The Kroger Co. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

NYSE:KR) filed its second-quarter result this time last week. The early response was not positive, with shares down 3.1% to US$34.37 in the past week. It looks like a credible result overall – although revenues of US$30b were what the analysts expected, Kroger surprised by delivering a (statutory) profit of US$1.03 per share, an impressive 99% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.” data-reactid=”28″>Shareholders might have noticed that The Kroger Co. (NYSE:KR) filed its second-quarter result this time last week. The early response was not positive, with shares down 3.1% to US$34.37 in the past week. It looks like a credible result overall – although revenues of US$30b were what the analysts expected, Kroger surprised by delivering a (statutory) profit of US$1.03 per share, an impressive 99% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Kroger ” data-reactid=”29″> Check out our latest analysis for Kroger

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Taking into account the latest results, Kroger’s 20 analysts currently expect revenues in 2021 to be US$130.8b, approximately in line with the last 12 months. Statutory earnings per share are expected to dip 3.8% to US$3.17 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$129.7b and earnings per share (EPS) of US$3.06 in 2021. So the consensus seems to have become somewhat more optimistic on Kroger’s earnings potential following these results.

There’s been no major changes to the consensus price target of US$36.23, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock’s valuation. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Kroger, with the most bullish analyst valuing it at US$43.00 and the most bearish at US$26.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Kroger shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Kroger’s revenue growth is expected to slow, with forecast 1.4% increase next year well below the historical 3.0%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.2% per year. Factoring in the forecast slowdown in growth, it seems obvious that Kroger is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Kroger following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Kroger’s revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$36.23, with the latest estimates not enough to have an impact on their price targets.

see them free on our platform here.” data-reactid=”51″>With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Kroger going out to 2025, and you can see them free on our platform here.