Safeway Announces 2009 Guidance; Free Cash Flow to Grow (SWY)
Posted on | December 4, 2008 Time: 8:58 am |
Grocery store operator Safeway (SWY) is holding analyst meetings today, and in conjunction have put out fiscal 2009 guidance of $2.34 - $2.44 EPS, versus Reuters estimates for $2.37.
Capex will be heading lower by $400 million to $1.2 billion in 2009, and thanks to prior cost-cutting efforts, free cash flow should nearly double to $1 - $1.2 billion next year. Comparable sales are currently estimated to be between 2% and 3%, excluding gas sales.
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The new EPS guidance puts the forward multiple at just over 10x, while the price/FCF measure is a quite sexy 9x or less. More importantly, the increased FCF guidance opens the door for a big increase to the buyback program and a hike of the dividend. Safeway has completed the renovation of about 70% of their stores by now, fortuitous timing as capex wouldn’t have been sustainable at the levels seen over the past few years.
If SWY shares can hold their gains of the day (currently up 4% at $22.82), they will close above their previous high going back to November. It’s all relative, but in a rare nod to the charts it’s a promising sign of investor sentiment.
Ryan Barnes
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