Why This Kroger Analyst Is Turning Bullish

Kroger Co KR shares were rising in early trading on Tuesday.

While the stock has been under pressure on fears of rising competition, the company's industry positioning "allows it to continue managing the competitive environment" with stable gross margins, according to BMO Capital Markets.

The Kroger Analyst: Kelly Bania upgraded the rating for Kroger from Market Perform to Outperform, while raising the price target from $58 to $60.

The Kroger Thesis: The company's pending deal to acquire fellow grocer Albertsons Companies Inc ACI is a "win-win under either a deal or no-deal scenario, Bania said in the upgrade note.

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He added, however, that a no-deal scenario seems likely, which could also be "the best path forward."

"We see upside to 1Q IDs and are raising our forecast to 0.8% (from 0%)," the analyst wrote.

He expects Kroger to report earnings of $1.46 per share, beating the current consensus of $1.35, "which we believe could put KR on track to reach the high-end of F25 guidance."

KR Price Action: Shares of Kroger had risen by 1.88% to $52.01 at the time of publication on Tuesday.

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