Sprouts Farmers Market Inc. (NASDAQ: SFM) beat analyst estimates Thursday in its Q3 financial report.
Despite the positive results the stock quickly sold off in aftermarket trading only to recover during Friday’s trading session.
Af of Friday afternoon, the stock traded at 31.74, up 1.47 percent.
Below are analysts comments on the financial results along with current ratings and price targets.
Bank of America - Neutral, $35 price target
“We believe SFM’s long-term outlook is supported by: 1) plans to maintain the F2014 14 percent unit growth rate for ~5 years (vs. 11 percent in F2013); 2) the strong performance of new market stores with plans for further expansion; 3) opportunities for share gains in existing markets (incl. Phoenix, Southern CA, & Denver); and 4) SFM’s broad demographic appeal and the growing demand for fresh & healthy food. We believe that SFM deserves a premium multiple relative to peers given its unique strategy to aggressively price its produce offering and position itself as a “value-priced” specialty natural/organic grocery retailer, which should continue to support market share gains while providing compelling returns with its high return, store economic model.”
Morgan Stanley - Overweight, $38 price target
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“The beat was primarily driven by lower Opex, -78bps y/y to 22.9 percent vs MSe 23.8 percent, as overall expense leverage more than offset the impact of 14 new stores entering the base. Expense control while growing stores is a major positive given the company's focus on unit growth. Better Opex was offset by lower GM, -50bps y/y to 29.5 percent vs MSe 30.0 percent, as SFM maintained competitive pricing despite a pick-up in inflation. OM expanded 27bps y/y to 6.6 percent, countering expectations of a decline to 6.1 percent. We forecast moderating inflation and continued SG&A leverage driving margin uplift going forward.”
Credit Suisse - Outperform, $34 price target
“Management expects inflation to moderate into Q4 and expects less gross margin compression relative to Q3. New store productivity levels remain strong, and management spoke positively about the recent expansion into the Southeast. Its positive tone was supported by another modest increase in guidance. SFM is one of the most compelling growth stories in consumer, in our view, given its differentiated model, high returns, large new store opportunity and robust earnings growth outlook. While the weaker than expected gross margin was disappointing, we believe the company's price-driven model tends to be a bit more volatile during periods of inflation (especially in produce).”