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Weis Markets Earns Its Way Among The Grocery Titans
Weis Markets (NYSE:WMK) reported a sharp rise in net income for its second quarter. The grocery store chain also registered a revenue increase over last year's same quarter. For the first half of this year, the company is running well ahead of its numbers from last year.
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An Overlooked Performer
Weis Markets, with a $900 million market cap, operates 164 grocery stores in the east. It is often overlooked compared to its larger national grocery and supermarket peers such as Safeway (NYSE:SWY) and Kroger (NYSE:KR), with their respective $8 billion and nearly $13 billion market caps. Weis Markets carries no long-term debt and has performed admirably through the recession, increasing its earnings from a fiscal 2008 earnings per share of $1.75 to $2.33 in fiscal 2009, along with its increases so far this year.
Earnings Flying Off the Shelves
Net income rose from $15.2 million in last year's second quarter to $20.5 million, a 34.9% increase. EPS was 76 cents, compared to 56 cents in last year's quarter. Revenue was $653.7 million, up from the $615 million last year, a 6.2 percent increase. Same store sales were flat.The company mentioned that this was its seventh consecutive quarter of earnings increases, despite the cautious-spending consumer.
Grocery Heavyweights
The landscape of the grocers is becoming the land of the giants. In addition to large-caps Safeway and Kroger, Costco (Nasdaq:COST) weighs in with its $25 billion plus market cap. This is not the only measure of scale. Costco's free cash flow for the last twelve months was $1.756 billion, while Safeway's was an equally impressive $1.658 billion. By contrast, Weis produced $56.3 million in FCF, more along the lines of regional grocer Winn-Dixie (Nasdaq:WINN). Weis can compete in its niche by careful, prudent management, but it will not achieve the torrent of cash flow these other grocery juggernauts can. (For more on analyzing companies in this sector, be sure to read our related article Analyzing Retail Stocks.)
Weis Business and Stock
Weis Markets is wise to continue to tightly stick to its regional niche and appeal to the bargain-oriented consumer going forward. Whatever view people may have on the economy, it's clear that free-spending days for the consumer, for anything, even groceries, are not on the horizon. So Weis has captured a niche it should continue to do well in this year and beyond, as its numbers suggests. Weis' smaller scale than the grocery giants gives it the potential to nimbly step into changing consumer trends should they occur.
Weis Stock
The stock trades in a tight range, with a PE just under 15, and pays a dividend that currently yields 3.41%. The dividend is attractive, and the stock price, at around $35, right in the middle of its 52-week range of $30.51 to $38.32, is not excessive. The market treats Weis appropriately as a slow grower, yet with its earnings increases there might be more potential upside than has historically been the case. That said, even as a stable, slow grower with a good dividend, this is a solid stock that's worth a look, especially for income investors.
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An Overlooked Performer
Weis Markets, with a $900 million market cap, operates 164 grocery stores in the east. It is often overlooked compared to its larger national grocery and supermarket peers such as Safeway (NYSE:SWY) and Kroger (NYSE:KR), with their respective $8 billion and nearly $13 billion market caps. Weis Markets carries no long-term debt and has performed admirably through the recession, increasing its earnings from a fiscal 2008 earnings per share of $1.75 to $2.33 in fiscal 2009, along with its increases so far this year.
Earnings Flying Off the Shelves
Net income rose from $15.2 million in last year's second quarter to $20.5 million, a 34.9% increase. EPS was 76 cents, compared to 56 cents in last year's quarter. Revenue was $653.7 million, up from the $615 million last year, a 6.2 percent increase. Same store sales were flat.The company mentioned that this was its seventh consecutive quarter of earnings increases, despite the cautious-spending consumer.
The landscape of the grocers is becoming the land of the giants. In addition to large-caps Safeway and Kroger, Costco (Nasdaq:COST) weighs in with its $25 billion plus market cap. This is not the only measure of scale. Costco's free cash flow for the last twelve months was $1.756 billion, while Safeway's was an equally impressive $1.658 billion. By contrast, Weis produced $56.3 million in FCF, more along the lines of regional grocer Winn-Dixie (Nasdaq:WINN). Weis can compete in its niche by careful, prudent management, but it will not achieve the torrent of cash flow these other grocery juggernauts can. (For more on analyzing companies in this sector, be sure to read our related article Analyzing Retail Stocks.)
Weis Business and Stock
Weis Markets is wise to continue to tightly stick to its regional niche and appeal to the bargain-oriented consumer going forward. Whatever view people may have on the economy, it's clear that free-spending days for the consumer, for anything, even groceries, are not on the horizon. So Weis has captured a niche it should continue to do well in this year and beyond, as its numbers suggests. Weis' smaller scale than the grocery giants gives it the potential to nimbly step into changing consumer trends should they occur.
Weis Stock
The stock trades in a tight range, with a PE just under 15, and pays a dividend that currently yields 3.41%. The dividend is attractive, and the stock price, at around $35, right in the middle of its 52-week range of $30.51 to $38.32, is not excessive. The market treats Weis appropriately as a slow grower, yet with its earnings increases there might be more potential upside than has historically been the case. That said, even as a stable, slow grower with a good dividend, this is a solid stock that's worth a look, especially for income investors.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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