Kroger (KR) Poised for Growth: Is It in Your Portfolio? - Analyst Blog
Is The Kroger Co. KR part of your portfolio? If not, then this is the right time to add the stock as it looks very promising. Moreover, the underlying factors are capable of carrying the momentum further. The stock sports a Zacks Rank #1 (Strong Buy) and has surged roughly 21% year to date, demonstrating its inherent strength.
A dominant position among the nation’s largest grocery retailers enables Kroger to expand its store base and boost market share through product launches. The company’s strong corporate and national brands have helped garner customers’ loyalty. Kroger’s Customer 1st strategy enriches shopping experience, convincing buyers to return to the store. We expect the company to sustain its earnings growth momentum with this strategy and through its cost-containment efforts.
Kroger has continued with its earnings beat performance for the fourth consecutive quarter in fiscal 2014. After posting positive earnings surprises of 3.8%, 1.5% and 13.1% in the first, second and third quarters respectively, earnings surpassed the Zacks Consensus Estimate by 15.6% in the fourth quarter. Given the company’s strong identical store sales growth for about 45 successive quarters and better-than-expected bottom-line performance, we believe that Kroger is poised to achieve its long-term earnings per share growth rate target of 8%–11%.
In the last concluded quarter, Kroger posted earnings of $1.04 per share that beat the Zacks Consensus Estimate of 90 cents, and surged 33.3% from 78 cents earned in the prior-year quarter. The improvement was aided by its Customer 1st strategy, increase in sales and strong fuel margins. The acquisition of Harris Teeter also supported the bottom line. The better-than-expected results prompted management to provide an upbeat outlook.
Management now projects fiscal 2015 earnings between $3.80 and $3.90 per share. The current Zacks Consensus Estimate for the fiscal is pegged at $3.87.
We believe that the company has enormous opportunities to augment identical supermarket sales, alleviate gross margin pressure, improve operating margin and enhance return on invested capital. Management continues to deploy capital to concentrate more on remodels, merchandising and other viable projects.
Favorably Ranked Stocks
Other favorably ranked stocks include Flowers Foods, Inc. FLO, Whole Foods Market, Inc. WFM and The Fresh Market, Inc. TFM, all carrying a Zacks Rank #2 (Buy).
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