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

Zacks Equity Research

Sprouts Farmers Market, Inc. SFM is scheduled to report third-quarter 2019 results on Oct 30, after market close. In the trailing four quarters, this provider of fresh, natural and organic food products has outperformed the Zacks Consensus Estimate by an average of 5.3%. In the last reported quarter, the company reported negative earnings surprise of 3.2%.

After registering a bottom-line decline of about 6% in the second quarter of 2019, Sprouts Farmers is likely to witness year-over-year fall of nearly 25.9% in the third quarter. Evidently, the Zacks Consensus Estimate for the quarter under review is pegged at 20 cents, which indicates a fall from 27 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the past 30 days.

The Zacks Consensus Estimate for revenues stands at $1,421 million, which suggests an increase of approximately 6.9% from the year-ago quarter’s tally. We note that total revenues of this Phoenix, AZ-based company increased 7% in the last reported quarter driven by comparable store sales growth of 0.1% and robust performance in new outlets.

Key Factors

Sprouts Farmers’ focus on product innovation, improving customer experience and enhancing technology is likely to have contributed to the top line in the to-be-reported quarter. Notably, the company’s steps to provide hassle-free shopping through Sprouts.com website and mobile app are commendable. Moreover, the company’s initiative to offer same-day delivery is likely to have expanded the customer base.

Further, Sprouts Farmers is expanding ready-to-eat, ready-to-heat and ready-to-cook items. Apart from these, the company is expanding private-label offerings in departments under the Sprouts Market Corner Deli, The Butcher Shop at Sprouts and Sprouts Fish Market brands. Moreover, with fresh item management technology, the company is lowering operational complexity, optimizing production, improving in-stock position and reducing shrink.

All these endeavors are likely to have made a favorable impact on the third-quarter top line. However, any deleverage in SG&A and direct store expenses is likely to show on margins, and in turn the bottom line. Analysts pointed that deleverage in SG&A expenses may occur due to wage investment, increased training related with the fresh item management and other systems implementations as well as rise in health and benefit costs.

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 doesn’t conclusively predict an earnings beat for Sprouts Farmers this time around. 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. But that’s not the case here.

Sprouts Farmers carries a Zacks Rank #4 (Sell) and Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

3 More Stocks With a 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:

Boot Barn Holdings BOOT has an Earnings ESP of +4.13% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Children's Place PLCE has an Earnings ESP of +17.24% and a Zacks Rank #2.

Target TGT has an Earnings ESP of +1.79% and a Zacks Rank #3.

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