Is The Kroger Co. (KR) part of your portfolio? If not, then this is the right time to add the stock as it looks very promising. Moreover, the underlying factors are capable of carrying the momentum further. The stock carries a Zacks Rank #2 (Buy) and has surged roughly 73% in the past one year, demonstrating its inherent strength. The stock also hit a 52-week high of $66.98 last Friday, reflecting its current bullish trend.
The company’s primary strength is its earnings surprise history. In 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%, including 13.1% in the last reported quarter.
Kroger posted third-quarter fiscal 2014 earnings of 69 cents a share that beat the Zacks Consensus Estimate of 61 cents, and surged 30.2% from 53 cents earned in the prior-year quarter, aided by its Customer 1st Strategy, increase in sales and strong fuel margins. The acquisition of Harris Teeter also supported the bottom line.
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 who prefer online shopping and home delivery.
We believe that the company has enormous opportunities to augment identical supermarket sales, alleviate gross margin pressure, improve operating margin and enhance return on invested capital. Moreover, management continues to deploy capital to concentrate more on remodels, merchandising and other viable projects. The strong fundamentals, along with the company’s long-term earnings per share growth rate of 11.5%, could prove to be a solid bet for investors.
Other Stocks That Warrant a Look
Other favorably ranked stocks include SUPERVALU Inc. (SVU), sporting a Zacks Rank #1 (Strong Buy), J&J Snack Foods Corp. (JJSF) and McCormick & Company, Inc. (MKC), both carrying a Zacks Rank #2.
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