Safeway Upgraded to Outperform - Analyst Blog
March 19 2013 - 11:20AM
Zacks
On Mar 15, 2013, we upgraded Safeway Inc. (SWY)
to Outperform following its robust results in the fourth quarter of
2012. With three consecutive positive earnings surprises and
agreement among analysts, the stock also carries a Zacks Rank #1
(Strong Buy).
Why the Upgrade?
On Feb 21, Safeway’s fourth-quarter results surpassed the Zacks
Consensus Estimate by a sizeable margin. Earnings per share rose
58.2% year over year to $1.06, representing a solid double-digit
beat over the Zacks Consensus Estimate, while revenues inched up
1.2% to $13.8 billion, edging past the respective Zacks Consensus
Estimate.
In the fourth quarter, we were keeping an eye on the “Just for U”
loyalty program and its potential to turn the tables for Safeway,
as predicted by management. The success of the program is reflected
in the higher identical-store (ID) sales (excluding fuel) growth
and 5.4 million household registrants (higher than Safeway’s
expectations).
Evidently, the loyalty program did not disappoint as it was a
major positive catalyst increasing the market share and
profitability for the company. We expect the trend to continue
going forward.
Moreover, Safeway has undertaken several initiatives to catalyze
future growth. The company plans to spin off its subsidiary
Blackhawk into a public company. Safeway is likely to launch a
Wellness initiative in the second quarter of 2013 to tap growth
opportunities in the fast growing health care market in the
U.S.
The company’s holistic approach to providing wellness products
as well as services to its clientele reflects a deft plan to
combine growth potential of the retail space with that of the
burgeoning healthcare industry.
Recently, the company stepped up efforts to reduce cost and shrink
expense to improve its bottom line. Safeway also sharpened focus on
its Canadian operations. In the interim, Safeway rewards
shareholders through dividend payments and share repurchases.
Other healthcare stocks such as Cyberonics (CYBX),
Given Imaging (GIVN) and Medical
Action (MDCI) are also likely to do well. These stocks
carry a Zacks Rank #1 (Buy).
CYBERONICS INC (CYBX): Free Stock Analysis Report
GIVEN IMAGING (GIVN): Free Stock Analysis Report
MEDICAL ACTION (MDCI): Free Stock Analysis Report
SAFEWAY INC (SWY): Free Stock Analysis Report
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