Hungry...?

Whole Foods/WFMI beats by 3¢, raises Y05 comps guidance

Reports Q2 (Mar) earnings of 61¢ per share, 3¢ better than the Reuters Estimates consensus of $0.58; revenues rose 20.3% year/year to $1.08 billion vs the $1.07 billion consensus. Company states that due to strong sales growth, they increase their comparable store sales guidance for the year to a range of 9-11% from 8-10%. Continues to expect diluted EPS growth to be lower than sales growth primarily due to the anticipated acceleration in new store openings. A webcast of the company's conference call, scheduled for next Wednesday, can be accessed here.

Morgan Stanley claims that WFMI's sales power weakens the bears' case, thus expecting the shares to trade up, as bears have been focused on difficult year-ago comps and potential for margin weakness. Continued double-digit comps reduce risk of margin and earnings shortfalls. With fundamentals on a roll, the firm believes stock will sustain its premium P/E. Sees 20% long-term eps growth driven by consistently strong comps and firm's outlook for 15% sq ft growth over next 5-10 years. Maintains Overweight and $112 tgt.

Which is silly. The first silliness is this fixation on quarterly revenues and earnings numbers, and the second silliness is the reality that the shares trade at ~107 in pre-opening trades, and they maintain a $112 target. Go figure.

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I have long smiled upon WFMI as a long term investment because stocks that are long term winners in the market are precisely such due to the companies themselves being winners. This reality trumps notions of charting, and technical analysis (especially by its misinformed practitioners). For example, I was told weeks ago that WFMI had built a top, and was headed down, down, down.

Wrong, wrong, wrong. Recent trading activity -- in particular today's opening -- points out this error. TA is a tool to help you decide when to purchase (and sell), certainly not what -- athough it will be interesting to see whether WFMI trades intra-day above its former high (aka, the "Top...!") and whether it holds that higher high into the close. And, of course, what tomorrow and next week bring for this long term winner.

Leaders lead, indeed. Hungry yet for more shares...?