Why Sprouts Farmers Market Shares Spiked Today

By Brian D. Pacampara, CFAFool.com

What: Shares of organic food retailer Sprouts Farmers Market popped as much as 14.7% Thursday morning after its quarterly results and outlook topped Wall Street expectations.

So what: Sprouts shares have slumped sharply over the past six months on concerns over stiffening competition, but strong Q3 results -- EPS of $0.21 on revenue of $903.1 million vs. the consensus of $0.19 and $897.9 million -- coupled with upbeat full-year guidance suggests that those worries are a bit overblown. Additionally, Sprouts' top-line growth of 18% was driven by a solid 5.8% increase in same-store sales and strong traffic in new stores opened, suggesting that the product deflation headwinds management has been facing are also starting to subside.

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Now what: Management now expects full-year 2015 EPS of $0.83-$0.84, nicely above the consensus estimate of $0.81, on revenue growth of 19%-21%. "We are accelerating investments across the enterprise in product innovation, business intelligence and our team, to build on our industry leading sales momentum and support long-term growth," said CEO Amin Maredia. "These investments will allow Sprouts to remain an innovator in the natural and organic sector and increase our relevance to customers." More importantly, with the stock still off more than 40% from its 52-week highs, there might be plenty of upside left to buy into that long-term story.

The article Why Sprouts Farmers Market Shares Spiked Today originally appeared on Fool.com.

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