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SUPERVALU (SVU): What Will Q2 Earnings Release Unveil?


SUPERVALU Inc. SVU is scheduled to report second-quarter fiscal 2017 results on Oct 19. Last quarter, the company posted a negative earnings surprise of 9.52%.

In the trailing four quarters, the company missed the Zacks Consensus Estimate in two quarters and posted in-line results in the other two quarters with an average positive earnings surprise of 4.66%.

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

Factors to Consider

SUPERVALU posted weaker-than-expected sales in the Retail and Save-A-Lot segments in second-quarter fiscal 2017. Higher competition in the grocery business as well as a challenging sales and retail environment led to the decline in sales in the retail business of the company.

Further, the Save-A-Lot segment is affected negatively due to deflationary environment as well as unfavorable comparisons with the previous year. The company also expects the comparable sales in the second quarter to be lower than the first quarter.

SUPERVALU INC Price and EPS Surprise


Apart from this, SUPERVALU is experiencing lower revenues due to declining fees from the company’s Transition Services Agreements (TSAs) with Albertson's LLC and New Albertson's, Inc. which may result in lower profits in the future. Additionally, pharmacy headwinds owing to lower managed-care reimbursement rates may put pressure on margins. This is expected to continue in the yet-to-be-reported quarter as well.

However, SUPERVALU has undertaken several sales and margin initiatives, which have helped it to counter persistent weakness and deliver solid results in the past few quarters. The company’s recent focus on retail business expansion is also expected to boost top-line in the yet-to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that SUPERVALU is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass earnings estimates. However, that is not the case here due to the following factors:

Zacks ESP: Earnings ESP for SUPERVALU is 10.00% as the Most Accurate estimate stands at 11 cents while the Zacks Consensus Estimate is pegged lower at 10 cents.

Zacks Rank: SUPERVALU has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some other consumer staple companies that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Coty Inc. COTY, has an Earnings ESP of +2.94%. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sanderson Farms Inc. SAFM, also sports a Zacks Rank #1 and has an Earnings ESP of +8.37%.

Tyson Foods Inc. TSN, carries a Zacks Rank #2 and has an Earnings ESP of +9.48%.

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