Kroger upgraded at Evercore as inflation highlights value proposition

Brandon Bell

Kroger Co. (NYSE:KR) is expected to continue to benefit from consumer belt-tightening into 2023, causing Evercore ISI to raise its rating on the stock on Wednesday.

“We see a favorable risk-reward for [Kroger] (KR) as our view is increasingly that food inflation will be higher for longer with trade-down into food at home categories, we are raising our Kroger CY23 ID sales and EPS outlook to $4.20, and assigning a base case value of $56,” a note to clients on Wednesday read. “We like KR's value status (35% S&P discount) at 11.5x CY23 EPS, with small ticket/trade down positioning for consumers that are likely to seek value given negative real wages.”

The firm’s analysts added that a bull-case wherein the merger with Albertsons (ACI) is approved only hints at potentially even greater upside ahead. As such, the stock was upgraded to a Buy-equivalent rating from a Hold-equivalent with a $56 base case rating raised from a prior $49. The bull case could lead to a share price above $70, the team added.

Kroger (KR) shares rose 2.27% in premarket trading on Wednesday on modest volume.

Read more on the latest legal wrangling on the Kroger-Albertsons combination.