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Kroger Stock Price Extends Upside Momentum After Topping Q2 Estimates

Kroger (NYSE: KR) stock price surged after beating revenue, margin and earnings estimates for the second quarter. After hitting a 52-weeks low of $20 a share a month ago, the stock price regained upside momentum amid prospects for improving fundamentals. The latest financial results added to the momentum.

KR The Kroger Co. daily Stock Chart

Kroger stock price is currently trading around $25 with the 52 weeks high of $31 a share. The company’s sales grew 2.2% year over year to $28.2 billion in the second quarter. Analysts were expecting sales growth of 1.8%.

In addition to sales growth, the company has also topped margins and earnings estimates. Its gross margin stood around 21.9% in Q2 compared to the consensus estimate for 21.3% and up from 21.5% a year ago. Its operating margin came in at 2.2% of sales, higher from consensus estimate for 2.0%.

Chairman and CEO Rodney McMullen said, “We continue to reduce costs and are on track to deliver $100 million in incremental operating profit through alternative profit stream growth. We delivered strong free cash flow and are now within our targeted net total debt to adjusted EBITDA range.”

The company is seeking to generate strong cash flows. They plan to use these cash flows for investment in growth opportunities to drive revenue growth. In addition, Kroger is among those companies that offer significant returns to investors.

Consistent with its financial strategy, the company has generated $3.2 billion in operating cash flows. It used $1 billion of cash flow for investment activities. It has used$256 million for dividend payments and reduced net total debt by $1.3 billion over the last four quarters.

The company expects to generate similar results in the following two quarters. Kroger expects to generate earnings of $2.40 per share for the full year – which would offer support to its cash flows and share price performance. Overall, Kroger stock price appears in position to extend the upside momentum in the coming days. Its lower than industry valuations are adding to the share price upside potential

 

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.