Morgan Stanley Makes Bull Case For Kroger

In a note dated June 24th, Morgan Stanley analyst, Vincent Sinisi initiated coverage on The Kroger Co.

with an Overweight rating and a $60 price target representing ~21 percent upside to current levels. Sinisi said Kroger isn't just your traditional grocer, noting its operations range from fuel centers to pharmacies. As Kroger continues to leverage its scale and buying power, Sinisi anticipates gains in both sales and margins. "The gap between our estimates and the Street widens over time on both top line and margin," Sinisi said. He noted that his 2014 EPS estimate is less than 1 percent above consensus but the gap grows to 10 percent in 2017 and 13 percent in 2018. Additionally, he sees the company's strong cash flow generation driving returns to shareholders through buybacks and a consistent dividend program.