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Harris Teeter Supermarkets Inc (HTSI), Safeway Inc. (SWY): How Solid The Kroger Co. (KR) Earnings Could Send Shares Soaring

The Kroger Co. (NYSE:KR) will release its quarterly report on Thursday, and investors have gotten extremely bullish about the grocery chain, bidding shares up to new all-time record highs earlier in the summer. If The Kroger Co. (NYSE:KR) earnings can deliver solid growth, then the stock could see even bigger gains despite tough competitive conditions in the grocery industry.

The Kroger Co. (NYSE:KR)The grocery business is inherently difficult, with razor-thin margins requiring companies to be quick on their feet to take advantage of sometimes-fleeting competitive edges. But The Kroger Co. (NYSE:KR) has handled the onslaught of big-box retailers and specialty natural-foods markets with a measured strategic approach that has helped the company thrive where others have fared worse. Let’s take an early look at what’s been happening with The Kroger Co. (NYSE:KR) over the past quarter and what we’re likely to see in its report.

Stats on Kroger

Analyst EPS Estimate $0.60
Change From Year-Ago EPS 17.6%
Revenue Estimate $22.67 billion
Change From Year-Ago Revenue 4.3%
Earnings Beats in Past 4 Quarters 4

Source: Yahoo! Finance.

Will Kroger earnings leave investors satisfied this quarter?
Analysts have gotten more optimistic about Kroger earnings in recent months, hiking their July quarter estimates by a penny per share and their full-year projections by a nickel per share. The stock has also done well, climbing 14% since early June.

What’s particularly impressive about The Kroger Co. (NYSE:KR)’s stock performance is that it came despite April-quarter earnings that disappointed investors. Kroger managed to boost profits 18% on a 3.4% gain in revenue for the quarter. But sales fell short of analyst estimates, worrying investors about Kroger’s ability to sustain its growth despite its impressive track record of 38 straight quarters of same-store sales increases. Even raising its earnings guidance wasn’t enough to prevent a short-term stock slide.

The big piece of news for Kroger this quarter came from its announcement that it would acquire Harris Teeter Supermarkets Inc (NYSE:HTSI) in a $2.44 billion deal. Harris Teeter Supermarkets Inc (NYSE:HTSI) is relatively small, with just over 200 store locations. But it has a strong reputation in the mid-Atlantic region that will help The Kroger Co. (NYSE:KR) boost its presence there and in the Southeast. Some have speculated that Kroger could buy A&P operator Great Atlantic & Pacific Tea as well, which could give it more Northeastern exposure.