Kroger Co (NYSE: KR) has reported the adjusted earnings per share of $0.53 in the fourth quarter 2016, beating the analysts’ estimates for the adjusted earnings per share of $0.52. The company had reported the adjusted revenue growth of 5.5 percent to $27.6 billion in the fourth quarter 2016, beating the analysts’ estimates for revenue of $27.36 billion. The sales grew due to the recent mergers with Roundy’s and ModernHEALTH, which has contributed to this growth.
In 2016, Kroger has repurchased $1.8 billion in common shares, paid $429 million in dividends, invested $3.6 billion in capital, and merged with ModernHEALTH for approximately $390 million. The capital investments, excluding mergers, acquisitions, and purchases of leased facilities, had totaled $3.6 billion for the year, compared to $3.3 billion in 2015. Further, the return on invested capital for 2016 was 13.09%. This result was affected by current year results and recently merged companies.
On the other hand, for the full year 2017, KR expects the earnings per share to be in the range of $2.21 to $2.25. KR expects in 2017 the identical supermarket sales, excluding fuel, to be range from flat to 1% growth. As a result, the stock fell over 4.2% in the pre-market session today (on March 2nd, 2017; Source: Google finance).
The operating environment in the first half of 2017 is expected to be similar to the second half of 2016. The company’s results in the second half of 2017 are expected to show improvement as the company cycles the previous year. In addition, KR expects the capital investments, excluding mergers, acquisitions, and purchases of leased facilities, to be in the $3.2 to $3.5 billion range for 2017. Over the long term, KR is committed to achieving net earnings per diluted share growth rate of 8 – 11%, plus a growing dividend.
KR like most grocers has struggled with food price deflation dating back to the middle of last year. That had hampered its same-store sales growth and cut into profits. However, the pricing is expected to improve in the coming months, which will boost its profit margins. This projection is based on easing comparisons, USDA (Department of Agriculture) forecasts for a return of food inflation and on increased demand in a more favorable macro-economic environment.
Meanwhile, KR has expanded its home delivery service to a second market and is planning the long-awaited addition of more areas. The company expects to soon announce a home delivery service across a much broader segment of its national market than where it operates the service now.
KR stock has fallen 18.73% in the last year (source: Google Finance). As per tipranks.com, 5 analysts has covered the stock while recommending a “Moderate Buy”. KR has an average price target of $36.25, which is a further upside of 13.07%.