What's Next for Kroger Stock's Recent Rally?

Analyzing KR's fundamentals, earnings, and stock performance

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Kroger Co (NYSE:KR) is an American retail company and one of the largest supermarkets in the United States. Kroger operates 2,800 retail food stores under a variety of banner names, as well as pharmacies and fuel centers. KR maintains markets in 35 different states.

Kroger stock is up over 17% year-over-year and boasts a 28.3% year-to-date lead. The equity just came off a six-month high of $41.95 on July 30, and it looks like the stock is finding support at its 10-day moving average today. Plus, Kroger offers a forward dividend of $0.84 and a dividend yield of 2.06%.

kr chart aug 2

In recent history on the fundamentals side of stock analysis, Kroger has been a consistent winner when it comes to earnings, beating expectations on all four of its most recently released quarterly earnings reports. Analysts covering the stock expect that Kroger’s earnings per share (EPS) will be coming in at $0.63 on the company's third-quarter earnings report, marking a significant drop compared to its second quarter.

For the third quarter of 2020, KR beat analysts’ estimates by a margin of $0.18, reporting an EPS of $0.73. For the fourth quarter of 2020, Kroger's EPS decreased to $0.71, but the supermarket chain managed to beat expectations by a margin of $0.04. For the first quarter of 2021, KR posted had an increase in earnings, rising to $0.81 per share and beating estimates by a margin of $0.12. For the second quarter of 2021, Kroger reported an EPS of $1.19 and beat expectations by a margin of $0.18.

Kroger stock has a price-earnings ratio of 21.10 and a forward price-earnings ratio of 13.77, making Kroger stock a potential value play. KR has struggled to show consistency with its revenue and net income growth, most notably experiencing a 47% net income decrease for the full fiscal year of 2019. In addition, Kroger's trailing 12-month revenues are down slightly, and its trailing 12-month net income has decreased by a massive 41% compared to what was reported for the fiscal year of 2020. Overall, Kroger stock is likely best suited for investor looking for low volatility and passive dividends.

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