Shares of Sprouts Farmers Market closed 4.7% higher on Thursday after the grocer announced a share buyback plan of $300 million. The company added that the buyback program could be commenced, discontinued, or suspended at any time. Moreover, it will expire in three years.
Sprouts Farmers’ (SFM) CFO Denise Paulonis said, “Our new share repurchase program reflects our commitment to strong cash flow generation and driving shareholder return, while at the same time deploying capital to drive growth over the long term.”
On Feb. 25, Sprouts Farmers reported stronger-than-expected fourth-quarter results. The company posted adjusted earnings of $0.59 per share, significantly higher than the year-ago period’s earnings of $0.27 per share. Moreover, it exceeded analysts’ estimate of $0.39 per share. Revenues grew 17% to $1.6 billion, beating the Street’s estimates of $1.58 billion. (See Sprouts Farmers stock analysis on TipRanks)
On Jan. 7, Jefferies analyst Matthew Fishbein maintained a price target of $21 (13% downside potential) and a Hold rating on the stock.
In a note to investors, the analyst said, “We believe margin sustainability and expansion off 2019’s base seems reasonable, before giving the company much credit for out-year supply chain enhancements and per-store productivity improvement via a new store footprint plan.” Fishbein added, “Potentially pent-up away-from-home food demand later this year and the longer-term/post-pandemic health of the experience-driven Specialty Grocery channel remain risks.”
Overall, consensus among analysts is a Hold based on 2 Buys, 3 Holds and 2 Sells. The average analyst price target of $26.08 implies upside potential of over 8% to current levels. Shares have gained around 46% over the past year.