Time to Buy Kroger (KR) or United Natural Foods (UNFI) Stock After Earnings?
Value investors in particular might be interested in Kroger KR and United Natural Foods UNFI stocks, both beating their quarterly earnings expectations this week. The grocery chain giant and leading organic food distributor fall on two different spectrums in terms of price performance, but remain attractive due to promising business operations and reasonable valuations.
At this point, Kroger’s stock is at a 52-week high at around $55 per share, while United Natural Foods is at a low of $11 per share. That said, let’s see if Kroger’s strong year-to-date rally can continue and if United Natural Foods stock is poised for a strong rebound.
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Earning Beats
Kroger stock turned heads Thursday with a +10% gain after reporting very favorable fourth-quarter results thanks to lower supply chain costs. Fourth-quarter earnings of $1.34 per share climbed 35% year over year and crushed expectations of $1.13 per share by 18%. Quarterly sales of $37.06 billion increased 6% from the comparative quarter, despite slightly missing estimates of $37.24 billion. Even more impressive, Kroger has now exceeded earnings expectations for 17 consecutive quarters dating back to March 2020.
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Reporting its second-quarter financial results on Wednesday, United Natural Foods reported earnings of $0.07 per share, which easily beat estimates of $0.01 per share. However, this figure is down from $0.78 per share a year ago, with the main causes being supply chain disruptions, contraction and loss of supply gains related to the ‘inflation. United Natural Foods’ second-quarter sales of $7.77 billion missed estimates by -2% and were down slightly from $7.81 billion in the year-ago quarter. Notably, United Natural Foods has again exceeded earnings expectations in three of its last four quarterly reports.
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Value of Kroger
After its recent rally, Kroger stock is still trading at an attractive forward earnings multiple of 12.7X, which is on par with the Zacks Retail Supermarket industry average and well below the company’s 21.6X multiple. S&P 500.
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Adding more value to Kroger stock is a 2.09% annual dividend yield and a potential acquisition of rival Albertsons ACI. also maintained investor interest. For now, the Albertsons acquisition remains on hold because it would create the largest supermarket merger in U.S. history and has been the subject of regulatory review by the Federal Trade Commission ( FTC).
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Value of United Natural Foods
Showing its immense earnings potential in recent years, the argument for United Natural Foods stock offering good value is that UNFI stock trades at just 0.02 times forward sales. Such a sharp discount is hard to ignore, even amid near-term probability concerns, given that United Natural Foods’ total sales are expected to rise 2% this year to $31 billion.
In comparison, United Natural Foods’ Zacks Food-Miscellaneous industry average is 1.4 times sales and the S&P 500’s is 3.6 times.
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Take away
With EPS estimates likely to rise after beating earnings expectations, shares of Kroger and United Natural Foods are currently sporting a Zacks Rank #2 (Buy). Additionally, looking at their valuations, Kroger’s rally could very well continue and United Natural Foods stock is starting to make the case for a rebound.
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The Kroger Co. (KR): Free Stock Analysis Report
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