On Friday, BofA Securities adjusted its outlook on Kroger Co (NYSE: NYSE:KR), raising the supermarket chain's share price target from $55.00 to $70.00, while reaffirming a Buy rating on the stock. The revision follows Kroger's robust fiscal fourth-quarter earnings, prompting the analyst to update the price objective based on a forward-looking earnings estimate.
The analyst at BofA Securities highlighted Kroger's recent financial performance, noting the company's potential for both near and long-term growth. The increased price target reflects a valuation of approximately 15 times the projected adjusted earnings per share (EPS) for fiscal year 2026, which is estimated to be $4.55. This marks an adjustment from the previous valuation, which was based on 15 times the forecasted earnings for fiscal year 2025.
Kroger's growth prospects are seen as being supported by several factors. Notably, the company's alternative profit streams, which are expected to generate $1.3 billion in fiscal year 2024, are a key component of this positive outlook. Kroger Precision Marketing is identified as a leading contributor within these alternative profit avenues.
Moreover, the analyst underscored Kroger's strategic emphasis on expanding its pharmacy operations. There is a significant opportunity identified for Kroger to convert more of its existing customer base to utilize the company's pharmacy services. This focus on healthcare is anticipated to play a crucial role in driving Kroger's future earnings and supporting the higher price target.
Investors are watching Kroger's stock as the company continues to navigate the competitive grocery market landscape, with alternative profit streams and pharmacy expansion strategies central to its growth narrative. The new price target of $70.00 presents an optimistic view of Kroger's ability to capitalize on these initiatives and sustain its positive earnings trajectory.
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