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Factors to Note Ahead of Sprouts Farmers (SFM) Q3 Earnings

Zacks Equity Research
·4 min read

Sprouts Farmers Market, Inc. SFM is likely to register an increase in the top line when it reports third-quarter 2020 results on Oct 28, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $1,633 million, indicating an improvement of 13.4% from the prior-year reported figure. The company is likely to have gained from coronavirus-led demand spike, as dining at home and maintaining social distancing become the new normal.

Further, the bottom line of this provider of fresh, natural, and organic food products is expected to improve year over year. We note that the Zacks Consensus Estimate for earnings for the quarter under review has been stable over the past 30 days at 35 cents. The figure suggests growth of 59.1% from the prior-year quarter.

Notably, the company has a trailing four-quarter earnings surprise of 49.9%, on average. In the last reported quarter, this Phoenix, AZ-based company surpassed the Zacks Consensus Estimate by a significant margin.

Factors to Note

Sprouts Farmers’ focus on better-for-you products, enhancement of e-commerce capabilities and a network of fresh distribution centers bodes well. Notably, the company has been providing hassle-free shopping through Sprouts.com website and mobile app. Additionally, the company’s initiative to offer same-day delivery is likely to have expanded customer base.

The company has been expanding ready-to-eat, ready-to-heat and ready-to-cook items. Apart from these, it has been expanding private-label offerings in departments under the Sprouts Market Corner Deli, The Butcher Shop at Sprouts and Sprouts Fish Market brands. Moreover, the company has been lowering operational complexity, optimizing production and improving in-stock position. All these endeavors might get reflected in the to-be-reported quarter’s top line.

On its last earnings call, management guided comparable store sales growth of approximately 9% for the month of July. It also projected e-commerce sales to represent roughly 11% of net sales for the said month.

Clearly, aforementioned factors raise optimism about the outcome of the results. However, margins still remain an area to watch. Impact of investments to increase team’s pay and benefits, and expenses on additional safety and cleansing measures, owing to the coronavirus pandemic, on margins cannot be ruled out.

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

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

Sprouts Farmers Market, Inc. price-consensus-eps-surprise-chart | Sprouts Farmers Market, Inc. Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Sprouts Farmers this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. 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 #3 but an Earnings ESP of 0.00%.

3 More Stocks With a Favorable Combination

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

Kroger KR has an Earnings ESP of +1.71% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Grocery Outlet GO has an Earnings ESP of +10.76% and a Zacks Rank #2.

Walmart WMT has an Earnings ESP of +11.51% and a Zacks Rank #3.

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Walmart Inc. (WMT) : Free Stock Analysis Report
 
The Kroger Co. (KR) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report
 
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Zacks Investment Research