4 Big Box Retailers to Keep an Eye on in Q4 With Americans cutting back on their shopping, big box retailers face overstocking issues. However, the upcoming holiday season might help them make a comeback. Therefore, investors could consider adding fundamentally...
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With Americans cutting back on their shopping, big box retailers face overstocking issues. However, the upcoming holiday season might help them make a comeback. Therefore, investors could consider adding fundamentally strong big-box retail stocks Walmart (WMT), Kroger (KR), Casey's (CASY), and Ingles Markets (IMKTA) to their watchlists. Read on….
Big box retailers have been facing massive inventory issues over the past year. Most retailers focus on finding ways to sell the extra stock, identify products in demand, and cut costs to survive the inflationary environment.
Rising prices and concerns about the looming recession are making consumers rethink their shopping habits and reduce their discretionary spending. This year, 76% of Americans have cut their spending by 25%, and 38% have cut the same by 50%.
However, the big box retailers have been improving in-store operations so that shelves are restocked with in-demand items, and fewer sales are lost. Moreover, retailers have increasingly invested in equipment, technology, and software. Most retailers are getting ready to make a comeback by capitalizing on the holiday rush.
Moreover, while consumers are expected to cut back on their discretionary spending, consistent spending on necessary items should help big-box retailers.
Given this backdrop, investors could consider adding fundamentally strong big box retail stocks, Walmart Inc. (WMT), The Kroger Co. (KR), Casey's General Stores, Inc. (CASY), and Ingles Markets, Incorporated (IMKTA), to their watchlists.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.
On October 26, 2022, WMT announced the completion of the renovations made to the retrofitted regional distribution center in Texas, transforming it into a high-tech automation center. This investment is set to modernize Walmart's vast supply chain network to increase the speed, efficiency, and safety of product distribution.
For the fiscal second quarter ended July 2022, WMT's total revenues increased 8.4% year-over-year to $152.86 billion. The company's consolidated net income attributable to WMT increased 20.4% from the prior-year period to $5.15 billion. In addition, its total assets increased 3.6% year-over-year to $247.20 billion.
WMT's revenue for the quarter ending October 2022 is expected to increase 4.9% year-over-year to $146.07 billion. Its EPS for fiscal 2024 is expected to increase 12.8% year-over-year to $6.60. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 15.7% to close the last trading session at $141.14.
WMT's POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Grocery/Big Box Retailers industry, it is ranked #3 out of 38 stocks. The company has an A grade for Sentiment and a B for Growth, Stability, and Quality.
Click here to see the additional POWR Ratings of WMT for Value and Momentum.
The Kroger Co. (KR)
KR operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, and pet centers, and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.
On October 14, 2022, KR and Albertsons Companies, Inc. (ACI) announced that they had entered into a definitive agreement merging the two complementary organizations with iconic brands to establish a national footprint and unite around KR's Purpose to Feed the Human Spirit.
KR's Chairman and CEO, Rodney McMullen, believes that the merger advances the company's commitment to building a more equitable and sustainable food system, expanding its footprint and accelerating its position as a more compelling alternative to larger and non-union competitors. He also believes that this transaction will lead to faster and more profitable growth and generate greater returns for its shareholders.
KR's sales increased 9.3% year-over-year for the fiscal second quarter to $34.64 billion. Its operating profit increased 13.7% year-over-year to $954 million, while net earnings attributable to KR increased 56.5% year-over-year to $731 million. Additionally, its adjusted EPS came in at $0.90, representing a 12.5% increase from the prior-year quarter. Also, its adjusted EBITDA increased 10.9% year-over-year to $7.63 billion.
Analysts expect KR's EPS and revenue for the current quarter to increase 3.1% and 6.7% year-over-year to $0.80 and $34 billion, respectively. Over the past year, the stock has gained 13.7% to close the last trading session at $45.44.
KR's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked #5 in the same industry. It has a B grade for Growth, Value, and Quality.
We have also given KR grades for Momentum, Stability, and Sentiment. Get all KR ratings here.
Casey's General Stores, Inc. (CASY)
CASY operates convenience stores under the Casey's and Casey's General Store names. It offers a selection of food, beverages, tobacco and nicotine products; health and beauty aids; automotive products; and other non-food items. The company's stores also provide motor fuel, gasoline, and diesel.
For the fiscal first quarter ended July 2022, CASY's total revenue increased 40% year-over-year to $4.45 billion. The company's net income increased 28.3% year-over-year to $152.93 million. In addition, its adjusted EBITDA increased 20.6% year-over-year to $293.21 million, while its EPS came in at $4.09, representing a 28.2% increase from the prior-year quarter.
CASY's EPS and revenue for the quarter ending October 2022 are expected to increase 12.6% and 24.4% year-over-year to $2.92 and $4.06 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 17.8% to close the last trading session at $221.41.
CASY's solid prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy. Again, it is ranked #4 in the same industry. In addition, it has a B grade for Growth, Value, and Quality.
Click here to see other CASY ratings for Momentum, Stability, and Sentiment.
Ingles Markets, Incorporated (IMKTA)
IMKTA operates a chain of supermarkets in the southeast United States. It offers food products, including grocery, meat, and dairy products, produce, frozen foods, and other perishables, and non-food products, including fuel centers, pharmacies, health and beauty care products, and general merchandise as private label items.
For the fiscal third quarter ended June 2022, IMKTA's net sales increased 14.1% year-over-year to $1.46 billion. Its gross profit increased 4.3% year-over-year to $351.88 million.
Over the past year, the stock has gained 35.9% to close the last trading session at $92.01.
IMKTA's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It is ranked first in the Grocery/Big Box Retailers industry. The company has an A grade for Quality and a B for Growth, Value, and Stability.
Click here to see the additional POWR Ratings of IMKTA for Momentum and Sentiment.
WMT shares were trading at $141.71 per share on Thursday afternoon, up $0.57 (+0.40%). Year-to-date, WMT has declined -0.89%, versus a -18.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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