Whole Foods Market, Inc. (NASDAQ: WFM) is scheduled to report fiscal third-quarter financial results after the markets close on Wednesday. The consensus estimates from Thomson Reuters are calling for $0.37 in earnings per share (EPS) on $3.73 billion in revenue. The same period from last year had $0.43 in EPS on $3.63 billion in revenue.

Since the 1990s this grocery chain has had explosive growth, high margins and a clear and different path to serving the customer natural and organic foods. But the market changed in recent years, and now organic food is available at most stores – often at far cheaper prices for the same item (and the same brand).

Wall Street has been hoping that the Whole Foods turnaround is taking shape. A fresh research report from Goldman Sachs might be seriously debunking that hope.

Goldman Sachs did not just issue a normal downgrade on Whole Foods. The firm’s Stephen Tanal and Alison Levens cut the rating to Sell from Buy, a two-notch downgrade. Much of the downgrade is due to the competition which has always been willing to operate on much thinner margins.

One issue cited in Tuesday’s report that hurts Whole Foods is that the other chains can have better economies of scale at the local level. Another issue cited is that the competition for the Whole Foods customer is endless and seems to be intensifying.

Whole Foods was also given a $31.00 price target by Goldman Sachs. One interesting issue here is that Whole Foods is expected to grow its store count, but that growth is not expected to be seen on earnings. That caused a re-rating of the Whole Foods multiple on earnings (P/E).

Several other analysts weighed in on Whole Foods ahead of the release of the earnings report:

• Pivotal Research reiterated a Sell rating with a $20 price target.
• BMO Capital markets reiterated an Underperform rating with a $23 price target.
• Macquarie has an Outperform rating.
• Jefferies reiterated a Hold rating with a $31 price target.
• Oppenheimer reiterated an Outperform rating with a $38 price target.
• Credit Suisse reiterated an Outperform rating.
• Wedbush reiterated a Neutral rating with a $32 price target.

Excluding Wednesday’s move, Whole Foods has underperformed the broad markets with the stock up about 3% year to date. Over the past 52-weeks the stock is actually down about 14%.

Shares of Whole Foods were last trading down about 1% at $33.70, with a consensus analyst price target of $ and a 52-week trading range of $ to $.

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