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Analyst Blog

Shares of The Kroger Company (KR - Analyst Report) recorded a new 52-week high of $33.76 yesterday, rising roughly 28.7% year to date. Based on a current price of $33.76, Kroger is 8.4% above the Zacks Consensus average analyst price target of $31.14.

Moreover, it currently trades at a forward P/E of 12.20x, at par with the peer group average. Additionally, the company’s long-term estimated EPS growth rate is 9.2%, which is relatively healthy.

We note that the company’s share prices has been rising consistently since it reported solid fourth-quarter fiscal 2012 results on Mar 7. Kroger’s fourth-quarter fiscal 2012 earnings of 88 cents per share surpassed the Zacks Consensus Estimate of 70 cents and jumped 76% year over year. Total sales (including fuel center sales) climbed 12.8% to $24,153.1 million from the prior-year quarter, and came ahead of the Zacks Consensus Estimate of $24,053 million.

Kroger’s dominant position among the nation’s largest grocery retailers enables it to sustain growth in its top and bottom lines, expand store base, and boost market share.

Kroger’s Customer 1st strategy provides a strong value proposition to consumers. The company’s value offerings further facilitate it to retain customers and in turn position it well in the highly competitive and fragmented grocery business where it faces stiff competition from Costco Wholesale Corporation (COST), Target Corporation (TGT) and Wal-Mart Stores Inc. (WMT).

These initiatives have augured well for the company, aiding its performance and leading to better-than-expected results. The company’s earnings surprise history evidently suggests that Kroger has outpaced the Zacks Consensus Estimate in the last 4 quarters by an average of 11.3%.

Going forward, Kroger envisions fiscal 2013 earnings ranging from $2.71 – $2.79 per share, reflecting year-over-year growth in the range of 8% – 11%. The company expects identical supermarket sales (excluding fuel) growth of 2.5% – 3.5% for fiscal 2013.

Currently, Kroger holds a Zacks Rank #2 (Buy).

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