Kroger upgraded to Buy from Hold at Jefferies

Jefferies analyst Rob Dickerson upgraded Kroger (KR) to Buy from Hold with a price target of $73, up from $54. BMO Capital downgraded the shares this morning. Jefferies says that if the if the Albertsons (ACI) deal closes, it sees a path to double-digit earnings and 30%-plus free cash flow accretion potential via right-sizing of Albertsons’ working capital. If the deal does not close, Kroger keeps $6B of debt it raised for the merger, acting as support for the stock and driving earnings upside via share buybacks, the analyst tells investors in a research note. Concurrently, Kroger’s foot traffic trends have been sequentially improving, while its fuel business is structurally more profitable now than pre-pandemic, “an incremental kicker,” adds Jefferies.