What to Expect From Whole Foods Earnings

This giant organic grocer has made a huge turnaround from where it was about eight months ago. To prove just how much the recovery has moved: Whole Foods shares have bounced roughly 44% from lows of almost $36 in 2014. In mid-January, we noted that Whole Foods shares have outperformed the S&P 500 by roughly 25 percentage points, returning about 33% since Argus recommended buying the shares on weakness following a disappointing earnings report in May.

The downward guidance and a report of poor margins seemed to dig an inescapable hole for the company at that time. One key issue was competition from the many new organic and natural food purveyors, as well as the continued threat from established grocers and superstores wanting their slice of the organic and natural pie.

However, in the most recent earnings report, Whole Foods blew away the competition and share prices skyrocketed.

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A few analysts have made calls in February ahead of Whole Foods’ first-quarter earnings report:

• Oppenheimer initiated coverage with a Buy rating and a $62 price target.
• SunTrust maintained a Buy rating and raised its price target to $62 from $50.
• Telsey Advisory Group has a Market Perform rating for Whole Foods, and it raised the price target to $48 from $43.

Whole Foods popped above its 200-day moving average back in November, after everyone figured that it had gotten too bearish from the warning earlier in 2014. Since then, the stock has not looked back and has risen from $43 to $53. The 50-day moving average has not come close to being tested since the November jump, and the 200-day moving average is all the way down at $42.38.

Options traders are prepared for a move of over $2.00 in either direction, judging by the speculative contracts. A straddle of the closest speculative options would cost roughly $3.25 to $3.50 for both put and call contracts.

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Shares of Whole Foods were up 0.5% at $53.35 at midday. The stock has a consensus analyst price target of $49.48 and a 52-week trading range of $36.08 to $56.42.