How Should Investors Approach Kroger Stock Before Q1 Earnings?

The Kroger Co. KR is set to report its first-quarter fiscal 2025 results on June 20, before the opening bell. KR is likely to have registered a marginal increase in the top line. The Zacks Consensus Estimate for revenues is pegged at $45.38 billion, indicating a slight improvement of 0.3% from the prior-year reported figure.Kroger is expected to have witnessed a year-over-year increase in its bottom line. The Zacks Consensus Estimate for first-quarter earnings per share has remained steady at $1.45 over the past 30 days, which implies a year-over-year jump of 1.4%. Image Source: Zacks Investment ResearchKR has a trailing four-quarter earnings surprise of 2.6%, on average. In the last reported quarter, this Cincinnati, OH-based company’s bottom line beat the Zacks Consensus Estimate by a margin of 1.8%. (See the Zacks Earnings Calendar to stay ahead of market-making news.) The Kroger Co. Price, Consensus and EPS Surprise The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. QuoteWhat the Zacks Model Predicts for KRAs investors prepare for Kroger’s first-quarter announcement, the question looms regarding earnings beat or miss. Our proven model does not conclusively predict an earnings beat for Kroger this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.Kroger has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00% at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Key Factors Driving Kroger’s Q1 PerformanceKroger’s top line is likely to have benefited from its continued focus on customer-centric strategies, particularly the private-label offerings under the “Our Brands” portfolio. The company’s ability to innovate and roll out a diverse range of value-focused products has helped deepen customer engagement and loyalty. Personalized promotions and fuel rewards have also played a key role in retaining price-sensitive customers. The Zacks Consensus Estimate for identical sales without fuel is projected to grow 2.3%. The company’s focus on digitization has strengthened its omnichannel capabilities and sharpened customer connection, driving sales through expanded services like Boost and Delivery Now. By enhancing its fulfillment infrastructure, Kroger has effectively kept pace with growing online demand. With digital sales surpassing $13 billion in fiscal 2024, this growth trend is likely to have continued into the first quarter.Kroger’s alternative profit businesses add meaningful contributions to overall revenues. Growth in media income, led by Kroger Precision Marketing, reflects the company’s ability to offer advertisers targeted reach and measurable results. These gains, combined with momentum in the health and wellness segment, have contributed to a more diversified revenue base. The renewal of its partnership with Express Scripts further expanded its pharmacy reach and service offerings.While the aforementioned factors raise optimism, we cannot ignore the challenging retail environment marked by inflation, high interest rates and shifting consumer behavior. Although Kroger has maintained solid engagement with its core customer base, overall sales momentum remains somewhat limited. KR’s fuel operations, a key loyalty driver via fuel rewards, were a drag in the fourth quarter. The consensus mark indicates supermarket fuel sales are likely to fall 5.8% year over year to $4,670 million for the first quarter. Moreover, the termination of the Albertsons merger has also left Kroger with $5.8 billion in new debt, pushing up projected interest expenses for 2025, which could pressure margins.KR Stock’s Performance vs. COST, WMT & DGKroger has witnessed an impressive surge in its stock price over the past year. The stock has rallied 30.3% compared with the industry’s rise of 38.2%.While Kroger has outperformed Costco Wholesale Corporation COST and Dollar General Corporation DG, it has underperformed Walmart Inc. WMT. Shares of Costco and Walmart have risen 13.1% and 39.8%, respectively, while Dollar General faced a decline of 11.9% over the past year. Image Source: Zacks Investment ResearchDoes Kroger Tick the Boxes for Value Investing?From a valuation standpoint, Kroger currently trades at a discount relative to its industry peers. The company’s forward 12-month price-to-earnings (P/E) ratio is 13.38, lower than the industry average of 31.95 and the S&P 500’s 21.87. However, Kroger is trading above its median P/E level of 12.93, observed over the past year. Kroger is trading at a discount to Walmart (with a forward 12-month P/E ratio of 35.10), Costco (49.93) and Dollar General (18.82).  Image Source: Zacks Investment ResearchHow to Play Kroger Ahead of Q1 Earnings?As Kroger prepares to report its first-quarter results, investors should weigh the company’s strategic strengths against a backdrop of broader market challenges. While initiatives in private-label innovation, digital expansion and alternative profit streams are likely to have supported the top line, external pressures such as inflation, shifting consumer behavior and rising interest expenses may continue to limit upside potential. With no clear indication of an earnings beat from the Zacks model, it may be prudent for investors to remain on the sidelines until greater clarity emerges from the upcoming earnings report.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Walmart Inc. (WMT): Free Stock Analysis Report Dollar General Corporation (DG): Free Stock Analysis Report The Kroger Co. (KR): Free Stock Analysis Report Costco Wholesale Corporation (COST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks