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SUPERVALU (SVU) to Report Q1 Earnings: What's in the Cards?

SUPERVALU Inc. SVU is scheduled to report first-quarter fiscal 2018 results on Jul 25, before the market opens.

The question lingering in investors’ minds is, whether this leading grocery dealer will be able to deliver positive earnings surprise in the to-be-reported quarter. Its earnings have lagged the Zacks Consensus Estimate in two of the trailing four quarters, with an average miss of 6.7%.

Let’s see how things are shaping up for this announcement.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show an earnings beat for SUPERVALU this quarter. This is because 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.

SuperValu Inc. Price, Consensus and EPS Surprise


SuperValu Inc. Price, Consensus and EPS Surprise | SuperValu Inc. Quote

SUPERVALU has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 10 cents. The company has a Zacks Rank #2, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Which Way are Estimates Treading?

Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate of 10 cents for the fiscal first quarter has been stable in the last 30 days and reflects year-over-year decline of 47.4% from 19 cents posted in the year-ago quarter. However, the Zacks Consensus Estimate of 35 cents for fiscal 2018 shows growth from 29 cents delivered in fiscal 2017.

Further, analysts polled by Zacks expect revenues of $3.98 billion and $12.85 billion for the impending quarter and fiscal 2018, which are 23.5% and 14.2% lower than the respective year-ago periods.

Factors at Play

We note that SUPERVALU has been witnessing difficulties in delivering growth, of late. In fact, the company has been reporting lower-than-expected sales for the last few quarters, primarily due to soft comparable store-sales. Evidently, its top line has lagged estimates for seven of the last nine quarters.

In addition, this leading grocery dealer is witnessing sluggish sales in the retail business due to tough competitive pressure, lower store traffic and deflationary environment in the food industry. Notably, in the fourth quarter of fiscal 2017, retail sales fell 3.2% year over year with same-store sales remaining negative at 5.8%, thereby marking the eighth consecutive quarter of decline.

We note that the food/grocery industry is grappling with a number of headwinds of late. Shift in consumer purchase decisions, evolving shopping behavior and increasing presence of small firms continue to plague the industry. Moreover, the fact that SUPERVALU is not completely immune to the industry’s headwinds, have been denting its financial results.

Nonetheless, management at SUPERVALU is striving hard to spark a turnaround and return to its growth trajectory. The company is also geared to expand its retail banners in order to boost sales, along with the intent to capitalize on the private brands portfolio among the retail banners. Moreover, it is trying all means to rejuvenate its retail segment, reduce costs and increase operating efficiency.

We commend SUPERVALU’s efforts to develop the wholesale operations, primarily through adding new customers, retaining and developing business with existing customers and acquisitions. In fact, the recent acquisition of Unified Grocers is expected to radically boost the company’s wholesale segment, alongside offering new growth opportunities across multiple geographies. Its wholesale business will drive the momentum further and boost its near-term results.

Notably, SUPERVALU’s shares have rallied 10% in the last one month against the Zacks categorized Food – Miscellaneous/Diversified industry’s decline of 2.8%. Meanwhile, the broader Consumer Staples sector fell 0.3%.

Per the latest Earnings Outlook, total second-quarter 2017 earnings for the sector are expected to rise 3.9%, while revenues are projected to improve 1.5%. In fact, we observed that the Consumer Staples sector has lagged the broader market in the last one year. While the Zacks categorized sector gained 1.1%, the S&P 500 index advanced 13.5%.

Stocks with Favorable Combination

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

The Clorox Company CLX has an Earnings ESP of +0.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tyson Foods, Inc. TSN has an Earnings ESP of +1.64% and a Zacks Rank #2.

Newell Brands Inc. NWL has an Earnings ESP of +1.18% and a Zacks Rank #2.

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