What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on June 17, 2021, Kroger reported EPS of $1.19 versus consensus estimate of $0.99 while it beat the consensus revenue estimate by 5.29%.
For the current fiscal year, Kroger is expected to post earnings of $3.07 per share on $132.24 billion in revenues. This represents a -11.53% change in EPS on a -0.2% change in revenues. For the next fiscal year, the company is expected to earn $3.15 per share on $134.78 billion in revenues. This represents a year-over-year change of 2.53% and 1.92%, respectively.
Kroger may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Kroger has a Value Score of A. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 15.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 5.9X versus its peer group's average of 6.5X. Additionally, the stock has a PEG ratio of 1.82. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Kroger currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Kroger passes the test. Thus, it seems as though Kroger shares could have a bit more room to run in the near term.
How Does Kroger Stack Up to the Competition?
Shares of Kroger have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including J. Sainsbury (JSAIY), Walmart (WMT), and Papa Johns International (PZZA), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 47% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Kroger, even beyond its own solid fundamental situation.
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The Kroger Co. (KR): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
Papa Johns International, Inc. (PZZA): Free Stock Analysis Report
J. Sainsbury PLC (JSAIY): Free Stock Analysis Report
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