Argus Says Buy Kroger, Cites 11 Years Of Market Share Gains And 50 Quarters Of Growing Comps

"We expect the company to continue using innovative strategies to extend an 11-year streak of gaining market share and 50 quarters of growing identical sales," Graja wrote in a note.

Argus expects EPS of $0.45, in line with Wall Street, while sales consensus is $26.77 billion.

However, the Street is concerned with deflation in some food categories, less pharmacy inflation and tough year-over-year comparisons in fuel profitability.

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However, the analyst is bullish on the company, noting that "ID sales growth for 12 years is not an accident."

Graja continued that Kroger has been using rigorous data analysis effectively to offer personalized promotions and offering low and compelling prices to drive market share. The company has reduced expense rate for 11 consecutive years and achieved several years of double-digit comp growth.

Meanwhile, private brands have become a growing segment of its merchandise mix, generating $20 billion of revenue in FY16. In FY16, the penetration of private brands was 29 percent of units sold and 26.2 percent of sales, ex-fuel and pharmacy items.

"We believe efficient operations and deep customer insights should help KR to drive sales to value-conscious shoppers and boost return on capital," Graja highlighted.

In FY16, the company boosted ROIC to 13.93 percent from 13.76 percent and the analyst expects improved returns once the recent investments starts maturing.

At time of writing, shares of Kroger fell 3.98 percent to $31.37, while the analyst's price target of $45 implies potential upside of 43 percent from the current levels.

Full ratings data available on Benzinga Pro.