Kroger Co (NYSE:KR) — This supermarket giant has more than 2,600 stores in 34 states. In addition, it operates convenience stores, jewelry stores, supermarket fuel centers and food processing plants.
Standard & Poor’s projects that earnings-per-share growth and valuation will benefit during the next 12 months from Kroger’s position as the largest traditional U.S. supermarket chain in an improving economy. Thus, their recent review of the company on March 2 reflects their four-star buy opinion with fiscal year (Jan) 2018 EPS estimate of $2.24 vs. $2.13 in FY 2017, $2.35 for FY 2018 and $2.35 in FY 2019.
Despite pricing pressure in the first half of FY 2018, they forecast the second half EPS for KR stock to significantly accelerate. An active share repurchase program is expected to reduce the shares outstanding by 1.5% and thus increase FY ‘18 earnings by 5.7%. S&P’s 12-month price target is $36. The stock pays a dividend of 48 cents for a dividend yield of 1.6%.
Technically KR stock is in a downtrend, which began on Dec. 30, 2015 at an intraday high of $42.75. That top marks the origin of the bearish resistance line, which, on my chart, terminates at $34. A double bottom at $28.70 occurred most recently on March 14, matching the low of Oct. 6 at $28.41.
KR stock may be an intermediate-term trade (six months), rather than shorter term, due to several resistance points that could stall a bounce (50-day moving average at $31.74 and 200-day at $32.74). Nevertheless, the technical aspects for Kroger are strong, and a patient investor could pick up between 15% and 22% for the wait.
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