WFMI Whole Foods Market, Inc. (MM)

Whole Foods Market's (WFM) third-quarter 2011 earnings of $0.50 per share beat the Zacks Consensus Estimate of $0.48, and rose 31.6% from the prior-year quarter on the heels of strong sales as shoppers flocked the grocery chain for natural and organic products. The company is revamping its pricing strategy and concentrating more on value offerings, while maintaining healthy margins.

Cost containment efforts, effective inventory management, and improved store-level performance are driving earnings growth. In the wake of better-than-expected results, the company raised its fiscal 2011 outlook, and now expects sales growth in a band of 12.2% to 12.4% and bottom-line increase of 34%.

Moreover, a prudent capital investment is also translating into improved cash flows with a lower debt level and healthy balance sheet. We have a long-term Outperform recommendation on the stock. Our target price of $73.00, 38.0X 2011 EPS, reflects this view.
 
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