Rallies After Q2 Results and Opioid Settlement

Kroger (KR) stock price surged roughly 3.1% on 8 September 2023 (Friday) after the release of the second quarter’s earnings results. The stock price entered into an uptrend in mid-June, rising from the support level of $44.40 in hopes of closing above $50. KR stock price did cross above $50 but was not successful in closing above it.

Kroger (KR) stock price has attempted thrice to break and close above $50 in 2023 and has not been successful. After the rejection, the asset price corrected the bullish move and fell to the recent support of $44.40.

Kroger Resolves Opioid Lawsuits, Reports Second Quarter Results

On 8th September, the retailer released its second-quarter report. Kroger reported adjusted earnings of $0.96 which surpassed the consensus estimate of $0.92, rising from $0.90 that was reported in the previous year’s quarter.

Total revenue amounted to $33,853 Million falling short of the consensus estimate of $34,251 Million. The metric has declined from $34,638 Million posted in the prior year quarter.

KR ended the second quarter with cash of $263 Million, a total debt of $12,791 Billion, and a shareowner’s equity of $10,604 Million. The total debt has declined by $1,792 Million in the last four quarters.

Kroger has decided to pay as much as $1.4 Billion to resolve thousands of lawsuits by the United States, local government, and Native American tribes claiming that the supermarket chain’s pharmacies fueled the nation’s opioid epidemic.

The retailer would be paying $1.2 Billion to the United States, counties, and municipalities and $36 Billion to Native American tribes to resolve the majority of cases it faced. Kroger will also pay $177 Million to cover Attroney’s fees and expenses. The $1.2 Billion would be paid out over the period of 11 years.

As a part of a $25 Billion merger with smaller rival Albertsons, Kroger stated that it will sell 413 grocery stores to C&S wholesale grocers to secure clearance from the United States regulators.

Will KR Stock Retest $50?

The stock price has closed above the 20-day exponential moving average, indicating a rise in bullish momentum. The Chaikin money flow score has been trading below the 0 mark since 16 August and currently stands at -0.13, suggesting weakness in the market.

The relative strength index of KR stock has crossed above the 50 mark and stands at 50.58, suggesting a rise in bullish momentum which supports the current price action.

Conclusion

The market structure and price action of Kroger (KR) stock are bullish after the release of second-quarter results and news regarding the settlement of opioid lawsuits.

Technical Levels

Major support: $44.40 and $42.90
Major resistance: $50 and $52

Disclaimer

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