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 16% year to date, demonstrating its inherent strength. The company has a long-term earnings growth rate of 9.5%. We believe that it could prove to be a solid bet for investors.
A dominant position among the nation’s largest grocery retailers enables Kroger 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. Kroger’s Customer 1st strategy enriches shopping experience, convincing buyers to return to the store. We expect the company to sustain its earnings growth momentum with the help of this strategy and through its cost-containment efforts.
Kroger has continued with its earnings beat performance for the past six consecutive quarters. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 8.4%, including a positive surprise of 3.3% registered in the first quarter of fiscal 2015. Given the company’s strong identical store sales growth for about 46 straight quarters and better-than-expected bottom-line performance, we believe that Kroger is poised to achieve its long-term earnings per share growth rate target of 8%–11%.
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. Management continues to deploy capital to concentrate more on remodels, merchandising and other viable projects.
Favorably Ranked Stocks
Other favorably ranked stocks include Campbell Soup Company CPB, McCormick & Company, Incorporated MKC and Post Holdings, Inc. POST, all carrying a Zacks Rank #2.
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