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The U.S. government is temporarily removing tariffs, which are taxes on imported goods, for a large amount of ground beef. Importers have reportedly agreed to sell this meat at 25 percent below current market prices for the next three months.
This is a helpful development for a grocery chain like Sprouts that focuses heavily on fresh food and the perimeter of the store. Lower costs for beef can either lead to higher profits on each sale or allow the company to lower its own prices to attract more shoppers without hurting its bottom line.
Source: CNBC
JP Morgan upgraded the company to Overweight, which is their way of saying they expect the stock to perform better than the broader market. This move suggests growing confidence in the grocer's ability to navigate a difficult retail environment.
While the company recently reported a small drop in sales at existing stores, analysts often look past short-term dips if they believe the company's long-term plan to open smaller, more efficient stores is working. This upgrade puts JP Morgan among the more optimistic voices on the stock, with the average analyst price target now sitting around $94.
Coker Palmer began covering the company with a price target of $103. This is notably higher than the current price of about $86 and sits above the average target of $94 from other Wall Street firms.
New coverage at a premium price often signals that a firm believes the market is underestimating a company's growth potential. For this business, that growth depends on successfully opening about 30 new stores a year while keeping profit margins steady as it competes with larger rivals.
Source: Coker Palmer
The grocery chain earned $1.37 per share last quarter, slightly ahead of the $1.34 analysts expected. Total revenue rose 5 percent to $2.33 billion, helped by the opening of new locations. However, sales at stores open at least a year, a key measure of a retailer's health, fell by 1 percent.
Management noted that consumers are being more cautious with their spending. For a specialty grocer that relies on shoppers paying a premium for organic and fresh foods, a drop in existing store sales is a trend to watch. The company's ability to keep growing depends on whether it can attract more shoppers to its current stores while continuing its aggressive plan to open new ones.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts raised their price targets following the company's recent quarterly earnings report. Most analysts are positive, with 21 of 43 rating the stock a buy and an average target of $88, suggesting 10% room for growth.
The company has beaten analyst profit targets for eight straight quarters. Management consistently sets a bar they can clear, making their forecasts a reliable floor for what to expect.
| Expectation | |
|---|---|
| EPS | $1.24 |
| Revenue | $2.34B |
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