsh Supermarkets, in a bid to retain its market share. We await the earnings results of the to-be-reported quarter which will substantiate whether the steps taken by the company are effective or not.

Earnings Whispers

Our proven model does not conclusively show that SUPERVALU is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass earnings estimates. However, that is not the case here as you will see below.

Zacks ESP: Earnings ESP for SUPERVALU is negative 15.39% as the Most Accurate estimate is 11 cents while the Zacks Consensus Estimate is pegged higher at 13 cents.

Zacks Rank: SUPERVALU carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement.

Stocks to Consider

Here are some other consumer staple companies that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Lancaster Colony Corporation LANC , has an Earnings ESP of +1.45%. It carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Monster Beverage Corporation. MNST , carriers a Zacks Rank #3 and has an Earnings ESP of +6.67%.

Pinnacle Foods Inc. PF , carries a Zacks Rank #2 and has an Earnings ESP of +1.28%.

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SuperValu Inc. (SVU): Free Stock Analysis Report

Monster Beverage Corporation (MNST): Free Stock Analysis Report

Pinnacle Foods, Inc. (PF): Free Stock Analysis Report

Lancaster Colony Corporation (LANC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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