Is Kroger Poised to Have Another Phenomenal Year?

Retail

Published: March 5, 2015 10:25 am

Last Updated: March 5, 2015 10:26 am

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Kroger Co. (NYSE: KR) reported its fiscal fourth-quarter financial results before the markets opened Thursday. This quarter marks the 45th consecutive quarter of positive same-store sales growth, not including fuel sales.

The giant grocer said it had $1.04 in earnings per share (EPS) and $25.21 billion in revenue, compared to Thomson Reuters consensus estimates of $0.90 in EPS and revenue of $25.13 billion. In the fourth quarter of the previous year, Kroger posted EPS of $0.78 and $23.22 billion in revenue.

For the 2015 fiscal year, Kroger anticipates same-store sales growth, excluding fuel, of approximately 3.0% to 4.0%. Also net earnings for 2015 are expected to range from $3.80 to $3.90 per diluted share. The consensus estimates are $3.72 in EPS and $112.45 billion in revenue.

Kroger’s strong financial position enabled it to return over $1.6 billion to shareholders through share buybacks and dividends in 2014. During the fiscal year, Kroger repurchased 28.4 million common shares, for a total investment of $1.3 billion. Capital investments, excluding mergers, acquisitions and purchases of leased facilities, totaled $2.8 billion for the year, compared to $2.3 billion in 2013.

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Rodney McMullen, chief executive and chairman of Kroger, said:

While improved fuel margins contributed to our results in the second half of the year, our core operating performance without fuel shows that our associates are improving our relationship with customers in ways that grow loyalty and generate strong shareholder returns.

Kroger’s consistent Customer 1st performance is expanding our business, creating opportunity for associates and generating value for our shareholders. We created nearly 25,000 new jobs last year, and I am especially proud that our commitment to hiring veterans resulted in more than 6,000 veterans joining our company last year.

A few analysts weighed in on the giant grocer in the two weeks prior to earnings:

Oppenheimer has a Buy rating and set its price target $80, implying an upside of 15% compared to current prices.
Vetr upgraded Kroger to a Sell rating from a Strong Sell, with a price target of $57, implying a downside of 18%.
Jefferies reiterated a Hold rating and slightly raised its price target to $67 from $66, implying a downside of 5%.

Thursday morning, shares of Kroger hit a new 52-week high of $74.32, up more than 6% on the day. Note that the stock has a consensus analyst price target of only $70.88. The 52-week low is $43.02.

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