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Kroger’s stock spikes on upbeat earnings & outlook

 

Monday, September 12, 2022

The news shaping the markets today

Russia’s forces hit power stations and other infrastructure, resulting in widespread outages across Ukraine, as a response to Kyiv’s counteroffensive measures. Despite the ongoing geopolitical tensions, the US dollar index traded slightly lower this morning.


Saudi Arabia’s industrial production grew 17.70% year-over-year in July. Although this was the lowest growth in six months, the SAR/USD forex pair rose on the news.


India’s total passenger vehicle sales fell by 4.3% to 281,210 units in August, following a 13.1% surge in the previous month. This being the first decline in vehicle sales in three months sent the INR/USD pair slightly lower in forex trading this morning.


Russia’s gross domestic product contracted by 4.1% year-over-year in the second quarter, compared to a preliminary estimate of 4%, exerting pressure on the RUB/USD forex pair.


New Zealand’s tourist arrivals jumped sharply by 344.2% year-over-year to 134,175 in July, surpassing the 100,000 mark for the first time since March 2020. Despite this, the NZD/USD pair declined slightly in forex trading this morning.

 

What’s happening: Shares of The Kroger Co. jumped on Friday, after the company reported better-than-expected results for its second quarter.

What happened: Apart from announcing upbeat quarterly results, Kroger boosted its full-year guidance citing higher demand for groceries and household essentials.

The company also announced a big buyback program.

How were the results: The Cincinnati, Ohio-based company reported growth in sales for the second quarter, with both top-and-bottom-line metrics surpassing market views.

  • Sales grew 9.2% year-over-year to $34.64 billion, exceeding the consensus estimate of $34.25 billion.
  • The company reported a 56.5% surge in attributable profit to $731 million for the quarter.
  • Adjusted earnings grew 12.5% from the same period last year to 90 cents per share, handsomely beating Street expectations of 77 cents per share.

Why it matters: Rising inflation forced shoppers to avoid nonessential items and focus on home-cooked meals despite the lifting of covid-19 restrictions. Kroger is looking to capitalise on these gains by increasing its investments in food products and expanding its store-label offerings.

The company’s comparable sales, excluding fuel, climbed 5.8%, exceeding market expectations of 4.6%. Sales of its store-label “Our Brands” portfolio also grew 10%.

Operating margin came in at 2.8, while operating income climbed 13.7% to $954 million, despite a 6.4% year-over-year rise in operating, general and administrative expenses to $5.4 billion.

Kroger held cash and equivalents worth $1.1 billion as of August 13, 2022, while it had a net total debt of $12.4 billion.

The company’s board announced a new $1 billion share buyback program on September 9.

Management raised its operating profit projection for fiscal 2022 from $4.3-$4.4 billion to $4.6-$4.7 billion. Kroger now projects adjusted same-store sales growth of 4%-4.5%, versus its previous forecast of 2.5%-3.5%. Kroger also raised its adjusted earnings guidance from $3.85-$3.95 per share to $3.95-$4.05 per share.

How shares responded: Kroger’s shares gained 7.4% to close at $51.94 on Friday, following the release of quarterly results. The stock has gained around 10% over the past month.

What to watch: Traders will continue monitoring the execution of Kroger’s expansion plans in store-label offerings.

The markets today

UK stocks will be in focus today ahead of a basket of economic reports

Context: London stocks settled higher on Friday amid a rise in energy and mining shares.

Details: Markets ended a volatile week with Britain witnessing several major events.

On Tuesday, Liz Truss was formally appointed as UK’s new Prime Minister. London indices recorded gains on Thursday after the country’s newly appointed PM announced a two-year plan to ease energy prices.

Queen Elizabeth died peacefully at her home in Scotland on Thursday. The death of Britain’s longest-reigning resulted in the Bank of England postponing its interest rate decision, which is now due next week.

Investors also focused on the European Central Bank’s interest rate decision last week. The ECB raised its key rate by 75 basis points and signalled further rate hikes ahead.

London’s FTSE 100 rose 1.23% to settle at 7,351.07 on Friday, recording gains of around 1% for the week.

The domestically focussed FTSE 250 Index added 1.64% to close at 19,188.03 on Friday, gaining 1.8% for the week. Big mining stocks, including Anglo American and Antofagasta, were among the biggest gainers in the session.

The GBP/USD forex pair also settled higher by 0.73% at 1.1588 on Friday, after declining to a low of 1.14, the last reached in 1985.

What to watch: Traders await the release of economic data on GDP, the balance of trade and industrial production from the UK today. The British economy, which shrank 0.6% in June, is expected to grow by 0.1% in July. The UK trade deficit is projected to widen to £11.7 billion in July, from £11.387 billion in June. Analysts expect industrial production to grow by 1.8% in July, following 2.4% growth in the previous month.

Other Markets: US indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.19%, 1.53% and 2.17%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0077 and 1.0089 Negative
GBP/USD – 1.1605 and 1.1623 Positive
WTI Crude Oil – 85.40 and 85.62 Negative
Platinum – 866.36 and 872.31 Positive
FTSE 100 – 7357.04 and 7376.91 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0082, 0.35%) Dow ($32,263, -0.01%) Brent ($91.53, -1.4%)
GBP/USD (1.1609, 0.18%) S&P500 ($4,066, -0.04%) WTI ($85.45, -1.5%)
USD/JPY (142.96, 0.26%) Nasdaq ($12,662, -0.07%) Gold ($1,724, -0.3%)

What else to watch today

Denmark’s inflation rate, Japan’s machine tool orders, Romania’s inflation rate, the UK’s manufacturing production, construction output and goods trade balance, Czech Republic’s inflation rate, Turkey’s unemployment rate, current account, labour force participation rate and car production, Thailand’s foreign exchange reserves, Italy’s industrial production, Central Bank of Brazil’s focus market readout, India’s manufacturing production, industrial production and inflation rate, Germany’s current account, US consumer inflation expectations, UAE’s value of loans and money supply M3, South Africa’s SACCI business confidence index, Israel’s consumer confidence, as well as Spain’s consumer confidence indicator.


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