Shares of Kroger Co KR pulled back on Friday after the grocery stock’s big post-earnings gains on Thursday.
Kroger reported third-quarter adjusted EPS of 78 cents on revenue of $31.9 billion. Both numbers beat consensus analyst estimates of 66 cents and $31.23 billion, respectively. Revenue was up 7.4% from a year ago.
Same-store sales were up 3.1% from a year ago and 14% from pre-pandemic levels in 2019. Kroger said online sales were up 103% on a two-year basis.
Kroger repurchased $297 million in stock in the third quarter and has now bought back more than $1 billion in stock year-to-date.
Looking ahead, Kroger also raised its full-year EPS guidance from a previous range of between $3.25 and $3.35 to a new range of between $3.40 and $3.50. Kroger also guided for full-year same-store sales growth of between 13.7% and 13.9% on a two-year basis.
Hurdles Ahead: Credit Suisse analyst Robert Moskow said Kroger is setting the stage for growth in 2022.
“Management’s tone is noticeably positive because their price gaps have stayed intact/improved over the past three months compared to value retailers and because their historical analysis indicates very little correlation between SNAP payments and ID sales,” Moscow wrote in a note.
BMO Capital Markets analyst Kelly Bania said third-quarter numbers were solid, but Kroger still faces hurdles in 2022.
“While Kroger remains bullish on eating-at-home trends, we remain cautious about volume growth in 2022 as the food service sector continues to recover,” Bania wrote.
Impressive Execution: Stephens analyst Ben Bienvenu said Kroger is proving it can maintain customer gains and grow earnings even in a difficult environment.
“While we lack the conviction to get more excited about the stock here, we are impressed by the results being delivered by the team and will continue to monitor the stock for a better entry point,” Bienvenu wrote.
Telsey Advisory Group analyst Joseph Feldman said Kroger is clearly moving along the right path.
“That said, it seems like the operating environment is more promotional, supply chain and other cost pressures are headwinds, and uncertainly remains around the profitability of Ocado,” Feldman wrote.
Ratings And Price Targets:
- Credit Suisse has a Neutral rating and $47 target.
- BMO Capital Markets has a Market Perform rating and $41 target.
- Stephens has an Equal-Weight rating and $50 target.
- Telsey Advisory Group has a Market Perform rating and $47 target.
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