Kroger (KR) stock: reasons to be bullish

12:20 pm ET, 12 Sep 2018

Kroger Company (KR) shares are trading at $31.31. What's driving the stock price? What's Kroger stock price forecast, and what should investors know about it?

Kroger Co. has produced a decent return of 47% in the past year. The stock got a boost after the first earnings report when the company beat analyst estimates and also elevated the guidance for the full fiscal year.  The full-year management EPS guidance is $2.00 to $2.15, which is $0.05 higher than the previous committee. 

Bulls boast of the strong local market presence and solid company brands. But a certain portion of investors worries about the declining margins. 

The company has started an initiative called “Restock” which is a data-driven effort around pricing, personalized communications, and revamping of product assortments. The company showed positive results from this initiative in the first earnings report.

Kroger will release its next quarterly results before market open on September 13, 2018. The median revenue estimate is $27.96 billion and EPS estimate is $0.38.

What is the sentiment towards the KR stock? Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending positive;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is positive. 

Kroger Company (KR) forward P/E ratio is 13.88, and it’s high compared to its industry peers’ P/E ratios.

Kroger Company (KR) short share of float is 4.9%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock.

Kroger Company (The) (KR) average analyst price target ($30.36) is -6.41% below its current price ($32.44).

For the latest price and information on Kroger Company (The), please visit Finstead and search for "KR price" or "KR news".

Kroger Company (The) (KR) Stock Guide

Updated at: 6:09 am ET, 17 Sep 2020

Before we start: if you're looking for KR stock price, you can quickly find it out by visiting Finny and typing "KR quote". If you're looking for a quick scoop on KR stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "KR". You'll get all this info in one place. Or you can just type "KR news" to get the latest stock news.

Looking to buy or sell Kroger Company (The) (KR)? Interested in getting the full scoop on KR, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this KR stock guide, we'll address key questions about KR, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are KR earnings?
2. What is KR dividend?
3. What is KR dividend yield?
4. KR buy or sell? What is KR Finny Score?
5. What are the reasons to buy KR? Why should I buy KR stock?
6. What are the reasons to sell KR? Why should I sell KR stock?
7. What are KR key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are KR earnings?

KR trailing 12-month earnings per share (EPS) is $2.59.

2. What is KR dividend?

KR forward dividend is $0.72.

3. What is KR dividend yield?

KR forward dividend yield is 2.02%.

Analysis

4. KR buy or sell? What is KR Finny Score?

#{finnyScore:50}Our quantitative analysis shows 5 reasons to buy and 5 reasons to sell KR, resulting in Finny Score of 50.

5. What are the reasons to buy KR? Why should I buy KR stock?

Here are the reasons to buy KR stock:

  • In the competitive grocery space, unlike its peer set, Kroger has driven positive comparable same-store sales and market share gains consistently for more than a decade.
  • Fifty percent of Kroger’s stores offer gasoline, which helps to insulate the company from e-commerce threats and drive consumers to its physical stores.
  • Kroger benefits from regional market share dominance, maintaining the number-one or -two position in 98 of the 120 markets in which it plays, helping fend off new entrants.
  • A dominant position among the nation’s largest grocery retailers enables Kroger to boost market share by introducing new items, digital coupons, order online pick up in store and smart shopping lists. The company provides customers with 1,091 pickup locations and more than 872 delivery locations. The company has also launched natural and organic e-commerce website KingSoopers.com/LiveNaturally as part of its omni-channel endeavor.
  • The company’s “Restock Kroger” program is reaping results. Kroger commenced “We Are Local” campaign; launched and opened a new restaurant concept, Kitchen 1883; and added two new product lines under “Our Brands” – an apparel brand and a floral line, BLOOM HAUS. The company is also passing the benefit of cost containment to customers by lowering prices.
  • In our view, Kroger’s customer-centric business model provides a strong value proposition to consumers, and is well positioned to deliver higher earnings primarily through strong identical supermarket sales growth (excluding fuel). The company’s Customer 1st strategy that enriches the consumers shopping experience and convinces them of returning to the store is benefiting the company. We believe that the company's operational strategies present enormous opportunities to augment identical supermarket sales and enhance return on invested capital.
  • Management continues to deploy capital to concentrate more on remodels, merchandising, and other viable projects. Kroger remains optimistic about the acquisitions of Vitacost.com, an online retailer of vitamins and health-oriented products; Harris Teeter, a grocery chain, and the merger of Modern HC Holdings with Axium Pharmacy Holdings Inc., a specialty pharmacy. Kroger also acquired Roundy's, the grocery store operator.
  • Kroger is actively managing its capital, returning much of its free cash to shareholders via share buybacks and dividends, and deploying cash flows in opening stores and entry into new markets. Kroger hiked its quarterly dividend by 4.2% to 12.5 cents in June 2017.
  • KR quarterly revenue growth was 11.50%, higher than the industry and sector average revenue growth (1.67% and 1.12%, respectively). See KR revenue growth chart.
  • KR forward dividend yield is 2.02%, higher than the industry (1.17%) and sector (0.62%) forward dividend yields. See KR forward dividend chart.
  • KR Price/Sales ratio is 0.22, which is low compared to its industry peers’ P/S ratios. See KR forward Price/Sales ratio chart.
  • KR cash to debt ratio is 0.13, higher than the average industry (0.10) and sector (0.11) cash to debt ratio. See KR cash to debt chart.
  • KR Enterprise Value/Revenue multiple is 0.36, which is low compared to its industry peers’ Enterprise Value/Revenue multiples. See KR Enterprise Value/Revenue chart.

6. What are the reasons to sell KR? Why should I sell KR stock?

Let's look at the reasons to sell KR stock (i.e., the bear case):

  • The growth of alternative channels, namely online and hard discounters, could challenge Kroger, given a lack of switching costs.
  • With the bulk of sales derived from food, traditional grocers are at a cost disadvantage to others that sell food as a loss leader to drive traffic.
  • Given its outsize exposure to private label (at more than one fourth of sales), Kroger is exposed to volatile commodity costs across many food categories, which can weigh on margins, particularly if the firm is unable to pass these costs on to customers without impairing volume.
  • Stiff competition, volatility in food prices, an aggressive promotional environment and waning store traffic are the primary headwinds with which Kroger is grappling. The grocery business is highly competitive and fragmented, and Kroger faces intense competition from big players such as Amazon, Wal-Mart, Safeway and Supervalu, other conventional retailers and specialty gourmet retailers in respect to price, store expansion and promotional activities. This may dent the company's sales and margins.
  • Most of Kroger's employees are protected by approximately 300 collective bargaining agreements with the unions. Should the company fail to renegotiate new contracts on their expiration with the unions, it could lead to work stoppages and operational disruptions. Kroger contributes to various pension plans arising under collective bargaining agreements. The unfunded nature of these plans could also lower its debt rating.
  • KR stock price ($35.39) is close to the 52-week high ($36.63). Perhaps now is a good time to sell? See KR price chart.
  • KR profitability is declining. The YoY profit margin change was -0.16 percentage points. See KR profitability chart.
  • KR PEG ratio (P/E adjusted for growth) is 2.03, which is high compared to its industry peers’ PEG ratios. See KR PEG chart.
  • KR short share of float is 7.65%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock. See KR short share of float chart.
  • KR short interest (days to cover the shorts) ratio is 8.88. The stock garners more short interest than the average industry, sector or S&P 500 stock. See KR short interest ratio chart.

Key Stats

7. What are KR key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for KR:

Metrics KR
Price $33.53
Average Price Target / Upside N/A
Average Analyst Rating N/A
Forward Dividend Yield 2.02%
Industry Grocery Stores
Sector Consumer Defensive
Number of Employees 449,000
Market Cap $27.54B
Forward P/E Ratio 13.67
Price/Book Ratio 0.22
Revenue (TTM) $126.58B
YoY Quarterly Revenue Growth 11.50%
Profit Margin 1.66%

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