On Tuesday, RBC Capital Markets adjusted its outlook on Albertsons Companies Inc. (NYSE: NYSE:ACI), increasing the grocery chain's price target to $22 from the previous $21 while maintaining an Outperform rating. The revision follows an investor event in New York where the company's management team, including CEO Vivek Sankaran and President and CFO Sharon McCollam, presented their strategic insights.
The firm's analyst reported that management's confidence in the company's robust foundation was a key point during the event. They emphasized that ongoing reinvestment and productivity improvements are expected to narrow the valuation difference with Albertsons' competitors, rather than relying on strategic actions.
Albertsons' third-quarter identical sales (ID sales) forecast was revised upwards by RBC Capital, from 1.2% to 1.8%. Additionally, the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) estimate for the quarter was lifted slightly to $1.03 billion from the previous $1.02 billion. This adjustment was based on the full-year 2024 guidance provided by Albertsons after the termination of a planned merger, which suggested a stronger performance than RBC Capital had initially projected.
Looking ahead, the analyst sees minimal downside risk to the consensus adjusted EBITDA for 2025, taking into account the changing pharmacy mix and continued reinvestment. However, the outlook for 2026 margin tailwinds has improved. Consequently, the forecasts for ID sales growth remain unchanged at 0.9% for 2025 and 1.6% for 2026, while the adjusted EBITDA projections for these years have been slightly increased to $3.85 billion and $3.99 billion, respectively.
The price target increase to $22 is based on a valuation of 5 times the revised 2026 adjusted EBITDA estimate of $3.99 billion, indicating a $1 rise from the previous target. Albertsons' management appears to be focusing on solidifying the company's position and driving growth through internal measures rather than external strategic changes.
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