Kroger Hits a New 52-Week High on Strong Growth Momentum - Analyst Blog

Shares of The Kroger Co. (KR) touched a 52-week high of $64.13 on Dec 19, 2014 before eventually closing at $63.55. The stock has jumped roughly 64% since the beginning of the year.

Kroger's dominant position among the nation's largest grocery retailers enables it to sustain growth, expand its store base and boost market share. Moreover, Kroger's customer-centric business model provides a strong value proposition to consumers, and is well positioned to deliver higher earnings primarily through strong identical supermarket sales growth.

In fiscal 2014, Kroger beat earnings estimates for three consecutive quarters. After positive earnings surprise of 3.8% and 1.5% in the first and second quarters, respectively, earnings surpassed the Zacks Consensus Estimate by 13.1% in the third quarter.

We believe that given the company's strong identical-store sales growth for about 44 successive quarters and better-than-expected bottom-line performance, Kroger is poised to achieve its long-term earnings per share growth rate target of 8% to 11%.

Further, this grocery retailer has made a smart move to grow in the soft-economic environment. This is evident from its acquisitions of Harris Teeter and Vitacost.com. Moreover, Kroger's Customer 1st strategy, enriches the consumers' shopping experience and convinces them to return to its stores.

We believe that the company's operational strategies present enormous opportunities to augment identical supermarket sales, alleviate gross margin pressure, improve operating margin and enhance return on invested capital.

We believe Kroger, carrying a Zacks Rank #2 (Buy), is a solid bet for investors.

Apart from Kroger, L Brands, Inc. (LB), The Procter & Gamble Co. (PG) and Colgate-Palmolive Co. (CL) also hit 52-week highs of $85.06, $92.73 and $70.31, respectively, on Dec 19.