Kroger (KR) Stock Drops Despite Market Gains: Important Facts to Note

Kroger (KR) closed down 0.52% to $51.37, extending its monthly decline to 6.45% and significantly underperforming the S&P 500 and the Retail-Wholesale sector. Investors are keenly focused on the supermarket chain's Q1 earnings report due June 20, 2024, as consensus estimates project an 11.92% year-over-year decline in EPS to $1.33 and a 0.31% revenue decrease to $45.02 billion. Despite trading at a forward P/E discount to its industry average, recent analyst estimate revisions have been slightly negative, contributing to its Zacks Rank #3 (Hold) amidst a top-performing Retail - Supermarkets industry.

Analysis

Kroger (KR) is exhibiting significant weakness ahead of its forthcoming earnings report, scheduled for June 20, 2024. The stock's recent performance has been poor, with a 6.45% decline over the past month, starkly underperforming both the S&P 500's 2.85% gain and the Retail-Wholesale sector's 0.48% gain. This underperformance is underpinned by negative analyst expectations, with consensus estimates projecting a quarterly earnings per share (EPS) of $1.33, representing an 11.92% year-over-year decline, and a 0.31% drop in revenue to $45.02 billion. The full-year outlook is similarly pessimistic, forecasting a 6.93% drop in EPS and a 1.28% revenue decline. While the stock trades at a forward P/E of 11.65, a slight discount to its industry's average of 12.2, its PEG ratio of 1.95 offers no compelling value relative to its growth prospects when compared to the industry average of 1.93. This challenging company-specific outlook, reflected in its Zacks Rank #3 (Hold) and a slight downward revision in EPS estimates, contrasts sharply with the strength of its peer group, as the Retail - Supermarkets industry ranks in the top 10% of all industries tracked by Zacks.

Key Decisions for Investors

• Given the consensus estimates for significant year-over-year declines in both quarterly earnings and revenue, investors should be prepared for potential volatility around the June 20th earnings release.
• Consider the conflicting valuation signals; while the forward P/E ratio of 11.65 suggests a modest discount, the PEG ratio of 1.95 indicates that the company's growth outlook may not be attractively priced.
• Monitor for any divergence between company guidance and the strong performance of the broader Retail - Supermarkets industry, as any positive surprise from Kroger could lead to a re-rating given its recent underperformance.