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This profitable IPO stock blew away analyst expectations on first earnings report

Grocery Outlet

When one mentions IPO stocks, most of the time what pops into your head are the many multi-billion-dollar tech IPOs that have flooded the market. However, one of Wall Street’s most profitable IPOs this year has nothing to do with technology.

The unassuming grocery store operator Grocery Outlet (NYSE: GO), which recently went public in June, surpassed expectations on Tuesday afternoon when it reported its first-ever public earnings report. In response, this sent shares of the stock surging in after-hours trading, gaining an extra 12 percent on top of what’s already been an explosive bull run for the company.



Analysts had forecast Grocery Outlet at earnings around 13 cents per share on revenue of $627 million. Instead, the company reported an impressive 20 cents per share on revenue of $645.3 million, with same-store sales going up by 5.8 percent as well. Grocery Outlet also opened eight new stores, ending the quarter with a total of 330 stores across 6 states.

“We are pleased with our second quarter financial performance which reflects consistent comparable sales growth, strong new store performance and gross margin expansion. Our comparable store sales growth was broad-based across product categories, regions, and store vintages,” said CEO Eric Lindberg in a press release. “We attribute the consistency of our performance to our unique business model that provides customers unbeatable value in a fun, treasure hunt experience along with great customer service through our local independent operators.”

Management now expects full-year earnings per share to come in between 68-71 cents, drastically above the 59 cents anticipated from analysts. Unlike most other multi-billion-dollar IPOs over the past few months, Grocery Outlets stood out in the fact that it boasts profitable sales figures.

This can’t be said for the slew of other tech-based IPOs, with many reporting losses despite having market values in the tens of billions in some cases. One of the top mutual funds in the market, T.Rowe Price New Horizons (PRNHX) recently purchased a stake in Grocery Outlet’s stock and many other institutional investors jump in on what seems like a highly profitable company.

Shares of Grocery Outlet jumped by 12.6 percent in after-hours trading in response to the news. Since going public back in late June, the stock has been steadily rising, gaining around 50 percent over the past couple of months as the stock continues to impress investors who have grown tired of tech stocks that fail to report profits year and year.

Other grocery store stocks, such as Kroger (NYSE: KR) and Sprouts Farmers Markets (NASDAQ: SFM), didn’t move much while Grocery Outlet hogged all the spotlight, falling by 0.4 percent and gaining 1 percent respectively between the two.

From a fundamental perspective at least, Grocery Outlets may very well be one of the strongest IPO stocks that have come this year.

Grocery Outlet Company Profile

Grocery Outlet Holding Corp is a grocery store operator in the United States. Its flexible buying model allows them to offer quality, name-brand opportunistic products at prices generally 40% to 70% below those of conventional retailers. The stores are run by Entrepreneurial independent operators which create a neighborhood feel through personalized customer service and a localized product offering. – Warrior Trading News

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