Amid a suddenly challenging environment in the equities sector, Wall Street hopes that grocery giant Kroger (NYSE:KR) can bring some good news to the table with its upcoming second-quarter earnings report. Scheduled for release this Friday, the implications of the disclosure could significantly impact both KR stock and the broader market.
So far, circumstances bode favorably for Kroger if past indicators offer any substance. For the company’s fiscal Q1 — which ended April 30 — Kroger posted adjusted earnings per share (EPS) of $1.45. In the year-ago quarter, adjusted EPS came out to $1.19. Better yet, Q1 2022’s earnings beat the consensus estimate of $1.28 per share.
Likewise, the revenue front provided stakeholders of KR stock much joy. In the last quarter, sales came out to $44.6 billion compared to $41.3 billion in the year-ago quarter. Additionally, the tally beat the consensus target of $44.16 billion.
Most significantly, Kroger raised its full-year guidance at the time, expecting identical sales without fuel to grow 2.5% to 3.5% and adjusted EPS in the range of $3.85 to $3.95. The FactSet consensus was for identical sales growth of 3.2% and EPS of $3.84.
“Our team is doing an outstanding job managing costs in an inflationary environment,” remarked chairman and CEO Rodney McMullen. Thanks to positive trends and fundamental momentum, Zacks Equity Research believes that Kroger can beat expectations against for Q2.
Below are three factors that could impact KR stock ahead of Friday’s financial release.
Keep an Eye Out for Boosted Revenue
Kroger’s fiscal Q2 ended on July 31. Usually a matter of inconsequence, the post-pandemic new normal disrupted old conventions. Primarily, the purchasing power of the dollar — or lack thereof — will likely play a significant role in the proceedings.
According to data from the U.S. Bureau of Labor Statistics, the dollar lost 1.17% of purchasing power during fiscal Q2. Should McMullen’s words be taken at face value, inflation may have cynically boosted Kroger’s revenue.
Under an inflationary environment, the dollar steadily loses value. Therefore, consumers are better off purchasing products (in bulk) today rather than waiting for tomorrow.
KR Stock Is a ‘Top 10’ Hit: Will It Beat Estimates Again?
Despite the ugliness of the coronavirus pandemic and the myriad disruptions it imposed, Kroger managed to ride the storm well. Indeed, one of the reasons why analysts are bullish on KR stock is its earnings track record.
According to data complied by CNBC, Kroger currently sits on an earnings-beat record that covers the last 10 quarters. In other words, investors must go back to fiscal Q3 2020 to see the last time the company missed estimates.
To be clear, past performance is not indicative of future results. However, KR stock so far delivered long-term resilience. Over the trailing five years, shares gained approximately 131%.
Watch the Deflationary Darkhorse
When Federal Reserve Chair Jerome Powell delivered his policy speech at the annual economic symposium at Jackson Hole, Wyoming, he acknowledged that addressing inflation through hiking rates would cause “some pain.” Nevertheless, Powell implied that taking the short-term hit was the superior solution to incurring long-term damage.
Interestingly, though, purchasing power increased by a magnitude of 0.3% in July from June. Though a mere blip, the dynamic suggests that deflationary forces started filtering into the economy.
Under such a scenario, the opposite framework of the aforementioned inflationary environment is true. Consumers are better off abstaining from purchases today as their dollars will be worth more tomorrow. Naturally, this deduction would not be helpful for KR stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.