Kroger Co (NYSE: KR) has reported an earnings per share (EPS) of $0.41 in the third quarter FY 16, which is as per the analysts’ consensus estimates. Kroger has reported 5.6% growth in the revenues from last year to $26.6 billion, beating the analysts’ expectations of $26.33 billion. As a result, the stock surged over 3.3%on December 1st, 2016 (Source: Google finance) and the momentum in the stock could continue, based on analysts from various brokerage houses. According to tipranks.com, 16 analysts has covered the stock while recommend a “Moderate Buy”. KR has an average price target of $36, which is a further upside of 7.91%.
The sales was $25.1 billion in Q3 FY 15. However, the identical supermarket sales growth, excluding fuel and Roundy’s, grew 0.1%, which is well below the estimates for a 0.5% gain. But, the overall sales, excluding fuel, have enhanced 7.1% in the third quarter as compared to the same period last year.
Kroger has reported the gross margin of 22.2% for the third quarter 2016. Kroger has experienced deflation in the third quarter and is focusing and is working on the process changes to lower costs. Additionally, the group’s long-term financial strategy could drive growth leading to strong returns to shareholders. Kroger’s net total debt to adjusted EBITDA ratio has increased to 2.35 in the third quarter 2016, as compared to 1.99 during the same period last year. This is due to the mergers with ModernHEALTH and Roundy’s, Inc. In FY 16, Kroger expects the net total debt to adjusted EBITDA to be near the high end of the company’s targeted range of 2.00 to 2.20.
Other than rising debts concern, Kroger has cut the high end of its FY 16 EPS outlook. KR now expects full year FY 16 adjusted diluted EPS of $2.10 to $2.15, down from $2.10 to $2.20 previous guidance. On an average, the analysts were expecting adjusted diluted EPS of $2.13 per share for the FY 16. Kroger in the FY 16 is expecting the capital investments excluding mergers, acquisitions and purchases of leased facilities to be in the range of $3.6 to $3.9 billion for the year.
On the other hand, Kroger in the fourth quarter is expecting slightly positive identical supermarket sales growth, excluding fuel. This favorable expectation drove the stock yesterday.
Kroger forecasts their net earnings growth to be below their earlier 8% to 11% forecast. But they expect a better second half of 2017 performance. Moreover, Kroger is finishing their business plan process for 2017 and expects both positive identical supermarket sales and net earnings per diluted share growth.