The Zacks Analyst Blog Highlights:Kroger, Wal-Mart Stores, Whole Foods Market, SIRIUS XM Radio and Liberty Media

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Jun 15, 2012, 09:30 ET

CHICAGO, June 15, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include The Kroger Company (NYSE:KR),Wal-Mart Stores Inc. (NYSE:WMT), Whole Foods Market Inc. (Nasdaq:WFM),SIRIUS XM Radio Inc. (Nasdaq:SIRI) and Liberty Media Corp. (Nasdaq:LMCA).

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Here are highlights from Thursday's Analyst Blog:

Kroger Beats, Ups Outlook

The Kroger Company (NYSE:KR), one of the largest grocery retailers, recently posted better-than-expected first-quarter 2012 results. The quarterly earnings of 78 cents a share beat the Zacks Consensus Estimate of 72 cents, and rose 11.4% from 70 cents earned in the prior-year quarter. Share repurchase activities provided cushion to the bottom line.

Healthy results prompted management to raise their outlook. The Cincinnati-based company now expects fiscal 2012 earnings between $2.33 and $2.40 per share, up from a range of $2.28 to $2.38 forecasted earlier.

The current Zacks Consensus Estimate for fiscal 2012 is $2.32 per share. Consequently, following an upbeat guidance, we could witness a correction in the Zacks Consensus Estimates in the coming days, with analysts revising their estimates to better align with the company's earnings outlook.

Total revenue (including fuel center sales) climbed 5.8% to $29,064.8 million from the prior-year quarter, but fell short of the Zacks Consensus Estimate of $29,194 million.

Excluding fuel center sales, total revenue rose 4.3% and identical supermarket sales (stores that are open without expansion or relocation for five full quarters) climbed 4.2% to $21,652.7 million.

Kroger, which faces stiff competition from Wal-Mart Stores Inc. (NYSE:WMT) and Whole Foods Market Inc. (Nasdaq:WFM), reiterated its identical supermarket sales (excluding fuel) growth guidance of 3% to 3.5% for fiscal 2012, including the anticipated adverse impact from prescription drugs coming off patent.

Including fuel center sales, identical supermarket sales jumped 5.5% to $26,100.6 million. We believe that Kroger's dominant position enables it to sustain top-line growth, expand store base, and boost market share.

Kroger's customer-centric business model provides a strong value proposition to consumers. It is well positioned to continue its growth momentum primarily through identical supermarket sales growth.

However, Kroger is not immune to the tough economic environment. The intensifying price war among grocery stores to lure budget-constrained consumers may adversely impact Kroger's sales and margins.

Kroger ended the first quarter with cash of $190.7 million, temporary cash investments of $320.4 million, and total debt of $8,105.9 million, reflecting a debt-to-capitalization ratio of 66.6%, and shareholders' equity of $4,067.3 million. Net debt increased $662.1 million from the prior-year. Trailing-twelve months' net total debt to EBITDA ratio was 1.91 compared with 1.79 in the prior-year period.

Capital investment, exclusive of acquisitions and purchases of leased facilities, aggregated $539.1 million for the quarter.

During the quarter, Kroger bought back 14.6 million shares for an aggregate amount of $345.3 million. The company's healthy free cash flow generating ability has facilitated it to return over $1.6 billion to shareholders via dividends and share repurchases in the trailing four quarters.

The company's board also authorized a new $1 billion share buyback program replacing the prior one, which was recently completed on June 12, 2012.

The company currently operates 2,425 supermarkets and multi-department stores in 31 states under approximately 24 local banners. Currently, we have a long-term 'Outperform' recommendation on the stock. However, Kroger's shares maintain a Zacks #3 Rank that translates into a short-term 'Hold' rating.

Still Neutral on SIRIUS XM Radio

We reaffirm our long-term Neutral recommendation on SIRIUS XM Radio Inc. (Nasdaq:SIRI). The first quarter of 2012 financial results were mostly in line with the Zacks Consensus Estimates. This improved performance was mainly due to strong management execution on the back of rising auto sales. In the last quarter, the company achieved several operating milestones including a record high net subscriber additions, massive adjusted EBITDA and free cash flow generation, and further penetration in the auto sector.

Management predicted that this momentum will further intensify in the rest of fiscal 2012 and accordingly projected a healthy financial outlook. We believe the introduction of Satellite Radio 2.0 and price increase will boost the company's financials going forward. However, SIRIUS XM is currently facing a hostile takeover bid from Liberty Media Corp. (Nasdaq:LMCA). We will closely monitor this development and believe the stock is fairly valued at this stage.

SIRIUS XM has a very strong business relationship with original equipment manufacturers. The company owns an extensive satellite network, covering the whole U.S. that provides audio contents through more than 170 channels. SIRIUS XM added 404,596 net new subscribers in the first quarter of 2012. This astonishing net subscriber addition helps SIRIUS XM to end the previous quarter with a record high total subscriber base of 22,297,420, up 8.4% year over year.

Payment category wise, Self-Pay subscriber was 18,208,090 while Paid Promotional subscriber was 4,089,330. The most important fact is that the Self-Pay subscriber net addition in the previous quarter increased 147.7% year over year to 299,348. The previous quarter was the best one with respect to net subscriber addition in the company's history.

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