Goldman Sachs Gives Earnings Preview On The Kroger Company

Goldman Sachs expects Kroger KR to report 4Q2010 EPS of $0.43 on Thursday, March 4, roughly in line with consensus at $0.44. On the heels of SWY's 4Q results, Goldman expects KR to report a similar sequential improvement in underlying trends, including 2.8% ID sales growth, budding inflation by the end of the quarter that is being passed to the consumer, and modest operating margin expansion. KR's shares have a history of selling off on earnings releases, therefore Goldman Sachs would be cautious into the print. However, it advocates buyingparticularly on weakness. The 4Q results should demonstrate two key aspects supporting our positive view of the shares: sequential EPS growth following the 3Q inflection point on a normalized tax-basis; and modest inflation is being pushed through to the consumer, which should lead to greater leverage as sales are driven by greater price per item versus tonnage. Goldman maintains its $25 PT and Buy rating on KR KR is trading higher at $22.89