Kroger stock wavered Thursday after the supermarket chain gave a mixed quarterly earnings report and raised its outlook. Shares came off an important chart level and bounced around in morning trades.
The company reported adjusted earnings of $1.04 a share, an increase of nearly 12% that beat analyst estimates. Sales of $33.94 billion were nearly flat and slightly below views, according to FactSet.
Gross margin of 22.5% of sales for the July-ended quarter improved from 22.1% a year ago. That was mainly due to the sale of Kroger Specialty Pharmacy to Elevance Health last October. Also helping were lower supply chain costs and other factors.
Excluding fuel and Kroger Specialty Pharmacy, sales increased 3.8% compared to the same period last year.
"Kroger's second quarter results reflect continued momentum in our business," Chief Financial Officer David Kennerley said in the company's earnings release. "Sales growth has been strong, led by pharmacy, e-commerce and Fresh, and we are encouraged by the improvement in grocery volumes."
The company raised its forecast for identical sales growth — excluding fuel — to 2.7% to 3.4%. It also raised its full-year earnings growth forecast to $4.70-$4.80 a share. In June, the company forecast identical sales growth of 2.25%-3.25% and earnings of $4.60-$4.80 a share.
Executives scheduled a conference call with analysts for 10 a.m. ET today.
Kroger Stock Analysis
One of the largest grocery chains in the nation, Kroger is the parent company of Ralph's, Food4Less, Home Chef and many other brands.
Kroger stock opened the day up more than 1% Thursday. Shares reversed and went slightly lower in the first 20 minutes of trading, then moved back up for a 1.5% gain in recent action. The stock held at its 200-day moving average and remains below the 50-day line. Its relative strength line had been trending down for about a month. Year to date, shares are up less than 10%.
The stock edged to new highs in early August as it cleared a flat base, but sold off Aug. 13 after Amazon.com announced plans to expand its same-day grocery delivery. Further, Investor's Business Daily gives Kroger a Composite Rating of 55 out of a best-possible 99.
Kroger stock has a 21-day average true range, or ATR, of 2.11%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Also, stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
