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Higher Revenues Likely to Drive Kroger's (KR) Q4 Earnings

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The Kroger Co. (KR - Free Report) is slated to release fourth-quarter fiscal 2017 results on Mar 8. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of roughly 2.3%. In the preceding quarter, the company delivered positive earnings surprise of 10%. Let’s see how things are shaping up prior to this announcement.

Investors are keeping their fingers crossed and hoping for a positive earnings surprise from Kroger in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 63 cents, reflecting a year-over-year increase of roughly 19%. We observe that the Zacks Consensus Estimate has increased by a penny in the past seven days. Analysts polled by Zacks expect revenues of $30,830 million, up approximately 12% from the year-ago quarter.

If Kroger posts better-than-expected results, this will be the company’s sixth straight quarter of revenue beat and second successive quarter of positive earnings surprise. Moreover, going by aforementioned estimates it is quite evident that the rate of growth of top and bottom lines is likely to accelerate from 4.5% and 7.3%, respectively, registered in the third quarter of fiscal 2017.

Which Factors Hold Key to Kroger’s Performance?

The grocery industry has been undergoing a fundamental change, with technology playing a major role and the focus shifting to online shopping. Kroger has taken the stock of the situation and is in the process of giving itself a complete makeover. The company is expanding store base, introducing new items, digital coupons, and order online, pick up in store initiative. The company’s “Restock Kroger” program is also gaining traction. These endeavors are likely to fuel top-line growth. The company in collaboration with Chase Pay is offering mobile payments in select markets.

Kroger is looking to expand its “Scan, Bag, Pay & Go and Self-CheckOut” program — piloted at 20 stores — to nearly 400 locations in 2018. Further, Ralphs — a unit of grocery giant — in partnership with Instacart is offering home delivery at select locations. The company also remains optimistic about the acquisitions of Vitacost.com, an online retailer of vitamins and health-oriented products; Harris Teeter, a grocery chain, and the merger of Modern HC Holdings with Axium Pharmacy Holdings Inc., a specialty pharmacy. Kroger also acquired Roundy's, the grocery store operator.

Kroger’s Customer 1st strategy that enriches the consumers shopping experience and convinces them of returning to the store is also benefiting the company. We believe that the company's operational strategies present enormous opportunities to augment identical supermarket sales, alleviate gross margin pressure, improve operating margin and enhance return on invested capital. The company envisions fourth-quarter identical supermarket sales growth, excluding fuel, to surpass 1.1%.

Kroger Company (The) Price, Consensus and EPS Surprise

 

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

What the Zacks Model Unveils?

Our proven model does not conclusively shows that Kroger is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — 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 a Zacks Rank #2 but an Earnings ESP of -0.33%. Consequently, making surprise prediction difficult.

Other Stocks With Favorable Combination

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

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +4.08% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ross Stores (ROST - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #2.

Urban Outfitters (URBN - Free Report) has an Earnings ESP of +0.85% and a Zacks Rank #3.

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