SUPERVALU Inc.SVU is set to report second-quarter fiscal 2016 results on Oct 21. Last quarter, the company posted positive earnings surprise of 15.00%.
Let's see how things are shaping up for this announcement.
Factors to Consider
We are encouraged by SUPERVALU's sales and margin boosting initiatives which helped it to counter persistent weakness and deliver solid results in the past few quarters. The company's recent focus on retail business expansion are expected to aid second-quarter sales.
SUPERVALU's fair price promotion strategy (started in fiscal 2013) has been successful in reducing prices to competitive level, but put margins under pressure.
Further, SUPERVALU may face lower revenues in its independent segment due to the Haggen stores that filed for bankruptcy in Sep 2015. The company supplies an estimated 64 Haggen stores in Washington and Oregon. It also offers certain transition services to the stores.
In addition, SUPERVALU is currently facing intense deflation headwinds in the grocery sector and difficulties in the pharmacy sector, which management apprehends will continue for the rest of the year. These factors are expected to affect the company's top line in the to-be-reported quarter.
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 estimate. However, that is not the case here due to the following factors:
Zacks ESP: ESP for SUPERVALU is 0.00% as both the Most Accurate Estimate and Zacks Consensus Estimate stand at 14 cents.
Zacks Rank: SUPERVALU has a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some other companies that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Flower Foods Inc. FLO , with an Earnings ESP of +4.17% and a Zacks Rank #2.
Keurig Green Mountain, Inc. GMCR , with an Earnings ESP of +4.23% and a Zacks Rank #3.
Estee Lauder Inc. EL , with an Earnings ESP of +1.45% and a Zacks Rank #3.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.