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Analyst Blog

Yesterday, shares of The Kroger Company (KR - Analyst Report) recorded a new 52-week high of $36.29. At the end of the trading session, the stock closed at $35.92, up 38% year to date.

The current price is 5% above the Zacks Consensus average price target of $34.23. Moreover, the stock is currently trading at a forward P/E of 12.8x, a 7.9% discount to the peer group average of 13.9x. The long-term EPS growth rate stands healthy at 8.1%.

Kroger’s leading position among the nation’s largest grocery retailers enables it to sustain growth in top and bottom lines, expand its store base and boost its market share. The company is also well positioned to deliver higher earnings, primarily through strong super market sales (sans fuel).

Moreover, Kroger’s Customer 1st strategy provides a strong value proposition to consumers. The company’s value offerings further facilitate it to retain customers and in turn generate identical supermarket sales growth.

These measures help Kroger to continue to perform well and post better-than-expected results. The company outpaced the Zacks Consensus Estimate in the last 4 quarters by an average surprise of 10.3%.

Going forward, this Zacks Rank #3 (Hold) company expects fiscal 2013 earnings between $2.73 and $2.80, up from $2.71 to $2.79 per share forecasted earlier. Moreover, Kroger’s identical supermarket sales (excluding fuel) are expected to increase in the range of 2.5%–3.5%.

Other Stocks to Consider

Until any further upward revision in Kroger’s Zacks Rank, another attractive stock in the retail wholesale sector include Ingles Markets, Inc. (IMKTA - Snapshot Report) which carries a Zacks Rank #1 (Strong Buy). Harris Teeter Supermarkets, Inc. and The Fresh Market, Inc. (TFM - Snapshot Report), both of which carry a Zacks Rank #2 (Buy) are also worth considering.

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