Kroger’s EPS growth
In the first three quarters of 2018, Kroger (KR) posted adjusted EPS of $1.62, which represents growth of 14.9% from $1.41 in the corresponding three quarters of 2017. The revenue growth and share repurchases drove the company’s EPS during the period, which was partially offset by a decline in its net margin.
During the period, the company’s net margin fell marginally from 1.5% to 1.4% due to a decline in gross margins, which was partially offset by lower operating, general, and administrative expenses and a lower effective tax rate.
Kroger has repurchased 78.4 million shares for $2.0 billion in the first three quarters of 2018. By the end of the third quarter of 2018, the company had ~$546 million available under its share repurchase program. Share repurchases drive the company’s EPS by lowering the number of shares outstanding.
In the fourth quarter, analysts expect Kroger to post adjusted EPS of $0.49 to take the company’s EPS for 2018 to $2.14, which represents growth of 4.7% from $2.04 in 2017. For 2018, management has set its EPS guidance in the range of $2.00 to $2.15.
Analysts’ EPS expectations for 2019
For 2019, analysts expect Kroger to post adjusted EPS of $2.26, which represents a growth of 5.9% from $2.14 in 2018. The revenue growth and share repurchases are likely to drive the company’s EPS growth in 2019. The net margin is expected to remain unchanged at 1.4%.
Target is expected to post EPS growth of 4.0% while Walmart’s is likely to fall 2.6%.