Value investors in particular may be eying Kroger KR and United Natural Foods UNFI stock with both beating their quarterly earnings expectations this week. The grocery chain giant and leading organic food distributor have been on two different spectrums in terms of their price performance but remain attractive regarding promising business operations and reasonable valuations.
To that point, Kroger’s stock is at 52-week highs at around $55 a share while United Natural Foods is sitting on lows of $11 a 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 sharp rebound.
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Earnings Surprises
Kroger’s stock turned heads on Thursday spiking +10% after posting very favorable Q4 results driven by lower supply-chain costs. Fourth quarter earnings of $1.34 per share soared 35% YoY and crushed expectations of $1.13 a share by 18%. Kroger has now surpassed earnings expectations for 17 consecutive quarters dating back to March of 2020.
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Reporting its fiscal second-quarter results on Wednesday, United Natural Foods posted earnings of $0.07 a share which easily surpassed estimates of $0.01 a share. Although down from $0.78 per share a year ago due to supply chain disruptions and other factors, United Natural Foods has still exceeded earnings expectations in three of its last four quarterly reports.
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Assessing Value
Following its recent rally, Kroger’s stock trades at an attractive 12.7X forward earnings multiple, in line with the Zacks Retail-Supermarkets’ industry average and significantly lower than the S&P 500’s 21.6X.
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In comparison, United Natural Foods’ stock offers good value as UNFI shares trade at just 0.02X forward sales, a significant discount compared to its industry peers and the S&P 500. United Natural Foods’ total sales are forecasted to rise by 2% this year to $31 billion.
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Key Insights
With EPS estimates likely to trend higher after exceeding their earnings expectations, Kroger and United Natural Foods stock currently sport a Zacks Rank #2 (Buy). When considering their valuations, Kroger’s rally could very well continue, and United Natural Foods’ stock is beginning to show potential for a rebound.
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