UBS Investment Research Reiterates Sell Rating on Safeway Ahead of Q213 Results

In a report published Wednesday, UBS Investment Research analyst Jason DeRise reiterated a Sell rating and $20.00 price target on Safeway SWY.

In the report, UBS Investment Research noted, “We first published our Safeway preview last week on July 11, which highlighted our view of what SWY would look like with Canada moved into discontinued operations. This is a difficult task to model since there is no available Q2 12 comparable results to model from. We are taking this opportunity to adjust the phasing our quarterly estimates, one last time before the results. We arrive at our ex-Canada estimates by attempting to model Canada by quarter and then backing it out of our model. We decided that our Canada revenues in Q2 were too high and H2 was too low. Since Canada is higher margin (5% vs US grocery 1.5%), we were understating the remaining profits by removing too much Canada revenue in Q2 (likewise H2 EBIT was too high). We increase our Q2 EBIT margin from 1.3% to 1.8% and Q2 EPS from $0.13 to $0.25. No change to full year EPS estimates. See page 2 for Q2 estimates in detail.”

Safeway closed on Tuesday at $24.82.