Is a Beat in the Cards for SUPERVALU (SVU) in Q2 Earnings?

SUPERVALU INC. SVU is scheduled to report second-quarter fiscal 2018 results on Oct 18, 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. The company’s earnings have lagged the Zacks Consensus Estimate in two of the trailing four quarters, with an average miss of 6.8%.

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

What Does the Zacks Model Unveil?

Our proven model conclusively shows 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. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

SuperValu Inc. Price, Consensus and EPS Surprise

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

SUPERVALU has an Earnings ESP of +24.64% with a Zacks Rank #3. This increases the predictive power of ESP, thus making us confident of an earnings beat.

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 35 cents for the fiscal second quarter has been stable in the last 30 days while it reflects a year-over-year decline of about 50% from the year-ago quarter. However, the Zacks Consensus Estimate of $2.30 for fiscal 2018 shows 13.2% growth from fiscal 2017.

Further, analysts polled by Zacks expect revenues of $3,758 million for the impending quarter, down 2.8% from the year-ago quarter. Meanwhile, revenues of $15.50 billion are forecasted for fiscal 2018, thus showing an increase of 3.5% from fiscal 2017.

Factors Likely to Impact the Quarter

SUPERVALU is battling with its sluggish retail business for quite some time, owing to tough competitive pressure and lower store traffic. Evidently, the company has witnessed negative sales from identical retail stores for the last nine quarters. Additionally, the company is facing competition from traditional grocery rivals that are offering alternative outlets for food and other staples.

Further, revenues generated from existing transition services agreements with Albertson’s LLC and NAI, which are expected to wind-down over the next two years are anticipated to contribute to lower corporate sales and operating earnings in fiscal 2018. Consequently, SUPERVALU’s share price declined 26.9% in the last six months, wider than the industry’s loss of 7.4%.

Nevertheless, the company’s focus on accelerating business by making acquisitions and supply agreements in its wholesale segment remains noteworthy. These agreements are expected to boost its top line in fiscal 2018.

SUPERVALU is also trying to develop wholesale operations, primarily through adding new customers, retaining and developing business with existing customers and acquisitions. In fact, the acquisition of Unified Grocers is expected to boost the company’s wholesale business and complement its customer base.

Furthermore, the company has been shutting down its underperforming locations. This, in turn, will allow it to utilize its resources and investments on a few strong performing locations. Additionally, SUPERVALU has been striving to reduce cost and resorted to ‘single sourcing’ in its independent businesses in order to induce greater operating efficiency.

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:

Nomad Foods Limited NOMD has an Earnings ESP of +8.70% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colgate-Palmolive Company CL has an Earnings ESP of +0.55% and a Zacks Rank #2.

The Procter & Gamble Company PG has an Earnings ESP of +0.77% and a Zacks Rank #2.

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SuperValu Inc. (SVU) : Free Stock Analysis Report
 
Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
 
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