A dominant position among the nation’s largest grocery retailers enables The Kroger Co. (KR - Free Report) to sustain growth in both top and bottom lines, expand its store base, and boost market share by introducing new items, digital coupons, along with the order online, pick up in store initiative. It also 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.
Kroger’s first-quarter fiscal 2016 earnings of 70 cents a share beat the Zacks Consensus Estimate by a penny and surged 12.9% from 62 cents earned in the prior-year quarter. Management reiterated its fiscal 2016 earnings per share projection of $2.19–$2.28. It further hinted that earnings may come at the low end to mid-point of this range based on current fuel margin trends.
Total sales (including fuel center sales and Roundy's Inc.) grew 4.7% to $34,604 million in the first quarter but missed the Zacks Consensus Estimate of $34,663 million. This was the fifth straight quarter in which the company’s sales fell short of the Zacks Consensus Estimate. 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).
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 Fred's, Inc. all carrying a Zacks Rank #2 (Buy).
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
A dominant position among the nation’s largest grocery retailers enables The Kroger Co. (KR - Free Report) to sustain growth in both top and bottom lines, expand its store base, and boost market share by introducing new items, digital coupons, along with the order online, pick up in store initiative. It also 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.
Kroger’s first-quarter fiscal 2016 earnings of 70 cents a share beat the Zacks Consensus Estimate by a penny and surged 12.9% from 62 cents earned in the prior-year quarter. Management reiterated its fiscal 2016 earnings per share projection of $2.19–$2.28. It further hinted that earnings may come at the low end to mid-point of this range based on current fuel margin trends.
Total sales (including fuel center sales and Roundy's Inc.) grew 4.7% to $34,604 million in the first quarter but missed the Zacks Consensus Estimate of $34,663 million. This was the fifth straight quarter in which the company’s sales fell short of the Zacks Consensus Estimate. 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).
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 Fred's, Inc. 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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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