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Why Sprouts Farmers Market Stock Popped 13% This Morning

By Rich Smith – May 2, 2019 at 2:42PM

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An earnings beat and a guidance raise have investors in this grocer feeling optimistic.

What happened

Shares of natural-foods grocery store Sprouts Farmers Market (SFM 1.84%) stock popped 13% in early trading Thursday after the company reported sales and earnings that broadly outperformed Wall Street's expectations.

Expected to earn $0.40 per share on $1.4 billion in sales, Sprouts nailed the sales target -- but earned $0.46 per share. Sprouts stock remains up 6.1% as of 2:20 p.m. EDT.

Supermarket produce department.

Image source: Getty Images.

So what

This was a relief -- but perhaps still not great news, which would explain why Sprouts shares are giving up some of their gains as the day wears on. Q1 2019 sales grew 10% year over year, with same-store sales climbing 1.4%. Profits, however, although they beat expectations, slid 8% from the $0.50 per share Sprouts had earned in last year's Q1.

Now what

Regardless, Sprouts interim co-CEO Brad Lukow said that based on what he's seeing in terms of "strong new store productivity...and planned continued expansion," he's "raising the bottom-end of our EPS guidance."

By year-end, Sprouts still expects to grow sales 9% to 10.5%, in line with Q1 sales growth. Earnings per share, however, are now expected to come in between $1.18 and $1.24 per share, or $0.02 better than previously expected. Taken at the midpoint, this implies $1.21 per share for the full year, or a penny better than Wall Street has been forecasting -- and suggests Sprouts will continue to beat earnings as the year moves along.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Sprouts Farmers Market, Inc. Stock Quote
Sprouts Farmers Market, Inc.
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