Investing

Earnings Previews: Kroger, Macy's

Paul Ausick

Published: February 28, 2023 11:22 am

Last Updated: March 2, 2023 1:19 pm

In mid-morning trading Tuesday, the Dow Jones industrials were down 0.15% and the S&P 500 down 0.52%, but the Nasdaq Composite was up 0.05%.

After U.S. markets closed on Monday, Occidental Petroleum reported mixed results for the fourth quarter. Earnings per share (EPS) missed the consensus estimate by $0.22 while revenues came in essentially flat. The company did announce a new $3 billion share buyback plan and a 38% increase to its common stock dividend payment. Shares traded up 2.1% Tuesday morning.

Range Resources beat consensus estimates on both the top and bottom lines. Shares traded up 5.4%.

Zoom Video hammered the consensus EPS estimate and also beat the revenue forecast. The company also said it would jump on the AI bandwagon. Shares were up 0.6%.

Before U.S. markets opened Tuesday, Target reported that it beat both top-line and bottom-line estimates and that store traffic was the primary growth driver in the company’s fourth quarter. Year over year, sales growth was 1.3%, not exactly heart-stopping, and while EPS came in higher than expected, it was down 40% from a year ago. Shares traded up 3.2%.

Norwegian Cruise Lines missed the consensus EPS estimate but did beat the revenue estimate. The company issued downside EPS guidance for both the current quarter and the full 2023 fiscal year. Shares traded down 9.9%.

After U.S. markets close on Tuesday, AMC Entertainment, HP and Rivian are scheduled to report quarterly results. Then, Kohl’s, Lowe’s and Nio are on deck to report first thing Wednesday morning, as well as Plug Power, Salesforce and Snowflake later in the day.

Here is a look at what to expect when these two major retail companies report results first thing Thursday morning.

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Kroger

Grocery store operator Kroger Co. (NYSE: KR) has seen a more than 7.5% drop in its share price over the past 12 months. The announced $24.6 billion merger with Albertsons is not much nearer completion than it was several months ago. The Washington State Supreme Court last month declined to review the state attorney general’s request to stop the special dividend that would be paid to Albertson’s shareholders when the deal is completed. But the company still has to clear regulatory approval and fight back against unions and competitors who oppose the merger.
Of 23 analysts covering Kroger stock, 13 have Hold ratings. Nine have a Buy or Strong Buy rating, and just one rates the stock at Sell. At a recent share price of around $43.00, the upside potential based on a median price target of $51.00 is 18.6%. At the high price target of $75.00, the upside potential is 88.4%.

Fiscal fourth-quarter revenue is forecast at $34.89 billion, which would be up 2.0% sequentially and by 5.5% year over year. Adjusted EPS are tabbed at $0.90, up 2.7% sequentially but down by a penny year over year. For the full 2023 fiscal year that ended in January, Kroger is expected to post EPS of $4.15, up 12.7%, on sales of $148.56 billion, up 7.7%.

The stock trades at 10.4 times expected 2023 EPS, 10.3 times estimated 2024 earnings of $4.22 and 10 times estimated 2025 earnings of $4.31 per share. The stock’s 52-week trading range is $41.81 to $62.78. Kroger pays an annual dividend of $1.04 (yield of 2.4%). Total shareholder return for the past year was negative 5.6%.

Macy’s

Shares of Macy’s Inc. (NYSE: M) have tumbled by nearly 21% over the past 12 months. Since reaching a 52-week low in late September, however, the stock is up almost 36%. Most of that gain first showed up in early November, then disappeared only to come back by early February before falling again. That roller-coaster follows the route of consumer confidence and spending, both of which have bounced around in the second half of last year and the first two months of this year.

Macy’s has announced four store closures for this year (so far). Hedge fund Renaissance Technologies cut its position in the stock by 63% in the fourth quarter and now owns less than 2% of Macy’s outstanding shares. Not exactly a vote of confidence in the company.

Seven of 19 analysts rate Macy’s stock as a Buy or a Strong Buy. Another nine have Hold ratings. At a share price of around $20.50, the upside potential based on a median price target of $25.00 is about 22%. Based on a high price target of $30.00, the potential upside on the shares is 46.3%.

Analysts are forecasting fiscal fourth-quarter revenue of $8.27 billion, up 58.1% sequentially but 4.6% lower year over year. Adjusted EPS of $1.59 are expected, which would up more than 200% sequentially and down 46.5% year over year. For the 2023 fiscal year that ended in January, analysts are looking for EPS of $4.17, down 21.6%, on sales of $24.49 billion, up less than 1%.

Macy’s stock trades at 4.9 times expected 2023 EPS, 5.3 times estimated 2024 earnings of $3.84 and 5.4 times estimated 2025 earnings of $3.82 per share. The stock’s 52-week range is $15.10 to $28.06. The company pays an annual dividend of $0.66 (yield of 3.24%). Total shareholder return for the past year was negative 18.5%.