Momentum Play: Whole Foods Market

Whole Foods Market, Inc. (WFMI) recently jumped to a new multi-year high after reporting strong Q4 results that included an 18% earnings surprise. With an average earnings surprise of 18% over the last four quarters and bullish 13% next-year growth projection, this Zacks #1 rank stock offers a healthy serving of momentum.

Company Description

Whole Foods Market, Inc. owns and operates organic and natural food supermarkets in the United States, Canada and the U.K. The company was founded in 1978 and has a market cap of $7.89 billion.

Although WFMI has seen big gains since finding a short-term bottom in March of 2009, shares jumped to a new multi-year high on Nov 4 after the company reported another strong quarter that came in ahead of expectations.

Fourth-Quarter Results

Revenue for the period was up 15% from last year to $2.1 billion. Earnings also came in strong at 33 cents, 18% ahead of the Zacks Consensus Estimate, in line with the company’s average earnings surprise over the last four quarters.

The good quarter was driven mostly by same-store sales, up an impressive 8.7% from last year with the company opening just one new store during the quarter.

Moving forward, Whole Foods plans to open 3 new stores in Q4, with two already opening, which would bring its total store-count to 302.

Paying Down Debt

The company was also busy strengthening its balance sheet, where its total debt load fell $228 million to $514 million against cash and equivalents of $223 million.

Estimates

We saw some decent movement in estimates off the good quarter, with the current year adding 9 cents to $1.70 and the next-year estimate gaining 10 cents to $1.92, a solid 12.5% growth projection.

Valuation

After the string of recent gains shares of WFMI trades with a forward P/E of 27X, a premium to the industry average of 17X.

2-Year Chart

On the chart, shares jumped higher on the good quarter, hitting a new multi-year high at $48.02. But in spite of the gains, the stochastic says shares are trading safely away from over-bought territory. Look for support from the short-term low and long-term trend line on any weakness.

WHOLE FOODS MKT (WFMI): Free Stock Analysis Report

About Michael Vodicka 49 Articles

Affiliation: Zacks Investment Research

Visit: Zacks Investment Research

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