Whole Foods stock rises after analyst upgrade

Whole Foods rises after Morgan Stanley ups rating, citing growth potential in coming years

Associated Press

NEW YORK (AP) -- Shares of Whole Foods Market Inc. rose Friday after a Morgan Stanley analyst upgraded the stock, citing the specialty grocery chain's potential to significantly grow its footprint over the next several years.

THE SPARK: Analyst Mark Wiltamuth changed his rating to "Overweight" from "Equal Weight," noting that Whole Foods has the potential to grow to as many as 1,300 stores, indicating about 15 more years of growth. The Austin, Texas-based company had 329 stores as of June 30.

Wiltamuth said he expects earnings per share growth of 19 percent through 2015. He said profit margins could also grow as the company leverages its operating scale.

He raised his earnings estimates to $2.51 per share for the current fiscal year, from $2.45, and to $2.97 per share for 2013, up from $2.75.

That compares with an average Wall Street estimate of $2.51 for the current year and $2.89 for next year, according to FactSet.

THE BIG PICTURE: Last week, Whole Foods lifted its profit outlook for the year after its net income rose 32 percent in the third quarter. The natural and organic foods store chain said it was doing well despite the slow economy.

Traditional supermarkets such as Kroger and SuperValu, which also operates Albertson's, have been struggling to hold onto shoppers as big-box retailers such as Target Corp. and other players expand their food offerings. Whole Foods, however, has revitalized its business by emphasizing lower prices and healthy offerings.

SHARE ACTION: Whole Foods stock added $2.30, or 2.5 percent, to $95.23 in morning trading, after earlier changing hands as high as $95.98. The stock has traded between $53.32 and $97.25 in the past 52 weeks.

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