On Wednesday, RBC Capital Markets adjusted its outlook on Albertsons Companies Inc. (NYSE: NYSE:ACI), reducing the supermarket chain's price target from $22.00 to $21.00, while sustaining an Outperform rating on the stock. The adjustment follows a federal judge's decision to halt the proposed merger between Kroger Co (NYSE:KR). and Albertsons. According to InvestingPro data, analyst targets for Albertsons currently range from $19.00 to $27.25, with the stock trading at $18.51.
The analyst at RBC Capital noted the court's ruling to block the merger between Kroger and Albertsons was largely expected by the market. Consequently, the analyst has moved away from a probability-weighted price target methodology and has set a new target based on a multiple of 5 times the firm's adjusted EBITDA projection for 2026, which stands at approximately $3.82 billion. This forecast is slightly lower than the consensus estimate of $4.08 billion. For context, InvestingPro shows Albertsons' current EBITDA at $3.86 billion, with the company trading at an EV/EBITDA multiple of 6.4x.
The reason behind the lower EBITDA estimate, as outlined by the analyst, is due to an anticipated ongoing shift in sales mix, primarily influenced by significant growth in the pharmacy sector and probable investments in pricing. Albertsons has not issued any statement regarding the judge's decision to block the merger at this time.
Looking ahead, the analyst suggests that potential positive developments for Albertsons could include a sizeable commitment to share repurchases or an announcement of a sale and leaseback deal coupled with a tender offer, which could help alleviate the current pressure on the company's shareholders.
In other recent news, a significant development in the grocery industry was the U.S. District Judge's decision to block the proposed $25 billion merger between Albertsons Companies Inc. and The Kroger Co. The ruling, favoring the U.S. Federal Trade Commission's opposition to the merger, effectively terminates the merger plans, according to court documents. On the leadership front, Albertsons announced changes to its Board of Directors, with Jim Donald assuming the role of independent Chair and Stephen Feinberg, co-founder of Cerberus Capital Management, joining as a Board member.
Albertsons also reported a year-over-year decline of 18% in its second quarter fiscal year 2025 earnings, despite surpassing earnings per share forecasts, and declared a quarterly cash dividend of $0.12 per share of common stock. In terms of analyst ratings, Albertsons was upgraded from Hold to Buy by research firm Melius, with a price target set at $24.00. Meanwhile, BMO Capital maintained a Market Perform rating, reducing Albertsons' price target from $21.00 to $19.00.
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