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Higher Revenues to Drive Sprouts Farmers (SFM) Q1 Earnings

Zacks Equity Research

Sprouts Farmers Market, Inc. SFM is set to report first-quarter 2020 numbers on May 5, after market close. The company’s top line is likely to have improved in the quarter under review. The Zacks Consensus Estimate for revenues is pegged at $1,600 million, indicating growth of 13.2% from the prior-year reported figure.

Further, the bottom line of this provider of fresh, natural, and organic food products is also expected to have improved year over year. We note that the Zacks Consensus Estimate for earnings for the quarter under review has moved up roughly 9% over the past 30 days to 49 cents. The figure suggests an increase of 6.5% from the prior-year quarter.

Notably, the company has a trailing four-quarter positive earnings surprise of 28.7%, on average. In the last reported quarter, this Phoenix, AZ-based company surpassed the Zacks Consensus Estimate by a wide margin.

Key Factors

Sprouts Farmers’ focus on product innovation, improving customer experience and enhancing technology has been contributing to its top-line performance. Notably, the company provides hassle-free shopping through Sprouts.com website and mobile app. Moreover, the company’s initiative to offer same-day delivery is likely to have expanded customer base.

Further, Sprouts Farmers has been expanding ready-to-eat, ready-to-heat and ready-to-cook items. Apart from these, the company has been expanding private-label offerings in departments under the Sprouts Market Corner Deli, The Butcher Shop at Sprouts and Sprouts Fish Market brands. Product innovation has been playing a key role in driving sales of private label items. Moreover, with fresh item management technology, the company has been 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 top line. On the last earnings call, management had guided net sales growth of 5.5-6.5% and earnings between 45 cents and 47 cents a share for the to-be-reported quarter.

However, margins might have been impacted by deleverage in SG&A and direct store expenses. Analysts pointed that deleverage in SG&A expenses may be due to wage investment, expansion of home delivery program, increased training related with the fresh item management and other systems implementations, and 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 predicts 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 chances 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 #1 and an Earnings ESP of +17.01%.

3 More Stocks With a Favorable Combination

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

Hain Celestial HAIN has an Earnings ESP of +9.24% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Campbell Soup Company CPB has an Earnings ESP of +21.06% and a Zacks Rank #2.

Flowers Foods FLO has an Earnings ESP of +7.77% and a Zacks Rank #2.

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The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report
 
Campbell Soup Company (CPB) : Free Stock Analysis Report
 
Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
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