Should I buy Kroger shares after the Q1 results?

By:
on Jun 19, 2022
  • Kroger reported strong first-quarter results
  • The company's management raised financial guidance
  • CEO Rodney McMullen said that Kroger is well-positioned for growth

The Kroger Co. (NYSE: KR) reported strong first-quarter results this Thursday, but the company’s shares fell more than 7% on a weekly basis as macroeconomic concerns stoke a broad-based downturn for stocks.

Kroger continues to invest heavily in the quality of its brands, and the company’s management raised financial guidance for the 2022 fiscal year.

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Kroger raised its financial guidance

Kroger is the United States’ largest supermarket by revenue and the second-largest general retailer behind Walmart.

Kroger reported first-quarter results this Thursday; total revenue has increased by 8% Y/Y to $44.6 billion, $1.55 billion above expectations, while the Non- GAAP earnings per share were $1.45 (beats by $0.17).

During the quarter, the company navigated a challenging operating environment characterized by continued inflationary cost pressures and supply chain headwinds.

Despite this, Kroger achieved strong performance, and management highlighted strong trends in digital and fresh produce that drove top-line trends. CEO Rodney McMullen said:

Our associates’ relentless focus on providing fresh, affordable food to our customers is driving our strong results. Looking ahead, we are well-positioned to continue delivering for our customers, investing in our associates, and driving sustainable returns for shareholders.

The company’s management raised financial guidance for the 2022 fiscal year and reported that net sales are expected to increase compared with the prior fiscal year. CEO Rodney McMullen said that adjusted earnings per share for the full fiscal year should be in a range between $3.85 – $3.95 (raised from $3.75).

Kroger trades at less than five times TTM EBITDA, and with the market capitalization of $35.9 billion, shares of this company are reasonably valued.

Even with continued increases in inflation, Kroger continues to generate strong free cash flow, and shares of this retailer represent a good opportunity for long-term investors.

$50 represents the first resistance

Kroger’s stock price has fallen more than 20% after reaching its highest level of $62,78 on April 08, 2022, and the current share price could be a good entry point for long-term investors.

Data source: tradingview.com

If the price jumps above $50, it will signal to trade Kroger shares, and the next target could be $53. On the other side, if the price falls below the strong support that stands at $40, it would be a strong “sell” signal, and we have the open way to $35.

Summary

Kroger continues to invest heavily in the quality of its brands, which preserves its strong price position and drives higher profitability. Kroger reported strong first-quarter results this Thursday, but the company’s shares fell more than 7% on a weekly basis as macroeconomic concerns stoke a broad-based downturn for stocks.

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