Wells Fargo raised its Albertsons stock price target to USD 12 from USD 11 after the grocery retailer reported better-than-expected second-quarter earnings. The bank kept its Equal Weight rating on October 14, showing a cautious outlook despite the earnings beat.
Albertsons reported adjusted earnings of USD 0.36 per share, beating analysts’ estimates of USD 0.33. Revenue reached USD 18.89 billion during the quarter.
Albertsons shares rose 8.4% over the previous week to USD 12.72, moving above Wells Fargo’s new price target. Stronger profit margins and a lower tax rate helped the company beat earnings estimates. However, weaker grocery sales and the withdrawal of its full-year financial forecast raised concerns about future performance.
Albertsons reported a 0.8% decline in identical sales, excluding fuel, during the second quarter. This measure compares sales at stores operating during comparable periods.
Core grocery sales fell around 1.5%, partly affected by a Cyclospora outbreak. Stronger pharmacy sales helped balance some of the weakness in grocery operations.
The company also reported a smaller decline in its gross profit margin than in the previous quarter. Its FIFO gross margin, excluding fuel, fell 17 basis points. This was an improvement from the 23-basis-point decline recorded in the first quarter. The company also kept operating expenses flat in dollar terms, showing continued efforts to control costs.
Albertsons has withdrawn its full-year financial guidance while reviewing its business operations. The review will examine costs, store brands, markets, business operations and spending plans. The company aims to identify ways to improve performance and manage expenses more effectively.
The decision leaves investors without a clear financial forecast for the rest of the year. Wells Fargo’s unchanged Equal Weight rating also suggests limited confidence in a stronger stock outlook. Its new USD 12 target remains below Albertsons’ recent share price of USD 12.72.
Investors will now watch for details from Albertsons’ business review. The company’s next steps on grocery sales, costs and future growth could influence the stock’s performance in the coming months.
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