Safeway, Inc. (SWY) - Bull Of The Day

Safeway Inc.’s (SWY) fourth quarter results were slightly below expectations, but management issued 2009 EPS guidance of $2.34-$2.44, which is above the Zacks consensus estimate of $2.35. Even so, the stock sold off 13% on the news.

We think the sell-off is overdone, and we reiterate our Buy rating. Investors remain skittish about Safeway’s future growth because consumers continue to trade down to cheaper alternatives, and that is pressuring the company’s results.

In our view, SWY shares have declined to a level that discounts a weak macro environment that persists into 2010. Our six-month target price is $23 (down from $28), or about 10x our 2009 EPS estimate.

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