When a stock comes in with earnings under analyst estimates, it usually gets punished. But in today's market any positive news is enough to keep shares in the green, and that is what we are seeing today with Safeway (NYSE: SWY) which is up strongly despite missing estimates for its third quarter.
First, let's get the bad news out of the way. Going into this morning's earnings announcement, analysts had been looking for earnings of 47 cents per share, but the company's actual earnings missed by a penny, with a reported 46 cents a share. With today's market environment, that in and of itself could have been enough to send shares crashing, but instead the stock is actually trading up 5.6% to $23.00, and earlier in the day was up as high as $23.75. Sounds crazy, but there is some good news to follow.
What the market is really interested in now is a company's forward looking estimate. Here the company showed real strength, and stood by its full year forecast of $2.25 to $2.35. Revenues during its third quarter were also strong, as the company showed revenues of $10.17 billion, verses estimates of $10.08 billion.
Also helping keeping enthusiasm in the stock today is the fact that the company had a modest earnings increase year over year. While the increase was small, it was still an increase, and the current 46 cents a share was two pennies higher than the 44 cents a share we saw for the same period last year. In this market, Wall Street loves to see year over year earnings increases.
Total sales were also strong, with a 3.9% increase, and same store sales were also positive, with a 2.8% increase.
So, initially the news wasn't too stellar, but Wall Street is overlooking the earnings short comings and sending shares strongly to the upside as Safeway continues to look strong through the end of the year.
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