Kelly Bania, an analyst from BMO Capital, maintained the Hold rating on Albertsons Companies (ACI – Research Report). The associated price target is $21.00.
Geoff Meacham has given his Hold rating due to a combination of factors surrounding Albertsons Companies’ recent performance and market conditions. The company reported a beat in its recent quarter, primarily attributed to robust pharmacy sales and fuel profitability. However, the gross margins continue to be under pressure, with the non-pharmacy sectors showing some weakness. Excluding pharmacy sales, Albertsons’ identical sales (IDs) were slightly negative, although there was a modest market share gain compared to industry benchmarks. The analyst also notes that while fuel profits were strong, contributing significantly to the company’s gross profit beat, the overall adjusted gross margin (excluding fuel and LIFO) has declined due to challenges such as pharmacy mix shift, shrink, and digital sales pressure.
Moreover, there are uncertainties surrounding Albertsons’ pending transaction with Kroger (KR), which has led to a cautious outlook. The potential deal has introduced regulatory and execution risks, which are believed to be already reflected in the current stock price. As such, the analyst has maintained a Market Perform rating with a target price of $21, indicating a neutral stance until there is more clarity on the transaction’s outcome. In the event the deal falls through, there are concerns about downside risks to Albertsons’ shares, but these risks appear to have been largely factored into the analyst’s assessment, thus leading to the Hold recommendation.
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Albertsons Companies (ACI) Company Description:
Albertsons Companies Inc is a Delaware corporation that was incorporated on June 23, 2015. The Company is a food and drug retailer in the United States, with local presence and national scale. It operates approximately 2,205 stores across 33 states under 18 banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market and Carrs. It provides its customers with a service-oriented shopping experience, including convenient and value-added services through 1,698 pharmacies and 378 adjacent fuel centers. Its stores offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other items and services. Various agricultural commodities constitute the principal raw materials used by the company in the manufacture of its food products.
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