Deutsche Bank Assigns Buy On Kroger, Sees 7.5% Upside
In a research report released today, Deutsche Bank analyst Karen Short assigned a Buy rating on Kroger Company (NYSE:KR) with a price target of $57, which represents a 7.5% upside from where the stock is currently trading.
Short wrote, “Many investors are concerned that food inflation could begin to slow or even become deflationary, and that without inflation, KR’s comps/profitability will stall. While we found a positive correlation recently between food inflation and ID’s, we also found a much weaker relationship between inflation and profitability. Thus, while we could see slowing inflation impact ID’s, we do not expect a material impact on EPS growth, which should remain on track and within KR’s +8-11%/yr long-term growth target.”
The analyst continued, “We found a high positive correlation between food inflation and Non-Fuel ID’s at 0.82, while correlations for profitability metrics were weak: 1) Non-Fuel FIFO gross margins at 0.28; 2) Non-Fuel gross profit growth at 0.24; and 3) EBIT growth at 0.23. The weak correlation between inflation and profitability supports our view that inflation is not a key driver of KR’s profitability and EPS growth.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Karen Short has a total average return of 2.6% and a 54.8% success rate. Short has a 13.3% average return when recommending KR, and is ranked #1445 out of 3318 analysts.