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Here's How Kroger (KR) Looks Just Ahead of Q2 Earnings

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The Kroger Co. (KR - Free Report) is likely to register an increase in the top line when it reports second-quarter fiscal 2020 results on Sep 11, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $29,663 million, indicating growth of 5.3% from the prior-year reported figure.

Further, the bottom line of this operator of supermarket chain is expected to improve year over year. We note that the Zacks Consensus Estimate for earnings for the quarter under review has been stable at 50 cents over the past 30 days. The figure suggests an improvement of 13.6% from the year-ago quarter.

Notably, the company has a trailing four-quarter earnings surprise of 4%, on average. In the last reported quarter, this Cincinnati, OH-based company’s bottom line surpassed the Zacks Consensus Estimate by 8.9%.

Key Factors to Note

Kroger, which operates in the thin-margin grocery industry, has been making every effort to strengthen position not only with respect to products but also in terms of consumers’ preference with regards to shopping grocery. The company has been focusing on plant-based products and eyeing technological expansion.

The company’s “Restock Kroger” program involving investments in omni-channel platform, identifying margin-rich alternative profit streams, merchandise optimization, and lowering of expenses have been gaining traction. Notably, the company has been prioritizing actions to resonate well with the prevailing crisis and burgeoning demand for necessary commodities. Realizing the need of the hour, the company has been offering a no-contact delivery option, low-contact pickup service and ship-to-home orders. Cumulatively, these have been aiding identical supermarket sales.

On its last earnings call management guided identical sales, excluding fuel, to increase at an elevated level during the second quarter. It projected second-quarter earnings per share growth in the mid-to-high single digit range.

While aforementioned factors raise optimism, stiff competition in the grocery segment and an aggressive promotional environment remain primary headwinds. Again, any incremental investments and higher freight expenses are likely to show on margins. Fuel is likely to have been a significant impediment. On its last earnings call management stated that considering the fuel performance, it anticipates headwind of anywhere between $50 million and $100 million.

The Kroger Co. Price, Consensus and EPS Surprise

The Kroger Co. Price, Consensus and EPS Surprise

The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Kroger this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Kroger carries a Zacks Rank #2 but an Earnings ESP of 0.00%.

Stocks With Favorable Combination

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

RH (RH - Free Report) has an Earnings ESP of +13.47% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darden Restaurants (DRI - Free Report) has an Earnings ESP of +67.17% and a Zacks Rank #2.

Costco (COST - Free Report) has an Earnings ESP of +2.50% and a Zacks Rank #3.

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