On Friday, Citi analysts reinstated coverage on Kroger stock (NYSE:KR) with a Neutral rating and a price target of $61.00. The decision follows a hiatus due to a potential merger between Kroger and Albertsons Companies Inc. (NYSE:ACI), which has since been blocked. According to InvestingPro data, Kroger maintains a GOOD financial health score and has consistently raised its dividend for 19 consecutive years, demonstrating strong operational stability.
The analysts at Citi provided their perspective, stating that the risk/reward balance for Kroger is currently even. They acknowledged multiple positive aspects for the company but also pointed out several concerns and challenges that could impact its performance. With annual revenue of $149.9 billion and a market capitalization of $42.4 billion, Kroger remains a prominent player in the Consumer Staples sector. According to the analysts, these factors collectively contribute to their neutral stance on the stock. Discover more detailed insights and metrics with InvestingPro, which offers comprehensive analysis through its Pro Research Reports.
Kroger shares are trading at a forward Price-to-Earnings (P/E) ratio of 12.1 times for Fiscal Year 2025 and an Enterprise Value to EBITDA (EV/EBITDA) multiple of 6.1 times. These metrics are reportedly in line with the company's historical average, excluding the period affected by the merger talks when the multiples were lower.
The historical average P/E ratio for Kroger, excluding the merger period, stands at 12.6 times, while the EV/EBITDA multiple is at 6.3 times. The Citi analysts believe that these figures indicate a balanced risk/reward scenario for investors at the current trading levels.
The coverage resumption comes after the proposed merger between Kroger and Albertsons faced regulatory roadblocks. The merger had been a significant factor influencing the company's stock performance and valuation in the recent past.
In other recent news, Kroger Co . has experienced significant developments. The grocery retailer has cancelled its proposed merger with Albertsons Companies Inc., following injunctions from U.S. District and King County Superior Courts. Analyst Ken Goldman from JPMorgan has updated the financial model for Kroger, increasing the price target for Kroger shares to $71 from the previous target of $69 and maintaining an Overweight rating on the stock. The revised price target and rating came after adjustments to the earnings per share (EPS) forecasts for the coming years, with an estimated EPS of $4.44 for fiscal year 2024.
Kroger has also announced the redemption of multiple series of senior notes totaling $4.7 billion, which is a direct financial obligation resulting from the termination of the merger agreement. In addition to this, BMO Capital Markets maintained its Market Perform rating on Kroger but increased the stock's price target from $60.00 to $63.00, factoring in the potential earnings accretion from Kroger's $5 billion accelerated share repurchase (ASR) program.
Furthermore, Kroger has revealed a $7.5 billion share repurchase program, including a $5 billion accelerated share repurchase, following the termination of the merger agreement. The company's CEO, Rodney McMullen, has emphasized the company's strategy to deliver value and growth, citing investments in lowering grocery prices, wage increases, and capital investments for store improvements. These developments are part of the recent changes at Kroger Co. that have significant implications for the company's future.
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