Kroger Co Stock Hold Recommendation Reiterated (KR)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Kroger (NYSE: KR) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+ . The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.4%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • KROGER CO has improved earnings per share by 10.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KROGER CO reported lower earnings of $0.95 versus $1.75 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $0.95).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Food & Staples Retailing industry average. The net income has decreased by 0.7% when compared to the same quarter one year ago, dropping from $281.00 million to $279.00 million.
  • The debt-to-equity ratio is very high at 2.14 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.

The Kroger Co., together with its subsidiaries, operates as a retailer in the United States. The company also manufactures and processes food for sale in its supermarkets. The company has a P/E ratio of 20.9, equal to the average retail industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Kroger has a market cap of $12.44 billion and is part of the services sector and retail industry. Shares are down 2.6% year to date as of the close of trading on Friday.

You can view the full Kroger Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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