Kroger (KR) Vs Albertsons (ACI): Which is the Better Stock After Merger Gets Denied

Kroger’s KR proposed acquisition of Albertsons ACI was officially blocked this week after federal judges ruled that the merger would violate consumer protection laws and reduce competition.Following more than two years of scrutiny, Albertsons terminated the merger agreement and filed a lawsuit against its grocery chain peer for $600 million in termination fees.  KR at Highs ACI Near Lows Speaking to Albertsons’ frustrations, ACI has traded near its 52-week low of $17, a far cry from the proposed acquisition stock price of $34.10 a share or $24.6 billion. Meanwhile, Kroger’s stock is at a 52-week peak of $63.Market sentiment has been in favor of Kroger as the larger of the two grocers with Albertsons being viewed as more dependent on the now-failed deal. Year to date, Kroger’s stock is up nearly +40% to outperform the benchmark S&P 500’s +28% with Albertsons' shares down a very dismal -18%.Image Source: Zacks Investment Research Buybacks & Dividends Going forward, Kroger says it remains committed to bringing down grocery costs after previously pledging $1 billion to lower prices if the Albertsons acquisition went through. Additionally, Kroger plans to repurchase $7.5 billion of its common stock after halting its buyback program during acquisition talks.Similarly, Albertsons is delegating $2 billion to a share repurchase program and will increase its quarterly dividend by 25% to $0.15 per share from $0.12.  At the moment, Albertsons 2.63% annual dividend yield tops the S&P 500’s 1.18% average and edges Kroger’s 2.09%.Image Source: Zacks Investment Research ACI & KR Outlook Comparison Based on Zacks estimates, Albertsons total sales are expected to be up more than 1% in its current fiscal 2025 and are forecasted to increase nearly 2% in FY26 to $82.04 billion. However, annual earnings are now projected to drop -21% in FY25 to $2.26 per share versus EPS of $2.88 in FY24. While FY26 EPS is expected to stabilize and rise 2%, it's noteworthy that earnings estimate revisions are noticeably lower over the last 60 days.Image Source: Zacks Investment ResearchAs for Kroger, total sales are projected to dip over -1% in its FY25 but are expected to rebound 1% in FY26 to $149.68 billion. Following a recod year for annual earnings, Kroger’s EPS is forecasted to dip -7% in FY25 but is projected to stabilize and rise 5% in FY26 to $4.66. Furthermore, FY25 EPS revisions have remained unchanged in the last two months while FY26 estimates are slightly up.Image Source: Zacks Investment Research ACI & KR Valuation Comparison Notably, Albertsons and Kroger trade at very reasonable forward P/E multiples of 8X and 13.8X respectively. Both trade at less than 1X sales, offering steep discounts to the benchmark in regards to these common valuation metrics.Image Source: Zacks Investment Research Takeaway Despite its cheaper P/E valuation and more tempting dividend, Albertsons stock has a Zacks Rank #4 (Sell) at the moment with Kroger shares landing a Zacks Rank #3 (Hold). Considering Kroger’s market dominance, long-term investors could still be rewarded from current levels while the decline in earnings estimate revisions may point to more downside risk for Albertsons stock.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Kroger Co. (KR): Free Stock Analysis Report Albertsons Companies, Inc. (ACI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks