Kroger Valuation Likely Stays Depressed Near-Term: Oppenheimer
Kroger Co (NYSE:KR) investors are wildly disappointed today after the grocery giant cut its annual profit outlook by 10% ($2.00-$2.05, down from the prior estimate of $2.21-$2.25), citing higher product costs than previously expected. However, Kroger reported Q1 revenues of $36.3 billion, beating Wall Street consensus of $35.5 billion.
In reaction, Oppenheimer analyst Rupesh Parikh reduced his price target on Kroger shares to $28.00 (from $38.00), while reiterating an Outperform rating.
Parikh commented, “Given negative investor sentiment toward retail, the potential for heightened grocery competition to persist, and the recent guide-downs from the KR management team, we now assume a more depressed P/E multiple of 14x on our FY18 forecast.”
“We are lowering our estimates to reflect today’s results and our latest thinking. We now look for FY17 and FY18 EPS of $2.00 and $1.95, respectively, vs. $2.20 and $2.30 previously. Our price target goes to $28 from $38. KR will be lapping a 53rd week next year, which will impact comparisons,” the analyst added.
Bottom line: “After digesting the release and conference call commentary further, we believe the move lower in KR shares is largely warranted.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rupesh Parikh has a yearly average return of 15.2% and a 61.% success rate. Parikh has a -0.5% average return when recommending KR, and is ranked #198 out of 4569 analysts.
Out of the 8 analysts polled by TipRanks (in the past 3 months), 3 rate Kroger stock a Buy, while 5 rate a Hold. With a return potential of nearly 49, the stock’s consensus target price stands at $31.57.
Finisar Is a Buying Opportunity: William Blair
Netis stated, “Given strong datacom market drivers, potentially improving conditions in China, new product qualifications (CFP2-ACO), and a large opportunity for ROADMs/WSS at Verizon and China, we believe revenue growth and margins are bound to improve throughout the year. We project 4% growth, but see significantly higher upside.”
The communications hardware maker reported adjusted fiscal fourth-quarter earnings of 50 cents a share, up 72% from a year ago and in line with consensus estimates. Revenue rose 12% to $357.5 million, but came in $2 million below consensus.
“Overall, the results were not far from what was expected, with management potentially using the current reset as an opportunity to clear the decks on fiscal 2018. Management commentary for the fiscal second quarter (October), postulating resumption of growth, was more optimistic, helped by lower overhang from China (at a low-teens percentage of revenue versus 20% historically) and due to continued strength of 100G QSFP28 transceivers and VCSEL arrays for 3-D sensing. Management noted it will be shipping a few million dollars’ worth of VCSEL array units in the July quarter (corresponding to about a million units), stepping it up to tens of millions of dollars in the October quarter (with a potential to reach upwards of $20 million depending on yield). Gross margins have a better probability of expanding than not as higher-margin QSFP28 product volumes grow,” Netis says.
According to TipRanks.com, analyst Dmitry Netis has a yearly average return of 8.7% and a 54% success rate. Netis has an -8.7% average return when recommending FNSR, and is ranked #473 out of 4569 analysts.
The overwhelmingly majority of analyst say Finisar is a “Buy.” The average forecast is for the stock to hit $37.50 in the coming months.