Dj Us Foods Holding Corp, Inst Holders, 3Q 2024 (Usfd)

Sprouts Farmers Market, Inc. SFM shares have gained 48.7% in the past three months, surpassing the industry and the broader S&P 500 index’s growth of 28.1% and 6.4%, respectively. This strong performance underscores the company’s solid business strategies and market positioning.

SFM stock last traded at $142.75 and just 3.9% below its 52-week high of $148.56, touched on Nov. 12, 2024. This highlights the stock's strong upward momentum, indicating continued investor confidence. However, it also raises the question of whether there is room for further growth or if a pullback might be on the horizon.

Technical indicators are supportive of Sprouts Farmers’ strong performance. The stock is trading above both its 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength implies positive market perception and confidence in Sprouts Farmers’ financial health and prospects.

Decoding SFM’s Strategies

Sprouts Farmers has been continuously enhancing its product assortment, thoughtfully selecting items to align with the needs of health-conscious shoppers. The company has been increasingly focusing on organic produce, which is growing at a faster pace than conventional options. By the third quarter of 2024, organic products represented more than 46% of total produce sales, making healthier choices more accessible to shoppers.

Sprouts Farmers has been focusing on strengthening customer engagement by improving the company’s marketing strategies and successfully drawing more shoppers to its stores. The company tailors its marketing efforts to align with regional and market-specific preferences.

Additionally, the company is enhancing SFM’s customer engagement through a robust omnichannel experience, partnering with Uber Eats, DoorDash and Instacart to expand its digital presence and drive accelerated e-commerce growth. The company has been also investing in technology to build a strong customer data foundation, enabling highly tailored and personalized communications that enhance interactions, strengthen loyalty and foster long-term customer engagement.

Sprouts Farmers expanded its footprint by opening nine new stores in the third quarter, bringing its total to 428 locations across 23 states. This growth aligns with the company’s long-term strategy. With nearly 110 new stores approved and more than 70 executed leases in the pipeline, Sprouts Farmers is well-positioned for continued expansion.

Sprouts Farmers has optimized the company’s operations by leveraging advanced technology and refining processes, resulting in improved stock levels, reduced shrinkage, increased sales and an enhanced overall shopping experience for its customers.

SFM’s Financial Health Snapshot

Sprouts Farmers holds a strong and healthy financial position with $309.7 million in cash and cash equivalents as of Sept. 29, 2024. This significant reserve is more than sufficient to cover its long-term debt and finance lease liabilities, which total $7.7 million. Year to date through Sept. 29, 2024, the company generated $520.4 million in operating cash flow and invested $132 million in capital expenditures, net of landlord reimbursement.

What to Expect From Sprouts Farmers in Fiscal 2024?

For the fourth quarter of 2024, SFM expects comparable store sales growth in the band of 8-10% and adjusted earnings per share in the range of 67 cents to 71 cents compared with 49 cents reported in the year-ago period.

For 2024, the company anticipates total sales growth of approximately 12%, with comparable store sales growth expected around 7%. Sprouts Farmers expects adjusted earnings before interest and taxes between $490 million and $495 million and full-year adjusted earnings in the range of $3.64 to $3.68 per share.

How Are Zacks Consensus Estimates Faring for SFM?

Indicating the positive sentiment around SFM, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 30 days, analysts have increased their estimates for the current and the next fiscal year by 9.2% to $3.68 and 14.1% to $4.21 per share, respectively. These estimates indicate expected year-over-year growth rates of 29.6% and 14.4%, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

SFM Stock Valuation

From a valuation perspective, Sprouts Farmers looks stretched. SFM’s forward 12-month price-to-earnings ratio was 34.99X, higher than the industry’s ratio of 20.45X. While the P/E ratio is elevated, this indicates the market's confidence in the company’s aggressive expansion into new markets and its product innovation.

What Should Be Your Move on SFM?

Sprouts Farmers’ strong stock performance with its focus on enhancing product assortment, improving customer engagement and experience, and making operational advancements demonstrates the company’s resilience and growth potential. With a healthy balance sheet and strong cash flow generation, SFM offers an attractive investment opportunity, especially for those seeking a resilient, growth-driven stock. Sprouts Farmers currently sports a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Ingredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

INGR has a trailing four-quarter earnings surprise of 9.5%, on average. The Zacks Consensus Estimate for Ingredion’s current-financial year’s earnings indicate growth of 12.5% from the year-ago reported number.

US Foods Holding Corp. USFD together with its subsidiaries, engages in marketing, sale and distribution of fresh, frozen and dry food and non-food products to foodservice customers in the United States. It currently carries a Zacks Rank #2 (Buy). USFD delivered an earnings surprise of 3.7% in the last reported quarter.

The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings indicates growth of 6.4% and 18.6%, respectively, from the prior-year reported levels.

McCormick & Company, Incorporated MKC is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry. It currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.

The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.

Zacks Investment Research

McCormick & Company, Incorporated MKC has raised the quarterly dividend by three cents or 7.1% to 45 cents per share. The next dividend payment is scheduled for Jan. 13, 2025, for its shareholders on record as of Dec. 30, 2024.

This highlights the company's 101st year of continuous dividend payments and the 39th consecutive year of a quarterly dividend hike, demonstrating MKC’s long-term commitment to its shareholders and dedication to returning excess cash through consistent dividend increases.

McCormick has made notable strides in strengthening its financial foundation and increasing shareholder value. In the first nine months of fiscal 2024, the company returned $338.3 million to its shareholders through dividends, while net cash provided by operating activities totaled $463.2 million. The company remains focused on allocating cash toward growth investments, shareholder dividends and debt reduction while maintaining a strong investment-grade rating.

What More Should Investors Know About MKC?

McCormick has been seeing strong momentum driven by three key factors, long-term trends driving its categories, strong consumer interest in healthy and flavorful cooking and enthusiasm for flavor exploration and trusted brands. The company continues to bolster its position across major markets and core categories by focusing on growth levers such as brand marketing, product and packaging innovation, category management and proprietary technology. This innovation-led growth strategy aligns with McCormick’s long-term goal of capturing increased market share, especially in high-growth segments.

McCormick achieved positive volume growth in the third quarter of fiscal 2024, despite the challenging environment and anticipates this momentum to continue into the fourth quarter. The company experienced sequential volume improvements across both Consumer and Flavor Solutions segments, with the Consumer segment in the Americas, EMEA and Asia Pacific regions, excluding China, demonstrating solid volume growth. This growth indicates MKC's continued focus on innovation, alignment with consumer trends and expanding distribution.

Apart from this, the company has been benefiting from its cost-saving initiatives, which are aimed to fund future investments and drive operating margin expansion. The company’s Comprehensive Continuous Improvement and Global Operating Effectiveness programs are driving growth investments and operating margin expansion. For fiscal 2024, the company is focused on strengthening its volume trends and prioritizing investments to fuel profits. Management expects adjusted operating income to grow 4-6% in fiscal 2024, including minimal currency impacts.

Final Words on MKC

McCormick has been experiencing positive volume growth across both of its segments, Consumer and Flavor Solutions, implying its ongoing focus on innovation, alignment with consumer trends and expanding distribution. The company’s strong financial stability and dividend track record further highlight its resilience and potential for sustained growth.

The Zacks Rank #2 (Buy) stock has risen 15.2% in a year against the industry’s decline of 1.2%.

Other Stocks to Consider

Ingredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

INGR has a trailing four-quarter earnings surprise of 9.5%, on average. The Zacks Consensus Estimate for Ingredion’s current-financial year’s earnings indicate growth of 12.5% from the year-ago reported number.

Freshpet, Inc. FRPT, together with its subsidiaries, manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently carrying a Zacks Rank #2. FRPT delivered an earnings surprise of 144.5% in the last reported quarter.

The Zacks Consensus Estimate for Freshpet’s current-fiscal year’s sales and earnings implies growth of 27.3% and 224.3%, respectively, from the year-ago reported number.

US Foods Holding Corp. USFD together with its subsidiaries, engages in marketing, sale and distribution of fresh, frozen and dry food and non-food products to foodservice customers in the United States. It currently carries a Zacks Rank #2. USFD delivered an earnings surprise of 3.7% in the last reported quarter.

The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings indicates growth of 6.4% and 18.6%, respectively, from the prior-year reported levels.

Zacks Investment Research