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Kroger Drops 4% As 3Q Sales Lag Estimates, Oppenheimer Remains Sidelined
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Kroger Drops 4% As 3Q Sales Lag Estimates, Oppenheimer Remains Sidelined

Shares of Kroger fell 4.4% on Thursday after the food retailer reported 3Q revenues of $29.7 billion, falling short of analysts’ expectation of $30 billion. However, quarterly sales increased by 6.3% on a year-over-year basis as the COVID-19 pandemic boosted online sales of essential commodities.

Kroger (KR) said that digital sales grew 108% year-over-year during the quarter. Moreover, the company’s adjusted earnings jumped 51% to $0.71 per share and beat Street estimates of $0.66.

“We delivered strong results in the third quarter. Customers are at the center of everything we do and sales remain elevated as we continue to enhance our competitive moats – Fresh, Our Brands, Data & Personalization and Seamless,” said Rodney McMullen, Kroger’s CEO. “We are executing against our strategy even during the pandemic and continue to grow market share.” (See KR stock analysis on TipRanks)

Supported by a strong bottom-line performance, the company raised its fiscal 2020 adjusted EPS guidance range to $3.30-$3.35, from $3.20-$3.30. McMullen said, “As a result of our continued strong performance, market share growth and the expectation of sustained trends in food at home consumption for the remainder of our fiscal year, we are raising our full year 2020 guidance.”

Following its quarterly results, Oppenheimer analyst Rupesh Parikh reiterated a Hold rating and price target of $34 (10.1% upside potential). In a note to investors, Parikh wrote, “We continue to view shares as fully-valued at these levels. Trading dynamics are likely to remain challenged, similar to other grocers given upcoming difficult compares and the risk of a more promotional backdrop as comps likely turn negative for many players starting in March.”

Like Parikh, the rest of the Street is sidelined on the stock. The Hold analyst consensus is based on 12 Holds and 1 Buy. The average price target stands at $36.27 and implies upside potential of about 17.5% to current levels. Shares have gained 6.5% year-to-date.

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