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Kroger Stock Rose Due to Third-Quarter Earnings Beat

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Dec. 7 2018, Updated 11:42 a.m. ET

Third-quarter performance

Kroger (KR) posted its third-quarter earnings on December 6. For the quarter ending on November 10, the company posted an adjusted EPS of $0.48 on revenues of $27.67 billion. The company’s adjusted EPS grew 9.1% year-over-year, while its revenues declined 0.3%.

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Stock performance

For the third quarter, Kroger outperformed analysts’ EPS expectation of $0.43 and revenue estimate of $27.66 billion. The company’s alternative revenue streams, Kroger Personal Finance and Kroger Precision Marketing, had strong performances during the quarter. However, the company’s SSSG (same-store sales growth) was 1.6%—slightly lower than analysts’ expectation of 1.7%.

Management credited Kroger’s early execution of the Restock Kroger initiative for its better-than-expected third-quarter earnings. The strong third-quarter earnings and 60% growth in the company’s digital sales appear to have increased investors’ confidence, which led to a rise in the stock price. On December 6, the company’s stock price rose to a high of $29.66 before closing at $29.56, which represents a rise of 3.2% from the previous day’s closing price.

YTD performance

Kroger has returned 7.7% YTD (year-to-date). During the same period, Target (TGT) and Walmart (WMT) have returned 6.5% and -4.0%, respectively. The broader comparative index, the First Trust Consumer Staples AlphaDEX ETF (FXG), which invests 24.8% of its holdings in grocery and drug store companies, has declined 5.5%.

Series overview

In this series, we’ll analyze Kroger’s third-quarter performance compared to analysts’ expectations. We’ll discuss management’s guidance and analysts’ expectations for 2018. We’ll look at Kroger’s valuation multiple and analysts’ recommendations.

Next, we’ll discuss Kroger’s revenues in the third quarter.

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