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Kroger (KR) to Report Q2 Earnings: What's in the Cards?

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The Kroger Co. (KR - Free Report) is slated to release second-quarter fiscal 2017 results on Sep 8. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of roughly 1%. In the preceding quarter, the company reported positive earnings surprise. Let’s see how things are shaping up prior to this announcement.

The question lingering in investors’ minds now is whether Kroger will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 41 cents, reflecting a year-over-year decline of roughly 13%. We note that the Zacks Consensus Estimate has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $27,366 million, up 3% from the year-ago quarter.

Factors at Play

Stiff competition, falling comps, volatility in food prices, aggressive promotional environment and waning store traffic are making things tough for Kroger that has underperformed the industry in the past six months. The stock has declined 23.7% compared with the industry’s growth of 7.6%.

Although, the company delivered a positive earnings surprise of 1.8% in the first quarter, earnings per share continued to decline year over year. After falling 4.7% and 7% in the third and fourth quarters of fiscal 2016, respectively, the bottom line plunged 18.3% in the first quarter of fiscal 2017. Subsequently, management trimmed earnings projection. Management envisions fiscal 2017 earnings in the band of $2.00-$2.05 per share down from earlier projection of $2.21-$2.25. The company anticipates earnings per share to decline in the second quarter. The company’s high debt level is also a concern for investors.

Nevertheless, a dominant position among grocery retailers enables Kroger to sustain sales growth, expand store base and boost market share. It has also kept long-term earnings per share growth rate target of 8-11% intact and expects it to attain on the back of customer 1st strategy, effective cost management and share buyback activities.

Kroger Company (The) Price, Consensus and EPS Surprise

 

Kroger Company (The) Price, Consensus and EPS Surprise | Kroger Company (The) Quote

What Does the Zacks Model Unveil?

Our proven model does not conclusively show 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 see the complete list of today’s Zacks #1 Rank stocks here.

Kroger has an Earnings ESP of -2.87% as the Most Accurate estimate is 40 cents, while the Zacks Consensus Estimate is pegged higher at 41 cents. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

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

Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an Earnings ESP of +1.54% and a Zacks Rank #3.

G-III Apparel Group, Ltd. (GIII - Free Report) has an Earnings ESP of +4.76% and a Zacks Rank #3.

V.F. Corporation (VFC - Free Report) has an Earnings ESP of +0.97% and a Zacks Rank #3.

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