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Factors Likely to Decide Kroger's (KR) Fate in Q3 Earnings

The Kroger Co.KR is slated to release third-quarter fiscal 2017 results on Nov 30. In the trailing four quarters, it underperformed the Zacks Consensus Estimate by an average of roughly 0.8%. In the preceding quarter, the company reported negative earnings surprise of 2.5%. Let's see how things are shaping up prior to this announcement.

Factors at Play

A dominant position among the nation's largest grocery retailers enables Kroger to boost market share by expanding store base, introducing new items, digital coupons, and order online, pick up in store initiative. We believe that the company's operational strategies present enormous opportunities to augment identical supermarket sales and enhance return on invested capital. Per analysts surveyed by Zacks, identical supermarket sales, excluding fuel center sales, is likely to increase by 7.1% to $22,444 million during the third quarter.

Kroger's top - line has been also benefiting from Customer 1st strategy, digital efforts and recent buyouts. Third-quarter revenue is projected to come in at $27,307 million, up 2.8% year over year.

However, stiff competition, volatility in food prices, an aggressive promotional environment and waning store traffic remain the primary headwinds with which Kroger is grappling. Moreover, higher investments in new services and compelling pricing strategy may also hurt margins. We observed that the company's bottom - line have been declining for quite some time now.

After falling 4.7% and 7% in the third and fourth quarters of fiscal 2016, respectively, bottom line plunged 18.3% and 17% in the first and second quarters of fiscal 2017, respectively. The Zacks Consensus Estimate for the quarter under review is currently pegged at 40 cents, a penny lower than the prior-year quarter figure.

Kroger Company (The) Price, Consensus and EPS Surprise

Kroger Company (The) Price, Consensus and EPS Surprise | Kroger Company (The) Quote

What the Zacks Model Unveils?

Our proven model shows that Kroger is likely to beat estimates this quarter. This is because a stock needs to have both - a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Kroger has an Earnings ESP of +3.33% and carries a Zacks Rank #3. This makes us reasonably confident that the bottom line is likely to outperform estimates.

Other Stocks With Favorable Combination

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

Zumiez Inc. ZUMZ has an Earnings ESP of +0.69% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +1.04% and a Zacks Rank #2.

G-III Apparel Group, Ltd. GIII has an Earnings ESP of +1.44% and a Zacks Rank #3.

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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.


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

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