What's Coming For Kroger? Oppenheimer Answers

In a report published Tuesday, Oppenheimer analysts Rupesh Parikh and Erica Eiler provided a preview of Kroger Co KR’s first quarter earnings, to be announced on Thursday.

The experts say they have been looking at the company’s prospects favorably for some time now, and continue to select it as one of their top picks in the space. Consequently, they maintain an Outperform rating and $80.00 price target on the stock.

The Outlook

Oppenheimer expects Kroger to at least meet the Street’s consensus this quarter, “but the components of a meet/beat may not be enough to drive KR shares out of the current trading range in the high $60’s/low $70’s.” However, the firm sees the recent pullback in the share price creating a very attractive entry point for investors, but expects “a largely range-bound trade near-term until investors get more comfortable with the inflation outlook and see a clearer path to comp upside.”

The analysts at Oppenheimer model first quarter earnings of $1.21 per share, in line with the Street’s consensus (Estimize) and in the upper end of the management’s guidance. Sturdier gross margins and a potentially lower LIFO charge could drive earnings upside, while gas margins are likely to remain quite consistent with the ones registered in the same quarter last year.

The experts also believe that management could raise the lower end of its full year earnings guidance, while keeping its comp guidance untouched. They add, “Recent KR management intra-quarter commentary (at a competitor conference) on the grocery backdrop and even the impact of inflation was decidedly positive.”