On Monday, Guggenheim maintained a Buy rating on Kroger (NYSE:KR) and raised the price target to $63 from the previous $61. The adjustment comes amid anticipation of a court decision regarding the Federal Trade Commission's (FTC) preliminary injunction against Kroger's merger with Albertsons Companies Inc. (NYSE:ACI) and ahead of the company's third-quarter results expected on December 5, 2024.
The analyst from Guggenheim highlighted the announcement of several unexpected management changes at Kroger. This development is particularly noteworthy as the market awaits the Portland court's ruling on the FTC's action, which could significantly influence Kroger's long-term shareholder value and near-term return of capital. Although the exact timing and outcome of the decision remain uncertain, it was initially expected to have been made by now and could be announced at any moment.
Furthermore, the upcoming third-quarter results are predicted to align with forecasts, with the possibility of a tightened full-year guidance. The analyst suggests that Kroger's performance may be viewed favorably in contrast to the anticipated lackluster results from Dollar General (NYSE:DG) and Dollar Tree (NASDAQ:DLTR). This perspective is based on estimates and takes into consideration Kroger's product mix and customer demographics.
Guggenheim's stance on Kroger is supported by what they consider to be conservative expectations from Wall Street, the company's modest exposure to macroeconomic factors, and a valuation based on a 6.5 times estimated 2025 EBITDA multiple. With these factors in mind, the firm has set a price target that implies an approximate 10% total shareholder return.
In other recent news, Kroger Co (NYSE:KR). has reported significant developments across various aspects of its operations. The company's Q2 2024 earnings showed a 1.2% rise in identical sales excluding fuel, a 17% increase in delivery solutions, and an 11% boost in digital sales. Despite a 3% decrease, adjusted earnings per share (EPS) were at $0.93.
In executive movements, the company announced the departure of Stuart Aitken, Senior Vice President and Chief Merchant and Marketing Officer, effective January 2025. No immediate succession plans were detailed.
Regarding mergers and acquisitions, Kroger has made strides in its merger process with Albertsons Companies, Inc., including securing amendments to its credit agreements. The company also completed the sale of its specialty pharmacy business to Elevance Health, a move not expected to affect its 2024 financial guidance.
In terms of investor relations, Kroger declared a quarterly dividend of 32 cents per share. Analyst firms Roth/MKM and BMO Capital have maintained a Neutral and Outperform rating on Kroger shares, respectively. Lastly, the company enhanced its customer loyalty program, Boost by Kroger Plus, by adding Disney (NYSE:DIS) streaming services as an additional benefit. These are among the recent developments at Kroger.
InvestingPro Insights
Kroger's financial metrics and market position align well with Guggenheim's optimistic outlook. According to InvestingPro data, Kroger's P/E ratio stands at 15.41, with an adjusted P/E ratio of 12.47 for the last twelve months as of Q2 2025, suggesting the stock may be undervalued relative to its earnings potential. This aligns with an InvestingPro Tip indicating that Kroger is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's strong market position is reflected in its $42.84 billion market capitalization and its status as a "Prominent player in the Consumer Staples Distribution & Retail industry," as noted by InvestingPro Tips. This strength is further evidenced by Kroger's impressive revenue of $150.2 billion over the last twelve months as of Q2 2025.
Investors should note that Kroger has "raised its dividend for 19 consecutive years," demonstrating a commitment to shareholder returns that complements Guggenheim's projected 10% total shareholder return. With a dividend yield of 2.16% and a dividend growth rate of 10.34% over the last twelve months, Kroger presents an attractive option for income-focused investors.
For those interested in a deeper analysis, InvestingPro offers 10 additional tips on Kroger, providing a comprehensive view of the company's financial health and market position.
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