Supervalu Inc. (SVU) Earnings Dangerous On Huge Valuation

Supervalu Inc. (SVU) Earnings Dangerous On Huge Valuation

SUPERVALU INC. (NYSE:SVU) will release its earnings report for the three months ending June 30 after the market closes today, July 16. The company’s stock price has grown profoundly in 2013, and today’s earnings are likely to cement opinion of the company for months to come.

Supervalu Inc. (SVU) Earnings Dangerous On Huge Valuation

Citigroup Analysts following the company are looking for earnings per share of 8 cents from the grocery retailer. Consensus estimates for the divisive stock lie around the 3 cent per share mark. The Citigroup analysts are optimistic on this quarter, but overall they recommend investors hold on the stock.

Gates Capital Management Reduces Risk After Rare Down Year [Exclusive]

Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More

Supervalu’s Incredible Growth

Since the start of 2013, SUPERVALU INC. (NYSE:SVU) investors have seen the stock increase in value by more than 175%. The almost tripling in the company’s value is a welcome reward for investors, but it leaves many wondering if the company’s value has grown too much too quickly. Analysts seem generally skeptical on the store at its current price.

The retail chain is managing its disparate brands well, and is lowering its margins in order to drop prices and appeal to a much larger group of customers. This strategy is being praised by analysts, but competition in the market place may be too much for SUPERVALU INC. (NYSE:SVU). If the company manages to pull in decent numbers this afternoon its strategy will have been vindicated, at least to some degree.

Possible Overvaluation

SUPERVALU INC. (NYSE:SVU) may be overvalued. There’s little or no way to dance around that simple fact. If the firm’s earnings are poor this afternoon, there might be a large downside to the stock. Any company that has grown quickly is vulnerable to a mass exit at earnings time. SUPERVALU INC. (NYSE:SVU) is no exception, and by tonight it may have proven exemplary.

Supervalu did not make a profit last year, and it’s forward earnings, according to Citigroup Inc (NYSE:C), are likely to end up in the red at the end of 2014. The firm’s earnings are not expected to hit black until 2015, when Citigroup is estimating full year earnings per share of 10 cents. That puts the firm’s 2015E P/E at 68, not an easy number for value investors to swallow.

SUPERVALU INC. (NYSE:SVU) earnings, and market reaction to them, will be a spectacle. Tensions tend to run high in the lead in to earnings from companies that are expected to grow quickly. If the firm disappoints, the run for the door, and the Twitter trail leading there, is bound to be entertaining.

No posts to display