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Will Sprouts Farmers' (SFM) Earnings Continue to Rise in Q3?

Zacks Equity Research
Updated

Sprouts Farmers Market, Inc. SFM is scheduled to report third-quarter 2018 results on Nov 1. In the trailing four quarters, this provider of fresh, natural, and organic food products has outperformed the Zacks Consensus Estimate by an average of 11%. In the last reported quarter, the company reported in-line earnings. In fact, investors are expecting Sprouts Farmers to beat estimates in the to-be-reported quarter.

How Are Estimates Shaping Up?

After registering a bottom-line increase of about 10% in the second quarter of 2018, Sprouts Farmers is likely to record year-over-year growth of roughly 13% in the third quarter. This is quite evident from the Zacks Consensus Estimate for the quarter under review, which is pegged at 26 cents compared with 23 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days.

The Zacks Consensus Estimate for revenues is $1,326 million, up approximately 10% from the year-ago quarter. We note that total revenue of this Phoenix, AZ-based company had increased 12% in the last reported quarter.

Out of the trailing seven quarters, the company’s earnings surpassed the consensus mark in the five quarters, while sales surpassed the same in six. Let’s delve deeper and analyze the factors impacting the results.

Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise
 

Sprouts Farmers Market, Inc. Price, Consensus and EPS Surprise | Sprouts Farmers Market, Inc. Quote

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Factors Holding Key

In an effort to expand its customer base, management has been taking several initiatives. The company launched Sprouts.com website and mobile app to aid customers experience hassle-free shopping. Moreover, the company has partnered with Instacart to offer same-day delivery to customers.

Further, management plans to launch more than 200 new items in 2018. The company is trying all means to provide ready-to-eat, ready-to-heat, and ready-to-cook items to customers. Apart from these, the company is trying to expand private-label offerings in departments under the Sprouts Market Corner Deli, The Butcher Shop at Sprouts and Sprouts Fish Market brands.

However, any deleverage in SG&A and direct store expenses may hurt margins. During the second quarter of 2018, direct store expense climbed 16% due to planned wage investments, rise in healthcare costs and higher depreciation charges. Meanwhile, SG&A expenses rose 14% on account of higher advertising expenses and strategic investments in technology.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Sprouts Farmers is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sprouts Farmers has a Zacks Rank #2 but an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

3 Stocks With Favorable Combination

Here are three companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Hain Celestial HAIN has an Earnings ESP of +5.66% and a Zacks Rank #3.

Kraft Heinz Company KHC has an Earnings ESP of +1.86% and a Zacks Rank #3.

Kellogg K has an Earnings ESP of +0.09% and a Zacks Rank #3.

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Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report
 
Kellogg Company (K) : Free Stock Analysis Report
 
The Kraft Heinz Company (KHC) : Free Stock Analysis Report
 
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Zacks Investment Research