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Kroger Co. (KR) Could Catch Fire This Week

By U.S. News & World Report

Kroger Co. (ticker: KR), America’s largest pure-play grocery stock with nearly 2,800 stores across two dozen brands, will enter Thursday morning’s first-quarter earnings report grossly behind the eight ball.

KR stock is off 11 percent versus a market that’s up 9 percent — largely the product of a dreadful fiscal year 2016 fourth-quarter report in which Kroger shocked Wall Street with a decline in same-store sales. Worse, the problems are hardly Kroger’s alone. Grocers and big-box stores with food-retail operations are feeling the pain from sliding food prices.

However, despite an ugly environment for grocers and Kroger’s company-specific issues, KR could be set up for a recovery.

The headline numbers. Make no mistake — Kroger doesn’t need a “good” quarter to make a splash on Thursday. It just needs to hurdle a limbo-level bar set by Wall Street’s analysts. Revenues are expected to reach $37.75 billion — a mere 3.3 percent jump amid a full year where pros think Kroger is capable of 5 percent top-line growth. Meanwhile, profit estimates are for an 18 percent dip to 57 cents per share.

[Read: 5 Delicious Ways to Invest in Organic Food.]

And if you didn’t like Kroger’s last quarter — in which comps declined 0.7 percent — you probably won’t enjoy what’s coming down the pike. Kroger said in its guidance statement that while it expected improvement in the operating environment later this year, the first half of 2017 will “be similar to the second half of 2016.”

If there’s any solace — and long-side opportunity — to be had, it’s that Wall Street seemed to absorb all these realities back in March, when KR stock sold off by about 10 percent in the week following its fourth-quarter report.

A slightly rosier view toward Kroger might be warranted going forward.

The sunnier side of Kroger. The best argument for a Kroger surprise is that food deflation — which choked grocers across 2016 — appears to be easing. April’s CPI Detailed Report showed a 0.2 percent improvement in the food index, marking the fourth consecutive month that measurement headed higher.

While customers won’t appreciate those kinds of changes, upticks in food prices help bolster grocers’ top lines.

This change is already bolstering the fates of other companies with large grocery operations. Wal-Mart Stores ( WMT), for instance, posted improvement in food retail for its first quarter, which “delivered the strongest quarterly comparable sales performance in more than three years, due in part to a lack of market deflation in food,” CNBC reported.

BMO Capital Markets analyst Kelly Bania also is hopeful that lower food deflation will show up in Kroger’s first-quarter results. In a report out last week, she says the company revised its deflation forecast from 1.3 percent to 1 percent and sees the potential for improved comparable sales.

Wells Fargo was far more exuberant on Kroger in an early May note, saying that Kroger “remains our best idea in food retail.” At the time, Wells cited a cheap valuation thanks to worries about competition; KR stock traded at a forward price-earnings ratio just above 13, where shares still trade today.

Looking ahead, expansion, which is one of Kroger’s favorite weapons, is constantly in play, too. Back in 2013, Kroger bought Harris Teeter for $2.5 billion to add more than 200 stores mostly located in the South, and in 2015 it gobbled up Midwest-focused chain Roundy’s for $800 million. Most recently, Kroger bought longtime partner Murray’s Cheese, a specialty foods retailer based in Greenwich Village, New York — a small $20.6 million play announced in February.

[See: 10 Skills the Best Investors Have.]

But analysts want more, suggesting Kroger could be a potential buyer for the remaining stores of Midwest chain Marsh, but a much bigger splash would be Whole Foods Market ( WFM), the struggling organic-centric grocer that Credit Suisse’s Edward J. Kelly says Kroger should buy at $40 to $45 per share.

In the near term, though, Wall Street increasingly looks optimistic about a Kroger recovery. Shares have already recovered to about $31 — 5 percent better than their May lows. But a significant beat Thursday could send KR stock back near the $33-$34 level it yielded after March’s report.

More Earnings in Focus

Bob Evans Farms (BOBE). Bob Evans hasn’t gotten the attention that Apple ( AAPL) and Alphabet ( GOOGL, GOOG) have, but it’s just as deserving. BOBE shares are up nearly 35 percent this year, outdoing several of Wall Street’s hottest tech stocks on optimism over the company’s new direction. Specifically, Bob Evans exited the restaurant business by selling its chain of 523 locations to private equity firm Golden Gate Capital back in January for $565 million. BOBE instead will focus on growing its prepared foods business, even doubling down by announcing the purchase of Pineland Farms Potato Co. on the same day it unveiled the Golden Gate deal. Bob Evans’ food division brought in $9.8 million in profits on $112 million in revenues last quarter, versus a $1.6 million loss for the restaurants business on roughly double the sales. This quarter’s fiscal fourth-quarter estimates, due out Thursday morning, are just as telling. Although the company’s revenues will plunge by almost 70 percent without restaurant contributions, earnings are expected to come in just 12.5 percent lower at 42 cents per share.

H&R Block (HRB). Here comes the big one. H&R Block’s fiscal fourth quarter covers the all-important three-month tax season from the start of February through the end of April, and as a result, this is where HRB makes its only profits of the year. For instance, in fiscal 2016’s fourth quarter, H&R Block brought in $3.13 per share in diluted earnings from continuing operations … to bring the full-year profit to just $1.53 per share. That’s why Wall Street actually cheered HRB’s 49-cent loss in the third quarter. For fiscal 2017, Wall Street isn’t expecting much on the growth side, with fourth-quarter revenues up 0.8 percent to $2.32 billion, capping off a fractional decline in sales for the year. But adjusted fourth-quarter earnings are expected to pop roughly 12 percent to $3.53 per share, pushing a 10 percent jump in full-year profits to $1.75.

This Week’s Earnings Calendar

Wednesday. Jabil ( JBL), Liberty Tax ( TAX)

[See: 9 of the Best-Loved Stocks of the Trump White House.]

Thursday. LightInTheBox Holding Co. Ltd. ( LITB), Yingli Green Energy Holding Co. Ltd. ( YGE)

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Kroger Co. (KR) Could Catch Fire This Week originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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