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Here's How Grocery Outlet (GO) is Placed Ahead of Q3 Earnings
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Grocery Outlet Holding Corp. (GO - Free Report) is likely to register a decline in the bottom line when it reports third-quarter 2021 numbers on Nov 9, after the market closes. Although the Zacks Consensus Estimate for third-quarter earnings per share is stable at 22 cents over the past 30 days, the same suggests a decline of about 56% from the year-ago quarter’s tally. This California-based company has a trailing four-quarter earnings surprise of 31.6%, on average.
The consensus mark for quarterly revenues is pegged at $781.2 million, which indicates an increase of about 2.2% from the year-ago period.
Key Factors to Note
Grocery Outlet’s flexible sourcing and distribution business model, which helps it in offering quality, name-brand consumables and fresh products at exceptional values, is likely to have favorably impacted the third-quarter top line. The company’s opportunistic purchasing strategy, inventory optimization, marketing initiatives and store-growth endeavors alongside strategic investments to improve functionality and scalability appear encouraging.
However, industry experts cited that moderating at-home consumption activities and a drop in pantry-loading trends, as consumers return to the old normal such as dining out, might have weighed on the top line to an extent. Management had earlier forecast comparable store sales to decline in the mid-single digits for the third quarter. Nonetheless, we note that the rate of decline is likely to have decelerated from the second quarter, when comps fell 10%.
Again, margins still remain an area to watch. Impact of higher commodity costs and increased labor as well as freight charges on margins cannot be ruled out. On its last earnings call, management guided gross margin of approximately 30.6%, modestly below pre-COVID levels, reflecting an increase in inflationary pressures in commodity and freight costs. Evidently, these are likely to get reflected in the bottom line.
Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise
Our proven model does not conclusively predict an earnings beat for Grocery Outlet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Although Grocery Outlet carries a Zacks Rank #2, its Earnings ESP of -10.26% makes surprise prediction difficult.
Stocks With a Favorable Combination
Here are a few companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
United Natural Foods (UNFI - Free Report) has an Earnings ESP of +9.24% and a Zacks Rank #1.
General Mills (GIS - Free Report) currently has an Earnings ESP of +5.26% and a Zacks Rank #3.
Hormel Foods (HRL - Free Report) currently has an Earnings ESP of +1.59% and a Zacks Rank #3.
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Here's How Grocery Outlet (GO) is Placed Ahead of Q3 Earnings
Grocery Outlet Holding Corp. (GO - Free Report) is likely to register a decline in the bottom line when it reports third-quarter 2021 numbers on Nov 9, after the market closes. Although the Zacks Consensus Estimate for third-quarter earnings per share is stable at 22 cents over the past 30 days, the same suggests a decline of about 56% from the year-ago quarter’s tally. This California-based company has a trailing four-quarter earnings surprise of 31.6%, on average.
The consensus mark for quarterly revenues is pegged at $781.2 million, which indicates an increase of about 2.2% from the year-ago period.
Key Factors to Note
Grocery Outlet’s flexible sourcing and distribution business model, which helps it in offering quality, name-brand consumables and fresh products at exceptional values, is likely to have favorably impacted the third-quarter top line. The company’s opportunistic purchasing strategy, inventory optimization, marketing initiatives and store-growth endeavors alongside strategic investments to improve functionality and scalability appear encouraging.
However, industry experts cited that moderating at-home consumption activities and a drop in pantry-loading trends, as consumers return to the old normal such as dining out, might have weighed on the top line to an extent. Management had earlier forecast comparable store sales to decline in the mid-single digits for the third quarter. Nonetheless, we note that the rate of decline is likely to have decelerated from the second quarter, when comps fell 10%.
Again, margins still remain an area to watch. Impact of higher commodity costs and increased labor as well as freight charges on margins cannot be ruled out. On its last earnings call, management guided gross margin of approximately 30.6%, modestly below pre-COVID levels, reflecting an increase in inflationary pressures in commodity and freight costs. Evidently, these are likely to get reflected in the bottom line.
Grocery Outlet Holding Corp. Price, Consensus and EPS Surprise
Grocery Outlet Holding Corp. price-consensus-eps-surprise-chart | Grocery Outlet Holding Corp. Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Grocery Outlet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Although Grocery Outlet carries a Zacks Rank #2, its Earnings ESP of -10.26% makes surprise prediction difficult.
Stocks With a Favorable Combination
Here are a few companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
United Natural Foods (UNFI - Free Report) has an Earnings ESP of +9.24% and a Zacks Rank #1.
General Mills (GIS - Free Report) currently has an Earnings ESP of +5.26% and a Zacks Rank #3.
Hormel Foods (HRL - Free Report) currently has an Earnings ESP of +1.59% and a Zacks Rank #3.