Market Overview

Kroger's Turnaround: No One Said This Was Going To Be Easy

Share:
Kroger's Turnaround: No One Said This Was Going To Be Easy
Related KR
Barron's Picks And Pans: Dollar Tree, Kroger, Volkswagen And More
Benzinga's Week Ahead: Can Facebook, Apple Earnings Rescue The Stock Market?
The Impact Of Dividend Increases Through September Of 2018 (Seeking Alpha)

By most accounts, Kroger Co (NYSE: KR) isn’t really a standout in the grocer league. The firm reported in-line earnings per share and a marginal revenue beat Friday, but lately it’s done little to draw eyes from all-star rivals.

“Competition remains intense, led by Wal-Mart Stores Inc (NYSE: WMT)’s price investments and better execution and the ongoing expansion of hard discounters (Aldi, Lidl),” Deutsche Bank analyst Shane Higginswrote in a Monday note. “Amazon.com (NASDAQ: AMZN)’s acquisition of Whole Foods will not make for an easier environment in 2018.”

Between such opposition and Kroger’s “surprisingly modest” second-half guidance for non-fuel ID, Higgins expects sales and earnings growth below historical averages for the next two years.

He downgraded Kroger to a Hold with a $21 price target.

tipranks.png

Competitive Potential

In some cases, the fierce grocery field may play to Kroger’s advantage.

“We continue to believe that KR is well-positioned to gain share from the many weaker competitors in the market who are likely to close doors over time,” Higgins wrote. “However, we expect store closings and acquisitions to be sporadic and will likely play out over the next several years.”

At the same time, Kroger is expected to accelerate investments in customer experience trends such as e-commerce.

“[This] will be critical in positioning the business for long-term growth during a period of rapid change in the U.S. food retail landscape where the lines between traditional grocers, online competitors, discounters and restaurants are becoming increasingly blurred,” Higgins wrote.

Deutsche Bank foresees low single-digit growth in earnings before interest, tax, depreciation and amortization (EBITDA) over the next few years accompanied by a below-average multiple.

After the stock waned a full 7.5 percent Friday, Kroger opened Monday at $21.06.

Related Links:

Has Kroger Shelved Its Sales Struggles? A Q2 Preview

Contrarian: Amazon Is One Of The Weakest Retailers There Is

_________

Image Credit: By WhisperToMe - Own work, CC0, via Wikimedia Commons

Latest Ratings for KR

DateFirmActionFromTo
Oct 2018JefferiesMaintainsBuyBuy
Oct 2018UBSMaintainsNeutralNeutral
Oct 2018Deutsche BankDowngradesHoldSell

View More Analyst Ratings for KR
View the Latest Analyst Ratings

Posted-In: Aldi Deutsche Bank GroceryAnalyst Color Downgrades Price Target Top Stories Analyst Ratings Best of Benzinga

 

Related Articles (AMZN + KR)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
LXFTKeyBancDowngrades0.0
CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

7 Biggest Price Target Changes For Monday

Seagate Technology's Continued Struggles With 10TB Helium Drives Results In A Downgrade