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Should You Buy Kroger (KR) Stock Before Q3 Earnings?

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The third quarter has been strong for retailers from Walmart (WMT - Free Report) to Macy’s (M - Free Report) . With that said, grocery power Kroger (KR - Free Report) is one of the last massive retailers to report its Q3 earnings results later this week. So, let’s see what to expect from Kroger to understand if KR stock might be worth buying.  

Overview

At this point, roughly 90% of the S&P 500’s retail sector has reported their quarterly earnings results, with total earnings for these retailers up 27.1% from the year-ago quarter on 6.8% higher revenues. But what does this mean for Kroger as it fights against Target (TGT - Free Report) , Walmart, Costco (COST - Free Report) , and others in the age of Amazon (AMZN - Free Report) ?

Kroger currently offers online ordering and curbside pickup through its ClickList service. The Cincinnati-based company has also expanded its partnership with grocery delivery startup Instacart, which works with the likes of CVS (CVS - Free Report) , as part of its Restock push. The company is also ready to roll out meal kit offerings after it purchased private meal kit firm Home Chef in an effort to compete against the likes of Blue Apron (APRN - Free Report) .

Plus, Kroger is currently working with Nuro to pilot autonomous grocery delivery.  On top of that, Kroger partnered Chinese e-commerce behemoth Alibaba (BABA - Free Report) to sell some of its brands in China. And the grocery firm announced a few weeks ago that it identified the location of its new “automated warehouse facility with digital and robotic capabilities.” Kroger said it will spend $55 million to build its first high-tech customer fulfillment center along with Ocado, and plans to build a total of 20.

Price Movement

Cleary, Kroger seems ready to adapt and thrive in a quickly changing retail landscape. Yet, we should note that despite KR’s solid 10% climb over the last 52 weeks, Kroger stock sits below its 52-week high and far behind its all-time high. Kroger stock closed regular trading Monday at $29.75 per share. This marked a roughly 9% downturn from its 12-month high, and sets up what could prove to be a solid buying opportunity for investors high on Kroger stock.

 

Outlook & Earnings Trends

Kroger, which currently boasts 2,800 stores, saw its Q2 revenues pop roughly 1% to $27.87 billion. Looking ahead, the company’s third-quarter revenues are projected to dip by 0.61% to reach $27.58 billion, based on our current Zacks Consensus Estimate. Plus, the company’s full-year revenues are expected to sink by nearly 1%.

At the bottom end of the income statement, KR is expected to see its adjusted quarterly earnings slip by 2.3% to $0.43 per share. Investors can also see that the company’s earnings estimate revisions have trended more heavily in the wrong direction recently.

 

Bottom Line

Kroger is currently a Zacks Rank #3 (Hold) and sports an “A” grade for Value and a “B” for Momentum in our Style Scores system. The company has also started to roll out its plans for the future. Yet, it seems like KR stock might be one to stay away from ahead of earnings based on its top and bottom-line outlook and its recent earnings revision trends.

Kroger is set to release its Q3 financial results before the opening bell on Thursday.

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