With sluggish data and an uncertain global outlook, many
investors are delving deeper into U.S. focused stocks. The focus
has largely been on more defensive areas, such as
companies, as these are seen by many as lower volatility choices
that can still participate in any market swings higher.
In particular, investors have been seeing a solid outing from
, which have not only performed well to start the year, but are
well positioned to continue their run in the second half of 2013
In fact, Kroger has already gained over 30% in the YTD time
frame, a pretty incredible figure that has not only crushed the
S&P 500, but has also obliterated expectations for the
grocery store segment as a whole.
Don't be alarmed by the firm's big rise so far this year
though, as there are a few reasons why the trend could continue
in the near term. First, double digit earnings growth is
projected for the next quarter, while the next five years look to
see a 9.2% growth rate, a better level than what was seen in the
trailing five year period.
Earnings estimates have broadly been moving higher for the
company too, but especially so for the current and next year
figures. In these time frames, analysts have universally raised
their estimates, suggesting broad agreement about the KR
Earnings consensus projections are now at elevated levels for
the current and next year figures, as over the past two months
both consensuses have risen by over 6%. While this does mean that
expectations might be tough to match in the coming time frames,
it is important to note that the firm has beaten out earnings
estimates in every one of the last four quarters, so it has a
pretty good track record.
Other Factors to Consider
The earnings picture isn't the only part of KR's story that is
strong though, as the company has a bevy of other fundamental
factors supporting its story as well. Kroger is favorably valued
when compared to other names in the food & staples retailing
industry, as it has a lower P/E, and a minuscule P/S ratio, when
compared to the industry average.
Beyond that, investors should also note that the product has a
very low short interest, coming in below 2%. This suggests that
most investors are in agreement on KR's story in the near term,
and that there isn't a big group betting against the grocer.
And, best of all, the stock is a relatively low beta choice as
its reading on this front comes in at just 0.40. So, even if
markets start to crumble, KR should remain relatively unscathed
making it an interesting defensive pick that is very capable of
Thanks to the robust earnings picture described above, Kroger
has a Zacks Rank of 1 or 'Strong Buy'. This means that we look
for this company to outperform other, lower Ranked, stocks over
the next few months.
While this has already been the case for much of 2013, we
expect this to continue, as there is a great deal of analyst
agreement over the company's story in the short term. And if
somehow that isn't a good enough reason to buy this grocer,
consider that even with its recent run, it is still undervalued
compared to the competition, suggesting that it might not be too
late to jump in on this stock.
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