Back to top

Image: Bigstock

Grocery Outlet (GO) to Post Q4 Earnings: What's in the Offing?

Read MoreHide Full Article

Grocery Outlet Holding Corp. (GO - Free Report) is scheduled to release fourth-quarter 2020 results on Mar 2. Although the Zacks Consensus Estimate for its fourth-quarter earnings has been stable at 22 cents over the past 30 days, the same suggests growth of more than 9% from the year-ago quarter’s tally. Moreover, the consensus estimate for quarterly revenues is pegged at $788 million, which indicates an improvement of 20% from the year-ago period.

Encouragingly, the EmeryVille, CA-based company has a trailing four-quarter earnings surprise of nearly 59%, on average.

Key Factors to Note

Being a grocery-store chain, we expect Grocery Outlet’s fourth-quarter results to have benefited from coronavirus-led demand as people continue to dine at home and have been stocking up essential items. In addition, the company’s flexible sourcing and distribution business model that helps it offer quality, name-brand consumables and fresh products at exceptional value is commendable. It has also been focused on store-growth endeavors alongside making strategic investments to improve functionality and scalability. Markedly, the company is emphasizing on digital marketing.

The aforementioned strengths along with the company’s opportunistic purchasing strategy, inventory optimization, marketing initiatives and new product offerings have been aiding Grocery Outlet’s comparable-store sales. In terms of offerings, the company sources on-trend products based on consumer preferences. At its last earnings call on Nov 11, management highlighted that for the fourth quarter through Nov 11, comparable store sales growth is tracking in the mid-single digits. Accordingly, management had projected comparable store results for the final quarter to remain consistent at these levels.

While all the aforesaid factors speak volumes for the quarter, we are a little cautious about the company’s margins. Apparently, management had anticipated fourth-quarter gross margin rate to be at or marginally below prior-year levels due to the headwinds from pandemic-related distribution expenses and commodity cost pressure. Grocery Outlet had estimated adjusted EBITDA margin for the to-be-reported quarter to remain modestly below year-ago levels.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Grocery Outlet this reporting cycle. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Grocery Outlet carries a Zacks Rank #2 and an Earnings ESP of +7.19%.

More Stocks With a Favorable Combination

Here are a few more companies that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat:

Celsius Holdings (CELH - Free Report) has an Earnings ESP of +20.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Purple Innovation (PRPL - Free Report) has an Earnings ESP of +4.76% and a Zacks Rank #3.

Dollar General (DG - Free Report) currently has an Earnings ESP of +1.23% and a Zacks Rank #3.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.

Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.

Click here to download this report FREE >>

Published in