RBC Capital Reiterates Sector Perform on Kroger (KR) Ahead of 3Q
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RBC Capital reiterated a Sector Perform rating and $37.00 price target on Kroger (NYSE: KR) ahead of the company's 3Q earnings report. After KR confirmed full-year guidance on November 2, there is little risk to the ID Sales for the quarter. Consensus is calling for a 120bps sequential and 110bps two-year ID Sales deceleration. RBC considers this appropriate and has seen similar decelerations at SVU retail, Sprouts, Publix, Walmart, and Whole Foods.
Analyst William Kirk commented, "We are in line with consensus on 3Q ID Sales (+0.5%) but believe there is risk to EPS (RBCe $0.40/consensus $0.41). With no inflection in PPI and worsening CPI (-2.3% in October from -1.6% in July), we expect earnings pressure and little ID Sales upside. Further exacerbating margin pressure is a departure from the record fuel gross margins seen in 3Q'14 and 3Q'15. Reiterating Sector Perform."
Shares of Kroger closed at $33.88 yesterday.
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