NEW YORK (TheStreet) - Whole Foods Market (WFM) shares rose roughly 3.1% to $37.68 on Tuesday ahead of Wednesday's earnings report, but it's unclear what caused the stock to pop.
The stock has been beaten down 23.5% since its second-quarter earnings report, when the company slashed its guidance. Whole Foods forecast that its annual per share earnings would range between $1.52 a share and $1.56 a share. The company also lowered its guidance for same-store sales growth for the year to 5-5.5% from 5.5-6.2%.
Fiscal third-quarter earnings for Whole Foods are expected to rise 2% to 39 cents a share on revenue growth of 11% to $3.39 billion, according to a consensus of analyst estimates compiled by Thomson Reuters. Quarterly same-store sales are forecast to rise 4.6%, according to Thomson Reuters. Whole Foods reports after the markets close on Wednesday.
The Austin, Texas-based company is up against some heavy competition from specialty grocers like Fairway (FWM), Sprouts Farmers Market (SFM), The Fresh Market (TFM) and privately-held Trader Joes. Even traditional grocers are expanding their assortment of natural products as consumers crave healthy food. Whole Foods, which has 380 stores, has lowered prices to compete more aggressively.
Here's what Wall Street is saying leading up to Whole Foods' earnings.
Rupesh Parikh, Oppenheimer (Outperform; $45 12-18 month PT)
As we look toward the upcoming quarterly report, we expect an in-line quarter at best. We now believe, however, that sentiment as reflected by a much more accommodative valuation is sufficiently negative. We believe modestly weaker results are less likely to represent a significant negative catalyst as in prior quarters. We also do not expect WFM shares to move meaningfully higher until Street estimates are reset lower and the chain can deliver sales/EPS upside. We therefore believe WFM shares are likely to remain range-bound for at least a bit longer in the $35-40 range. For longer-term investors, we believe indications of a potential bottom forming in the shares are beginning to emerge and could, in our view, create an attractive entry point in coming months.