Stock of the Day Kroger KR Q2 Earnings, Stock Surge, & Albertsons Merger Update Made with Clipc

welcome to for Corners Finance your go-to Source in the latest stock market news and Trends today we're going to talk about a stock of the day uh this stock is a household name of the grocery industry in many households Across America uh the stock we're going to talk about is Kroger ticker symbol KR we're going to dive into the numbers some key takeaways from its earnings report and why the stock surged more than 7% on the news so what we're going to look at here is we've got an article from Reuters uh you can find right on Yahoo finance it says right there in the headline Kroger raising a lower end of its annual sales forecast cheap groceries luring customers um so the earnings report came out on the 12th and U the quarterly earnings report and it's handily beat in expectations of the streets um the company raising lower end of its annual sales sales forecast which is largely driven by its strategy in offering fresh groceries at competitive prices um which really helped attract budget conscious consumers who've uh still been reeling from the effects of inflation especially food inflation is uh eaten into a lot of the American household budget um so Kroger has taken the strategy of offering groceries that sort of at the discounted price um but take a closer look here at the report and why Kroger's earnings caught the attention of the market and risen so well so scrolling through the article very deeper within it got this statement here Kroger's posted adjusted profit of 93 cents a share which beat the estimate estimates of Wall Street of 91 cents a share um not huge on the surface it was really enough to boost a lot of uh investor confidence in the company um identical sales excluding fuel were up 1.2% you can see right here which also surpassed expectations company's updated its annual forecast its sales are now projected to be between 75% and 1.75% growth uh the lower limit is previously 0.25% we can see right here um so that is is a big reason that drove the stock higher on the news report I think um especially the lower end raising at a half a percentage point you know the grocery industry tends to not be a high margin or high growth industry but these numbers from the street are apparently good um take a look deeper into what's driving the sales um you know the US consumer still facing tight household budgets you have more people choosing to eat at home rather than dining out um you know Kroger's is really set to capitalize in this trend and has been uh been offering aggressive promotions and budget friendly options to attract some of those deal hungry shoppers there's a quote in here from their CEO Rodney McMullen which we can find here here we go so uh McMullen says that consumers are really being strategic with their spending uh kroger sees a trend consumers buying in bulk at the beginning of the month becoming more cautious as the month goes on and this is the kind of behavior U with Kroger has been targeting and it's really coming into fruition some interesting comments from the CEO just about um however you want to take it about the economy in general if you view uh kroger as any sort of a bell weather but um you can see according to Kroger's a large grosser the consumer is still um hungry for Budget uh lower cost options um and really you could see here Joseph Feldman tells the advisor group regardless of where the consumer fits in the income Spectrum they're trying to save some money seems to be ubiquitous through the economy out there in Kroger you know U the grocery industry is very competitive retail is very competitive you've had um Giants of the likes of Walmart entering the space Amazon with the higher-end Whole Foods and Costco of course doing very well but really w um I see is more similar in terms of the demographic that they go after the budget conscious consumer um the cost conscious crowd but looks like Kroger is really holding its own um you see that in the stock price today uh move over to some graphs this is just in Yahoo finance and you can see this is a chart comparison we have Walmart uh it's line down here is Walmart and I go to year to date you see a year to date Walmart I mean really has outperformed Kroger uh there's a big gap between the two you see the Divergence happen um around May and June you know some news of Kroger trying to purchase Albertson but you see Walmart just steadily advancing up 53% year-to date Kroger 22% uh year-to date it's not a bad return either this doesn't factor in any dividends but Walmart in the near term doing uh fairing much better on the stock performance than Kroger but if I zoom out decent amount more time in the five-year chart you could see Kroger actually has slightly outperformed Walmart on the five years um this doesn't factor in dividend payments but Kroger pays a fairly healthy dividend uh today it's closer to 2.3 to 2.5% um five years year historical average has been around 2% according to Yahoo finance see here dividend here you go fiveyear average dividend yield about 2% there um interesting to know then Kroger really has been in the news a lot lately for it's Mega merger with Albertson's uh they're trying to push through the deal is being held up in court uh from the Federal Trade Commission um it's a $25 billion do Mega merger with Albertson and said it's really under uh scrutiny from the FTC fear that it could reduce competition increase prices of groceries to Consumers really but uh despite the ongoing trial Kroger has remained optimistic U CEO MC Mullen reaffirmed his confidence stating he thought the merger would go through and um I his claim is that he sees it'll actually reduce grocery prices but uh you know this speculation both ways from either side here left to be said by the market if it actually happens but consider the retail space the grocery space is is fairly competitive you got a number of uh players like we said earlier Walmart has entered the space becoming a a really large one of the largest Grocers uh in the country you know people shopping in bulk at Costco you can see Costco has done very well over the last several years and then there's other spaces like uh Amazon you know with the Whole Foods the higher end you have your uh Amazon uh Whole Foods and Sprouts Farmers Markets uh really done well over the last year but nonetheless this deal with Albertson's something for Kroger shareholders to pay attention to um investors really want to keep an eye on it could have a significant impact to Kroger's long-term growth $25 billion dollar deal you go back to the article go down here this J JP Morgan chimes in as well talking about Kroger their statement about Kroger's business is it's not crumbling under some of this competitive pressure that some had feared from entrance of Walmart um in fact the company's steady performance in a tough economic climate uh reassuring to investors you can see by the performance over the last five years the stock has done very well um you know food and grocery store sector remains very competitive uh but Kroger up there seems well positioned to maintain its Edge so with that said on the stock performance one more chart I want to get into so this is Kroger as compared to two major indices the S&P 500 here in the NASDAQ let's see this is just Yahoo finance we have we have the S&P 500 in the NASDAQ and you go down year to date you can see Kroger's um with the recent pop on the earnings is outperformed slightly both IND Dees and then if I zoom out to the fiveyear uh this is what I thought was really interesting to note about Kroger um you would think the grocery space is being fairly low growth it's a low margin space um particularly when compared to the NASDAQ it's performed comparably this chart doesn't factor in dividends over the last five years which Kroger uh pays a substantially larger dividend than the NASDAQ index but the NASDAQ is known to be a tech industry uh or Tech index with a lot of growth names in it um you often wouldn't think of a a name like Kroger more mature grocery retailer as as keeping Pace in such a way that it has with the NASDAQ and it's also outperformed the S&P 500 in the same time frame like I said when you factor in the dividend payments we you can see steadily every quarter and I've also raised over this time quarterly dividend of 16 cents a share bumping up to over the 25 cents a share now to 32 cents a share so really some substantial dividend growth in that time frame um along with the capital appreciation of the stock has made it a interesting note and it's why we picked it up here on the stock of the day um so really looking ahead to what's next for Kroger what we're interested in as investors where is it where's it going from here not where has it been as much um but company really remains laser focused offering value to Consumers at a time when the consumer is pinched in their uh large deal of economic uncertainty we've got a election coming up here in November which there will be a new president with Biden stepping down um but with Kroger's revised growth forecast possibly ible merger on the horizon with Albertson it's uh definitely a stock to watch um like I said we really want to keep an eye on the progress of the Albertson's merger and what it would hold for the future of Kroger Kroger um look at some of the key stats as well in Yahoo finance you can see the valuation the market cap right here it's current market cap is near the highest it's been in the past year year and a half um price earnings to growth ratio a interesting metrics that a lot of investors look at is the PE Ratio is very close to the growth ratio um forward and trailing price to earnings something that investors often look at is seems to be less than the overall S&P 500 in the market you look down to some of its other statistics here Yahoo finance is really just a great site accessible to anybody um just go under key under statistics under the ticker let's see the grocery industry retails notoriously low margins profit margin of less than one and a half percent operating margin just about 2% uh return on assets about 6% it's not screaming high but for its industry could be be fairly uh fairly good metrics but um return on Equity closer to 19% you can see large amount of revenue revenue growth quarterly is on the decline some of this can not be up to date but some balance sheet metrics some cash fair amount of debt fair amount of debt to equity you can see the 52 we range in the S&P 500 range so it's kind of getting closer to its 52e highs of 58 stocks around 55 56 and just look at the dividends forward dividend about two and a half percent trailing two and a quarter fiveyear average has been about 2% and but the payout ratio doesn't look unhealthy you know 38 and a half% of the earnings paid out into dividends it's a a good metrics investors look at when analyzing dividend stocks is how sustainable is the dividend so um just by that payout ratio alone looks looks fairly stable um but you know you've got the Albertson merger which be a lot of cash for the company um something to watch so uh that's really all for today's stock of the day in Kroger hope you found the breakdown helpful uh make sure please hit the like And subscribe for Four Corners Finance as we get into more insights and more stocks we like to do this uh more often but i' like to hear what your thoughts are on Kroger on the earnings report um upcoming mergers competitive landscape with Walmart entering Amazon uh as well delivering groceries so drop your comments below thanks for watching and see you next time