NEW YORK (TheStreet) -- Shares of SUPERVALU (SVU) are sinking, down 3.92% to $8.82 in early market trading Tuesday, after the wholesale grocery chain had its rating lowered to "perform" from "outperform" by analysts at Oppenheimer.
The firm removed its price target of $10, citing a less attractive risk/reward following the recent outperformance of shares.
Oppenheimer analysts also believe the company's earnings upside will be more muted from now on.
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SUPERVALU is a wholesale distributor to independent retail customers, operating in three reportable segments which include independent business, save-a-lot, and retail food.
Separately, TheStreet Ratings team rates SUPERVALU INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SUPERVALU INC (SVU) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SVU's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, SVU's share price has jumped by 43.18%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- SUPERVALU INC's earnings per share declined by 26.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SUPERVALU INC turned its bottom line around by earning $0.00 versus -$1.23 in the prior year. This year, the market expects an increase in earnings to $0.64 from $0.00.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Food & Staples Retailing industry. The net income has decreased by 22.5% when compared to the same quarter one year ago, dropping from $40.00 million to $31.00 million.
- The gross profit margin for SUPERVALU INC is currently extremely low, coming in at 14.24%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.77% trails that of the industry average.
- You can view the full analysis from the report here: SVU Ratings Report