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We expect The Kroger Co. (KR - Analyst Report), one of the largest grocery retailers, to beat expectations when it reports first-quarter fiscal 2014 results before the market opens on Jun 19, 2014. In the last quarter, it posted a positive surprise of 6.9%.                                  

Why a Likely Positive Surprise?

Our proven model shows that Kroger is likely to beat earnings because it has the right combination of two key components.  

Positive Zacks ESP: Kroger currently has an Earnings ESP of +1.91%. This is because the Most Accurate estimate stands at $1.07, while the Zacks Consensus Estimate is pegged at $1.05.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Kroger’s Zacks Rank #2 (Buy) and +1.91% ESP makes us very confident regarding a positive earnings beat on Jun 19.

What is Driving the Better-than-Expected Earnings?

A dominant position among the nation’s largest grocery retailers enables Kroger to sustain growth, expand store base and boost market share. It also remains well positioned to deliver higher earnings, primarily through strong super market sales growth. Management also continues to deploy capital to concentrate more on remodeling, merchandising, and other viable projects.

The company, in the last four quarters, has outperformed the Zacks Consensus Estimate by an average of 4.4%.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements:

Red Robin Gourmet Burgers Inc. (RRGB - Analyst Report) has an Earnings ESP of +1.11% and holds a Zacks Rank #2 (Buy).

The Hain Celestial Group, Inc. (HAIN - Analyst Report) has an Earnings ESP of +1.12% and a Zacks Rank #2 (Buy).

Macy's, Inc. (M - Analyst Report) has an Earnings ESP of +1.16% and a Zacks Rank #3 (Hold).

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