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On Friday, Evercore ISI made an adjustment to its outlook on Kroger Co (NYSE:KR) shares, reducing the price target to $73 from the previous $75 while maintaining an Outperform rating on the stock. This move comes as Evercore ISI analyst Michael Montani expressed confidence in Kroger’s ability to deliver on its total shareholder return (TSR) goals, despite a slight lag in fourth-quarter sales growth compared to the industry. According to InvestingPro data, Kroger, with its substantial $43.63B market capitalization, has demonstrated strong financial health with an overall score of 2.83 out of 5.
Kroger’s fourth quarter results showed core grocery sales growth of 2.6%, a stable market share, and an expansion in FIFO (First In, First Out) EBIT (Earnings Before Interest and Taxes) margin. Montani highlighted that although Kroger’s 2.4% identical sales and 2.6% total growth were slightly behind the industry by 20-30 basis points, the addition of Express Scripts should aid in reversing a decline that has lasted over one and a half years. InvestingPro analysis reveals that Kroger has maintained dividend payments for 20 consecutive years, with a current dividend yield of 2.01% and impressive dividend growth of 10.34% over the last twelve months.
Looking ahead, Kroger is on track to achieve a 3% FIFO EBIT growth in 2025, according to Montani. However, the company may face rising inflation excluding tariffs, and the impact of share buybacks is expected to be recognized with a lag. Consequently, Evercore ISI has revised its 2025 earnings per share (EPS) estimate for Kroger to $4.80, which includes a 5-cent impact from pension adjustments in the first quarter. The 2026 EPS projection has been reduced to $5.40, compared to the consensus on Wall Street, which stands at $5.15.
Montani concluded by noting that Evercore ISI is ending its positive Tactical Outperform (TAP) on Kroger as the event that prompted it has concluded. During the period of the TAP, Kroger’s stock declined by 1.5%, while the S&P 500 fell by 3.5%. Nevertheless, Montani recommends Kroger for investors seeking company-specific drivers and improved core operations, highlighting that the stock is trading at a 35-40% discount compared to the S&P 500 and is less affected by tariff and port disruptions.
In other recent news, Kroger reported its first-quarter 2025 earnings, revealing an earnings per share (EPS) of $1.14, which surpassed the analyst forecast of $1.11. However, the company did not meet revenue expectations, reporting $34.3 billion against the anticipated $34.75 billion, primarily due to lower fuel sales. Despite this revenue shortfall, Kroger’s digital and delivery sales showed significant growth, with digital sales increasing by 10% and delivery solutions by 18%. Guggenheim recently maintained its Buy rating on Kroger with a $71 price target, noting confidence in the company’s strategic initiatives and potential for earnings growth. The firm highlighted Kroger’s guidance for comparable store sales growth of 2-3% and an EBIT forecast of $4.7 to $4.9 billion. Kroger’s ongoing efforts to enhance its business model, including its return to the ESI Rx network and increased alternative profits, are expected to support this growth. The company’s adjusted EPS for 2024 was reported at $4.47 per diluted share, with expectations for 2025 set between $4.60 and $4.80. Additionally, Kroger plans to complete 30 major store projects in 2025, further indicating its commitment to expanding its physical and digital presence.
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