Option Trade 
Kroger Co (NYSE:KR) Calls 
Wednesday, March 02, 2016

**OPTION TRADE: Buy the KR Jul 2016 40.000 call (KR160715C00040000) at approximately $2.80. Place a pre-determined sell at $5.60.

Note: No protective stop losses added -- but if you wish to do so make it $1.15.

by Ian Harvey

March 02, 2016

Kroger Co (NYSE: KR), a grocery store chain, will report its fourth-quarter results tomorrow, March 3rd, before the market opens. Ahead of the report, analysts have forecast earnings of $0.54 per share, up from $0.52 during the same period last year.

Overall, the retail sector has held up pretty well over the last few months as the broader market has been a little shaky. Low gas prices should keep strength under retailers, leaving more discretionary income in consumers' pockets.

Kroger has a solid track record of posting better than expected results, topping estimates each quarter since the fourth quarter 2013. The stock has an attractive P/E of 19.3, which should allow the stock to move higher on another decent quarterly report.

Therefore, expect another solid report from Kroger, and for the stock to build on its recent momentum on the news.

The stock has erased some losses from earlier in the year, but remains down 6.7% year to date.

Kroger Co has a 52-week low of $27.32 and a 52-week high of $42.75. The company has a market capitalization of $38.90 billion and a price-to-earnings ratio of 19.75. The company’s 50 day moving average is $38.46 and its 200-day moving average is $38.10.

Analysts forecast earnings per share of $0.54, up exactly $0.02, or 3.85% from 2014’s $0.52 EPS. The expected KR’s profit could reach $532.42M giving the stock 18.81 P/E if $0.54 earnings per share is reported. After releasing $0.43 EPS for the previous quarter, The Kroger Co’s analysts now forecasts 25.58% EPS growth.

The stock increased 1.78% or $0.71 during the last trading session, hitting $40.62. The Kroger Co has risen 6.34% since July 27, 2015 and is up-trending. It has outperformed the S&P500 by 10.65%.

Nationwide Fund Advisors raised its stake in shares of Kroger Co by 244.3% during the fourth quarter. The institutional investor owned 1,440,200 shares of the company’s stock after buying an additional 1,021,887 shares during the period. Nationwide Fund Advisors owned 0.15% of Kroger worth $60,244,000 as of its most recent SEC filing.

A number of other large investors also recently made changes to their positions in KR, such as:-

• Eagle Asset Management increased its position in Kroger by 87.6% in the third quarter. Eagle Asset Management now owns 487,160 shares of the company’s stock valued at $17,570,000 after buying an additional 227,526 shares during the last quarter.
• Park National increased its position in Kroger by 1.1% in the fourth quarter. Park National now owns 38,513 shares of the company’s stock valued at $1,611,000 after buying an additional 435 shares during the last quarter.
• EQIS Capital Management increased its position in Kroger by 220.2% in the fourth quarter. EQIS Capital Management now owns 36,853 shares of the company’s stock valued at $1,542,000 after buying an additional 25,343 shares during the last quarter.

Kroger Co has earned a “BBB” credit rating from Morningstar. The research firm’s “BBB” rating indicates that the company is a moderate default risk. They also gave their stock a two star rating.

Also, several equities research analysts have recently commented on the company.

• Guggenheim increased their price objective on shares of Kroger from $45.00 to $46.00 and gave the company a “buy” rating in a research report on Wednesday, December 23rd.

• Oppenheimer upped their target price on shares of Kroger from $42.00 to $47.00 and gave the company an “outperform” rating in a research note on Wednesday, January 6th.

• Wells Fargo initiated coverage on shares of Kroger in a research note on Friday, December 18th. They set an “outperform” rating on the stock.

• Finally, JPMorgan Chase & Co. upped their target price on shares of Kroger from $45.00 to $46.00 and gave the company an “overweight” rating in a research note on Tuesday, December 22nd.

Seven research analysts have rated the stock with a hold rating, fifteen have given a buy rating and one has given a strong buy rating to the company. The stock currently has a consensus rating of “Buy” and an average target price of $43.28.

Harvey’s Options Volatility Indicator

Conclusion

A dominant position among the nation's largest grocery retailers enables Kroger to sustain growth, expand store base and boost market share. The company also remains well positioned to deliver higher earnings, primarily through strong identical supermarket sales growth.

It is believed that there remain enormous opportunities to augment identical supermarket sales, alleviate gross margin pressure and improve operating margin. Kroger's long-term earnings per share growth rate target of 8%, seems achievable. The Cincinnati-based company had earlier projected fiscal earnings between $2.02 and $2.04 per share.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the KR Jul 2016 40.000 call (KR160715C00040000) at approximately $2.80. Place a pre-determined sell at $5.60.

Note: No protective stop losses added -- but if you wish to do so make it $1.15.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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