UPDATE: Citigroup Raises PT on Kroger Following Harris Teeter Merger Announcement

In a report published Wednesday, Citigroup analyst Deborah L. Weinswig reiterated a Buy rating on Kroger KR, and raised the price target from $40.00 to $43.00.

In the report, Citigroup noted, “We view the KR/Harris Teeter (HTSI) merger favorably as it transforms KR into more of a national food retailer. HTSI is strong upscale food retailer with a unique store format, excelling in fresh foods. We believe KR can leverage these strengths to enhance its existing stores, and also potentially expand online through HTSI's Click & Collect. With online grocery expected to grow at +9.5% CAGR to reach $9.4B in 2017, we believe there is an early mover advantage and we hope to see KR ramp up its digital capabilities. We are raising our 2014 EPS estimate to $3.31, up from $3.24 prev., based on $0.07 of accretion. Our $43 target price, up from $40 prev., reflects our revised 2014 adjusted EPS of $3.31 and our 13x target forward P/E multiple (vs. 12x previously). We reiterate our Buy rating.”

Kroger closed on Tuesday at $37.15.