NEW YORK (TheStreet) – Shares of Kroger (KR) , the largest pure-play supermarket chain in the U.S., have risen about 54% so far this year and have more than doubled since the start of 2013 (see chart below), and yet they may still have some more room to run.
That's because the Cincinnati-based retailer has been boosting its profits, margins and sales, and last Thursday, when it reported its results for its fiscal third quarter, it boosted its profit estimate for its fiscal year ending in February. The company now projects a profit of $3.32 to $3.36 a share. Previously, it estimated earnings of $3.22 to $3.28 a share.
The chart below, courtesy of Google Finance shows the run Kroger's stock has had.
Last week's earnings report showed why Kroger's run may not be over. The company said revenue for its quarter ended on Nov. 8 rose 11.2%, and same-store sales rose 5.6%, excluding fuel sales.
Its net profit rose 21%, helped by higher margins. Kroger's margins have been aided by two big acquisitions it made this year -- North Carolina-based Harris Teeter Supermarkets, an upscale chain in the Southeast, and Vitacost.com, an online seller of vitamins, nutritional supplements and grocery products.
With Harris Teeter, Kroger added a $4.7 billion company that has 227 supermarkets in the Southeast and mid-Atlantic regions, allowing Kroger to better compete against Wal-Mart (WMT) . Furthermore, Harris Teeter has a curbside delivery subscription service as well as an online shopping service. Those offerings give Kroger ways to separate itself from other traditional grocers and to compete against online grocer FreshDirect and against Amazon (AMZN) , which has been testing an online grocery delivery service.
With Vitacost.com, Kroger gained a fast-growing business -- Viatcost's sales rose 16% in 2013 -- and added technology and logistical expertise to help it with its online delivery segments.
In Kroger's latest quarter, earnings per share rose 28% thanks in part to the company's stock buyback program, which is another reason to be bullish on the shares.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates KROGER CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate KROGER CO (KR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
You can view the full analysis from the report here: KR Ratings Report