One of the largest grocery retailers, The Kroger Co. (KR - Analyst Report) seems to be on a roll since the company announced shareholder friendly moves on Mar 13, 2014. Since then, the company’s shares have gained 3.4%.
Under the new share repurchase program, which replaced the existing authorization, Kroger’s board approved buybacks worth $1 billion. The earlier program had nearly $2 million worth of shares remaining for repurchase. Along with this, the company announced a quarterly dividend of 16.5 cents per share, payable on Jun 1, 2014, to shareholders of record as of May 15, 2014.
Kroger is an asset for yield-seeking investors, as it actively manages its capital, returning much of its free cash to shareholders via share buybacks and dividends, apart from deploying cash flows for opening stores and entry into new markets. The company has paid $928 million to shareholders through share repurchases and dividends in the last four quarters. Since Jan 2000, the company has returned about $10 billion to stakeholders via its share buyback program.
These moves reflect the company’s healthy cash flows and sound financial status and its intention to boost shareholders’ value. It also instills investor confidence in the stock, driving it higher.
Moreover, Kroger gained traction from its better-than-expected fourth-quarter 2013 earnings released on Mar 6, 2014 and its shares have gained 3.4% since then. The company posted quarterly earnings of 78 cents a share that surpassed the Zacks Consensus Estimate of 73 cents, buoyed by its Customer 1st strategy. It also provided upbeat earnings guidance for 2014.
This Zacks Rank #2 (Buy) stock hit a 52-week high of $45.47 yesterday, before closing at $44.96 and amassing a return of 42.7% over the past one year. The company currently trades at a forward P/E of 14.0x, a 4% discount to the peer group average of 14.59x. Moreover, the last traded price is 2.1% below the Zacks Consensus average analyst price target of $45.91, leaving room for the stock’s northward movement.
Going forward, we believe that a predominant position among the nation’s largest grocery retailers will enable Kroger to sustain growth, expand store base and increase market share. It also remains well positioned to deliver higher earnings, primarily through strong super market sales growth.
Apart from Kroger, Foot Locker, Inc. (FL - Snapshot Report), Nordstrom Inc. (JWN - Analyst Report) and Carter's Inc. (CRI - Snapshot Report) also hit 52-week highs of $48.71, $64.19 and $80.02, respectively on Apr 3, 2014.