Kroger (KR) Looks Strong from Earnings Beat Perspective - Analyst Blog

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A dominant position among the nation's largest grocery retailers enables The Kroger Co. ( KR ) to expand its store base and boost market share through product launches. The company's strong corporate and national brands have helped garner customers' loyalty.

The company has been performing remarkably well with regard to both its revenues and earnings. Following the company's strong performance, this Zacks Rank #2 (Buy) stock has surged roughly 67% year-to-date, demonstrating its inherent strength. We believe that it could prove to be a solid bet for investors.

We remain optimistic about the company as the acquisition of Harris Teeter Supermarkets is aiding Kroger to expand its footprint in high-growth markets, resulting in top-line growth of 11.2% during the third quarter of fiscal 2014 when compared with the corresponding period last year.

Additionally, its acquisition of Vitacost.com has given an edge to the company by helping it penetrate into the online retail market, thus reaching out to busier customers through online shopping and home delivery.

Moreover, Kroger, which competes with Target Corp. ( TGT ), remains well positioned to perform better than its rivals due to its Customer 1st strategy which enriches consumers' shopping experience and convinces them to return to the store. We expect the company to sustain its earnings growth momentum with this strategy.

Moving on, we also notice that over the trailing 13 quarters, Kroger has beaten the Zacks Consensus Estimate in 12 quarters while being in line with the consensus in only one. The average earnings beat over these 13 quarters comes to an impressive 6.5%.

We believe that given the company's strong identical-store sales growth for about 44 successive quarters and better-than-expected bottom-line performance, Kroger is poised to achieve its long-term earnings per share growth rate target of 8%-11%.

Management now projects fiscal 2014 earnings between $3.32 and $3.36 per share, up from its earlier projection of a range of $3.22-$3.28 due to its exceptional results with regard to both revenue and earnings of $24,987 million and 73 cents per share, respectively, for the last reported quarter.

Hence, the company looks promising as it has enormous opportunities to augment identical supermarket sales, alleviate gross margin pressure, improve operating margin and enhance return on invested capital. Management continues to deploy capital to concentrate more on remodels, merchandising and other viable projects.

Other Stocks that Warrant a Look

Other stocks worth considering in the grocery retail sector are Ingles Markets, Incorporated ( IMKTA ), sporting a Zacks Rank #1 (Strong Buy) and Safeway Inc. ( SWY ), carrying a Zacks Rank #2.

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KROGER CO (KR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: KR , TGT , IMKTA

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