Kroger (KR) is a Zacks #1 Rank (Strong Buy) back to back positive earnings surprises and higher estimates. Value investors will key on low valuation metrics.
Company Description
Kroger Company is one of the larger grocery retailers in the United States. The company also manufactures and processes food for sale by its supermarkets. The company intends to develop new food and convenience store locations and will continue to assess existing stores as to possible replacement, remodeling, enlarging, or closing.
5 Beats in the Last 7 Reports
Of the last seven earnings reports, KR has beaten the Zacks Consensus Estimate. One time there was a miss and one time there was an earnings meet. The October 2010 quarter saw the company report in line with earnings expectations and the stock promptly sold off by 11.5%, the biggest move following earnings over the last seven quarters.
The last two beats of $0.02 in the October 2011 quarter and $0.01 in the January 2012 quarter translate into an average beat of 4%.
KR Recently Reported Earnings
On March 1, 2012 the company reported revenue of $21.4 billion in line with estimates and up from the $19.9 billion posted in the year ago period. In addition, earnings per share came in at $0.50 up from $0.46 posted a year ago and $0.01 ahead of the Zacks Consensus Estimate. As a result, the stock moved higher by more than 1.2%.
Earnings Estimates Bumped Up
Following the most recent earnings report, analysts bumped up their earnings estimates for 2012. The Zacks Consensus Estimate for 2012 EPS moved from $2.21 in January 2012 to the current level of $2.33.
Valuations
KR hits our value screen as it is trading at a discount to the industry average in terms of forward PE. KR carries a 10.47x multiple for forward PE compared to the 10.51x industry average. Value investors tend to look for lower PE and hope for multiple expansion via consistent positive earnings surprises.
The Chart
A quick look at the price and consensus chart shows that analysts have been moving their estimates higher. We can see that the stock closely follows expectations so value investors would probably do well to buy shares of KR. Kroger is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
