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Kroger stock may have a quiet few months ahead of it.
Bloomberg/Scotty Perry
The massive Covid-19 boost for food merchants is fading, but that means now is a great time to buy grocer stock.
Kroger,
Guggenheim believes so. On Wednesday, analyst John Heinbockel maintained his Buy recommendation on Kroger stock (ticker: KR), but raised his price objective to $41 from $37. He expects Kroger’s next six to nine months to be quite boring, with modest expectations. This might be beneficial to the stock.
“Kroger, like other consumables stores, is better than expected in cycling last year’s big Covid top- and bottom-line benefits,” he adds. Despite the threat of inflation, he sees some unexpected bright spots in the company’s recent first-quarter results, as well as its ability to raise its forecast and dividend. While the pandemic benefited Kroger and other stores by encouraging customers to cook and eat at home, it also resulted in increased operational expenses, which the analyst believes to subside over time. Kroger is also investing in strengthening its online presence, as well as its selection of fresh and prepared foods and private-label brands. Kroger also appeals to Heinbockel because of its robust cash flow and modest investor expectations. “With a unionized workforce and less reliance on imports, the company is also less subject to labor and freight cost pressures than many retailers,” he adds.
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Of course, certain shops, such as Target, thrive even more in a post-pandemic society (TGT),
Dollar General is a store that sells a
& (DG)
Wholesale Costco
(COST), but their stock’s multiple reflects their accomplishment. Kroger shares, on the other hand, have a low valuation, trading at just 12.5 times estimated full-year earnings per share, according to him. In recent trade, Kroger has risen 0.7 percent to $37.67. The stock has increased more than 18 percent this year and 16 percent in the last 12 months. To contact the editors at Barron’s, send an email to editors@barrons.com./n
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