News Column

Ahead of the Bell: Whole Foods rated 'sell'

May 7, 2014

The Associated Press



Whole Foods deserves deeper scrutiny from investors after reporting another disappointing quarter and lowering its 2014 earnings forecast again, said a Cantor Fitzgerald analyst who dropped his rating on the stock.

Shares of the Austin, Texas-based grocery chain continued to tumble Wednesday before markets opened and a day after it detailed second-quarter results that missed Wall Street's expectations.

Whole Foods Markets Inc. said its earnings were unchanged from a year ago at $142 million, or 38 cents per share. Revenue climbed nearly 10 percent to $3.32 billion but, like earnings, missed analyst expectations. The company also cut its 2014 forecast again after previously lowering it in November and in February.

"Virtually all of the metrics in Whole Foods' latest earnings were materially worse than our expectations," analyst Ajay Jain wrote in a Wednesday morning research note.

He lowered his rating on the stock to "sell" from "hold" and dropped his price target to $38 from $48. Jain noted that the company is now offering detailed guidance on earnings and store development plans through the 2018 fiscal year, but he said that will provide little consolation to investors who are wondering about significant near-term competitive threats.

"While we prefer not to pile onto the stock with this downgrade following more bad earnings news, we don't believe the stock has gotten a critical look from investors for quite some time," Jain wrote. "We believe (Whole Foods) finally deserves a lot more scrutiny."

The company's stock started sliding Tuesday after markets closed. They fell more than 16 percent, or $7.95 per share, to $40, in premarket trading Wednesday about an houir and a half before the market open. That would represent a 52-week low if it carries over in regular trading.


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Source: Associated Press


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