Last July, shares of Whole Foods (WFM) were down 32% from where they ended the prior year and almost 45% from the all-time high they'd set above $65 only months earlier.
After that steep drop, the stock had fallen into the high $30s. It didn't do much to correct that into the autumn. But that all changed when the fourth-quarter and full-year earnings report restored hope in Whole Foods.
Since mid-October, when it was around $37, the stock has climbed more than 40%. It's up another 5.1% so far in 2015. Because of the rally, the organic goods seller is now trading at $53, taking it past the consensus price of $49.31 among Wall Street analysts. At the same time, most of its common valuation measures are at or above their normal levels -- it's not being discounted, then.
Whether it deserves to get to an even higher price will depend on how traders view the first-quarter report that's due to arrive after the close of trading Wednesday. Analysts are anticipating earnings of 45 cents a share, sales of $4.67 billion and a same-store sales gain of 4.4%. In the same quarter last year, the Austin, Texas-based company earned 42 cents with revenue of $4.24 billion. Same-store sales rose 5.4%.
Considering how far it's risen in just a few months, Whole Foods might need to do even better than those estimates to preserve the run. This is a stock in which investors had gotten used to wins -- the shares went from under $5 at the end of 2008 to near $58 at the end of 2013. Then it stopped.
Last year, Whole Foods lowered its financial outlook again and again. Conference calls with analysts were starting to be on the tense side, filled with questions about what precisely management was doing to deal with pricing and remain special with picky consumers. Worries about competition were building, with other chains like Sprouts (SFM), Kroger (KR) and Wal-Mart (WMT) also getting in the natural foods game.
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Whole Foods, which has around 400 stores today, was proud to say it deserved credit for leading a "better eating" trend now seen at so many restaurants and grocers. In the stock market, that wasn't much reason to cheer. The company, sometimes mocked as "Whole Paycheck" by detractors, was seeing doubters in greater numbers.
But the last quarter of the year, when results and guidance were fine, returned calm to the situation. Maybe it wouldn't be run out of town by lower-priced competitors after all.
Ultimately the stock did lose 12.8% in 2014, though as noted, it had been much worse. Still, even with the late lift, Whole Foods trailed the market, and its industry measured by FactSet, for the second year in a row. We'll know soon if it's setting up to keep climbing or if that fourth quarter was a short break in a troubling trend.