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How Sprouts Farmers (SFM) Looks Just Ahead of Q1 Earnings

Zacks Equity Research

Sprouts Farmers Market, Inc. SFM is scheduled to report first-quarter 2019 results on May 2, before the market opens. In the trailing four quarters, this provider of fresh, natural, and organic food products has outperformed the Zacks Consensus Estimate by average of 2.9%. In the last reported quarter, the company reported positive earnings surprise of 5.6%.

How Are Estimates Shaping Up for Q1?

After registering a bottom-line increase of about 19% in the final quarter of 2018, Sprouts Farmers is likely to report year-over-year decline of roughly 20% in the first quarter of 2019. This is evident from the Zacks Consensus Estimate for the quarter under review, which is pegged at 40 cents compared with 50 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has fallen by a penny in the last seven days.

The Zacks Consensus Estimate for revenues is pegged at $1,412 million, indicating an improvement of 10% from the year-ago quarter. We note that total revenue of this Phoenix, AZ-based company had increased 11% in the last reported quarter on account of comparable store sales growth of 2.3% and robust performance in new outlets.

Factors Influencing the Performance

In an effort to expand customer base, management has been taking several initiatives focused on product innovation, customer experience and technology. The company launched Sprouts.com website and mobile app to aid customers experience hassle-free shopping. Moreover, the company has partnered with Instacart to offer same-day delivery to customers. These initiatives are likely to aid the to-be-reported quarterly results.

Further, the company is striving to provide ready-to-eat, ready-to-heat, and ready-to-cook items to customers. Apart from these, the company is trying to expand private-label offerings in departments under the Sprouts Market Corner Deli, The Butcher Shop at Sprouts and Sprouts Fish Market brands.

All these endeavors are likely to have a favorable impact on the top line. However, any deleverage in SG&A and direct store expenses may hurt margins and in turn the bottom line. Analysts pointed that deleverage in SG&A expenses may be owing to wage investment, increased training related with the fresh item management and other systems implementations, along with 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. Quote

What the Zacks Model Unveils?

Our proven model does not conclusively show that Sprouts Farmers is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sprouts Farmers has an Earnings ESP of +1.41% but a Zacks Rank #4 (Sell), which makes surprise prediction difficult.

3 Stocks With 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:

Sally Beauty Holdings SBH has an Earnings ESP of +1.23% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG has an Earnings ESP of +1.51% and a Zacks Rank #3.

Ross Stores ROST has an Earnings ESP of +2.20% and a Zacks Rank #3.

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