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Wells Fargo added Kroger (NYSE:KR) to its Q3 Tactical Idea List. The firm said it likes the near-term setup for the grocery store stock.
Analyst Edward Kelly and his team see strong potential for a beat-and-raise quarter for the grocery giant against what is said to be a wall of worry in the sector. “We believe conservatism played a more meaningful role than appreciated,” noted Kelly ahead of the Kroger (KR) print. The positive view on Kroger (KR) is that underlying grocery identical-store sales seem to be slowly improving, and margins look to be holding steady despite promotions. In addition, the “likely” resolution of the Albertsons Companies (ACI) overhang in September is anticipated to further fuel upside in the stock.
On Seeking Alpha, analyst Chuck Watson is positive on Kroger (KR) as well, even if the merger with Albersons (ACI) does not go through.
“If the merger is blocked, the company’s share buyback program will resume. I think it is also likely that rating agencies would provide a positive outlook on the company’s debt. Management might also react to a failed merger by boosting the dividend and/or share repurchases markedly.”
Shares of Kroger (KR) are down about 4% over the last six weeks. During that period, 14 of the 15 EPS revisions on the grocery stock have been to the downward side.