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Kroger (KR) on Growth Track, Exhibits Operational Strength
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A prudent investment decision involves buying stocks that offer solid prospects and selling those that appear risky. Again, at times it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions. These stocks rally as soon as the market enters into a correction mode. Here we have discussed one such stock, The Kroger Co. (KR - Free Report) , with expected long-term earnings per share growth rate of 9.5% and a VGM Score of “A”.
Hidden Catalysts
A dominant position among the nation’s largest grocery retailers enables Kroger to sustain growth in both top and bottom lines, expand its store base, and boost market share by introducing new items and digital coupons, along with the order online, pick up in store initiative. Further, it remains well positioned to deliver higher earnings, primarily through strong identical supermarket sales growth.
We believe that given the robust identical supermarket sales growth (excluding fuel) for about 50 successive quarters and better-than-expected bottom-line performance for 10 consecutive quarters, Kroger is poised to achieve its long-term earnings per share growth rate target of 8%−11%. We expect the company to sustain its earnings growth momentum, buoyed by the Customer 1st strategy, effective cost management and share repurchase activities.
Hurdles to Overcome
Total sales fell short of the Zacks Consensus Estimate for the fifth straight quarter, when Kroger reported first-quarter fiscal 2016 results. Intensifying price war among grocery stores to lure budget-constrained consumers may be cited as one of the reasons behind the lower-than-expected sales performance.
Moreover, higher debt-to-capitalization ratio remains a cause of concern. Kroger ended the first quarter of fiscal 2016 with a total debt of $12,386 million, reflecting a high debt-to-capitalization ratio of approximately 66% which could adversely affect its credit worthiness.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
Investors may consider better-ranked stocks such as Wal-Mart Stores Inc. (WMT - Free Report) , Burlington Stores, Inc. (BURL - Free Report) and Dollar General Corporation (DG - Free Report) , all carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Kroger (KR) on Growth Track, Exhibits Operational Strength
A prudent investment decision involves buying stocks that offer solid prospects and selling those that appear risky. Again, at times it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions. These stocks rally as soon as the market enters into a correction mode. Here we have discussed one such stock, The Kroger Co. (KR - Free Report) , with expected long-term earnings per share growth rate of 9.5% and a VGM Score of “A”.
Hidden Catalysts
A dominant position among the nation’s largest grocery retailers enables Kroger to sustain growth in both top and bottom lines, expand its store base, and boost market share by introducing new items and digital coupons, along with the order online, pick up in store initiative. Further, it remains well positioned to deliver higher earnings, primarily through strong identical supermarket sales growth.
We believe that given the robust identical supermarket sales growth (excluding fuel) for about 50 successive quarters and better-than-expected bottom-line performance for 10 consecutive quarters, Kroger is poised to achieve its long-term earnings per share growth rate target of 8%−11%. We expect the company to sustain its earnings growth momentum, buoyed by the Customer 1st strategy, effective cost management and share repurchase activities.
Hurdles to Overcome
Total sales fell short of the Zacks Consensus Estimate for the fifth straight quarter, when Kroger reported first-quarter fiscal 2016 results. Intensifying price war among grocery stores to lure budget-constrained consumers may be cited as one of the reasons behind the lower-than-expected sales performance.
Moreover, higher debt-to-capitalization ratio remains a cause of concern. Kroger ended the first quarter of fiscal 2016 with a total debt of $12,386 million, reflecting a high debt-to-capitalization ratio of approximately 66% which could adversely affect its credit worthiness.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
KROGER CO Price, Consensus and EPS Surprise
KROGER CO Price, Consensus and EPS Surprise | KROGER CO Quote
Stocks that Warrant a Look
Investors may consider better-ranked stocks such as Wal-Mart Stores Inc. (WMT - Free Report) , Burlington Stores, Inc. (BURL - Free Report) and Dollar General Corporation (DG - Free Report) , all carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>