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Kroger (KR) Likely to Top Q3 Earnings: Stock to Gain?

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The Kroger Co. (KR - Free Report) is slated to release third-quarter fiscal 2016 results on Dec 1. The question lingering in investors’ minds is whether the company will be able to continue with its positive earnings surprise streak in the quarter to be reported. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 5.4%. Let’s see how things are shaping up prior to this announcement.

Zacks Model Shows Likely Earnings Beat

Our proven model shows that Kroger is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Kroger has an Earnings ESP of 2.38% as the Most Accurate estimate stands at 43 cents, while the Zacks Consensus Estimate is pegged lower at 42 cents. So, the positive ESP and the company’s Zacks Rank #3 make us reasonably confident of an earnings beat.

Factors Influencing this Quarter

A dominant position among the nation’s largest grocery retailers enables Kroger to sustain growth, expand store base and boost market share. Further, the company remains well positioned to deliver higher earnings, primarily through strong identical supermarket sales growth. We believe there are huge opportunities to augment identical supermarket sales, alleviate gross margin pressure and improve operating margin. In our view, Kroger’s long-term earnings per share growth rate target of 8% to 11% seems achievable. However, stiff competition, deflationary environment and cautious consumer spending are making things tough for Kroger. Moreover, despite registering an increase of 4% in the second quarter, total sales fell short of the estimate for the sixth straight quarter.

KROGER CO Price, Consensus and EPS Surprise

 

KROGER CO Price, Consensus and EPS Surprise | KROGER CO Quote

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Sanderson Farms, Inc. has an Earnings ESP of +4.48% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ascena Retail Group Inc. has an Earnings ESP of +14.29% and a Zacks Rank #3.

Express Inc. has an Earnings ESP of + 8.33% and a Zacks Rank #3.

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