New Trade for November 25th, 2020

Wall Street may be looking to take a breather this morning, after closing out another historical session.  Yesterday the DJIA broke through 30,000 and closed above 30,000 for the first time ever.  The president even held a congratulatory briefing in the moments following the initial breakthrough.  Wow!  What a day!  We’ll have to wait and see if the 30 stock index can maintain a >30,000 close for two days in a row, on this Wednesday before Thanksgiving.  

If you’re looking for a stock that has been consistently beating earnings estimates and might be well positioned to keep the streak alive in its next quarterly report, we have a great candidate to consider.  

Kroger Co. (KR) operates supermarkets, drug stores, multi-department stores and convenience stores.  The company also makes and processes some of the food it sells in its supermarkets.  In 2020, Kroger introduced more than 50 new plant-based products in its Simple Truth plant-based collection.  The company recently launched Chefbot, an AI-powered tool aimed at reducing food waste by suggesting recipes based on what customers already have in their kitchens.

The supermarket chain has an established record of topping earnings estimates, especially when looking at the previous two reports.  The company boasts an average surprise for the past two quarters of 26.03%.

For the last reported quarter, Kroger came out with earnings of $0.73 per share versus the Zacks consensus estimate of $0.51, representing a surprise of 43.14%.  For the previous quarter, the company was expected to post earnings of $1.12 per share and it actually produced earnings of $1.22 per share, delivering a surprise of 8.93%.

With this earnings history in mind, recent estimates have been moving higher for Kroger.  In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the company is positive, which is a great sign of an earnings beat, especially when you combine this metric with its nice Zacks Rank.  

According to Zacks research, stocks with the combination of a positive Earnings ESP and a Zacks rank of #3 (Hold) or better produce a positive surprise nearly 70% of the time.  Kroger Co. is scheduled to report earnings on Thursday, December 3rd. 

 One more thing, Kroger stock sports a 2.2% dividend payout, which is a sustainably low ratio of 20% of its income after tax.  That means the dividend is not likely going anywhere anytime soon.