Opportunity Aisle
In this edition of the Smart Investor newsletter, we examine the stock of the largest supermarket operator in the United States. We are not selling any stocks this week due to a packed earnings schedule across Portfolio holdings; however, we have placed six stocks under review for potential sale as we await greater clarity on their developments. But first, let’s dive into the latest Portfolio news and updates.
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Market & Portfolio Update
We’ve entered uncharted territory with the onset of a global tariff war, creating an unstable landscape where market moves are increasingly unpredictable. Trade disputes and shifting policies have driven a market fueled more by headlines than fundamentals, sidelining earnings, valuations, and even basic assumptions. Analysts are left without reliable footing, as traditional forecasts lose relevance almost as quickly as they’re published.
In this environment, Smart Investor remains focused on what truly matters: fundamentals, business quality, and portfolio diversification across industries – prioritizing companies with the resilience to withstand tariff impacts and economic downturns while maintaining profitability and delivering shareholder value.
We aren’t chasing short-term narratives or reacting to fear-driven swings. Instead, we continue to monitor industry leaders and resilient growers for Portfolio additions, while decisively hitting “Sell” when news materially alters a holding’s medium- to long-term outlook. Short-term noise may dominate the tape, but durable businesses at reasonable prices remain the foundation of any successful long-term strategy.
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Portfolio Updates
❖ Taiwan Semiconductor Manufacturing (TSM) helped stabilize sentiment in the semiconductor sector to some extent after posting better-than-expected Q1 2025 results. Net income rose 60% year-over-year, beating analyst forecasts, while both revenue and adjusted EPS came in ahead of expectations. Growth was driven by sustained demand for AI and high-performance computing (HPC) chips, underscoring TSMC’s critical role in next-gen technologies.
Management reaffirmed its bullish stance, guiding Q2 revenue above consensus and maintaining a mid-20% growth outlook for full-year 2025 in U.S. dollar terms. However, the tone was notably more cautious, with TSMC highlighting “uncertainties and risks” tied to evolving tariff policies. CEO C.C. Wei stated that no customer behavior shifts have been observed yet, but geopolitical pressures remain a watchpoint. Overall, the print confirmed resilience in core demand drivers, while acknowledging the external risks facing the sector.
In other company news, TSMC addressed concerns about its chips reportedly being used in Huawei’s advanced AI processor, the Ascend 910B. The company explained that, as a contract manufacturer, it has limited control over how its semiconductors are used once they leave its factories. Despite strict compliance efforts, TSMC cannot fully guarantee that its chips won’t be incorporated into products by sanctioned entities or used for unintended purposes. This follows a 2024 incident where some of its semiconductors ended up with Huawei, despite U.S. export restrictions. TSMC emphasized that its position in the supply chain means it often lacks visibility into how customers or third parties deploy its chips after sale. The company is cooperating with U.S. authorities to prevent diversion but highlighted that absolute enforcement is beyond its operational reach, especially as export regulations on AI-related technologies to China tighten.
❖ Charles Schwab (SCHW) delivered record Q1 2025 results, beating expectations across key financial and operational metrics despite ongoing market volatility. Revenue rose 18% year-over-year to $5.6 billion, while adjusted EPS came in at $1.04, surpassing consensus estimates. Net income increased 40% compared to the prior year, reflecting Schwab’s ability to capitalize on heightened trading activity and sustained client growth.
The firm reported $138 billion in core net new assets for the quarter, marking a 44% year-over-year increase and signaling robust client confidence. Schwab added 1.2 million new brokerage accounts, bringing the number of total active accounts to 37 million. Daily average trades surged 24% to 7.4 million, driven by elevated market activity.
Management emphasized Schwab’s leadership in brokerage metrics, wealth management flows, and client engagement. Assets under management in wealth solutions approached $500 billion, reflecting a 15% year-over-year increase. The company also raised its quarterly dividend by 8% and repurchased $1.5 billion worth of shares, underscoring its commitment to shareholder returns.
While Schwab refrained from issuing formal forward guidance, executives highlighted the firm’s resilience and strategic focus on efficiency, diversification, and client service. Management acknowledged market volatility and interest rate uncertainty but expressed confidence in Schwab’s positioning for long-term growth. Overall, Schwab’s Q1 results showcased strong operational momentum, supported by record asset inflows, growing client activity, and disciplined capital management – despite external headwinds.
❖ Verizon (VZ) posted Q1 2025 results that topped expectations on both revenue and adjusted EPS, but subscriber trends highlighted ongoing challenges. Revenue reached $33.49 billion, slightly ahead of forecasts, while adjusted EPS came in at $1.19, beating consensus. However, Verizon reported a larger-than-expected loss of 289,000 postpaid phone subscribers, which management partly attributed to reduced federal spending under the new administration. On the positive side, broadband growth remained solid, with 339,000 new subscribers added in the quarter.
Verizon also expanded its satellite messaging services for select Android devices, aiming to improve connectivity in remote areas – an initiative seen as a strategic response to competitive pressures in wireless services. The company reaffirmed its full-year guidance, targeting wireless service revenue growth of 2%-2.8%, while noting that tariff risks remain an external variable.
In other company news, Verizon announced plans to refinance nearly $1 billion in debt maturing in 2026 through new 10-year investment-grade bonds. While intended to optimize its debt profile, the move drew attention given the crowded bond market environment.
❖ GE Aerospace (GE) reported first-quarter 2025 results that exceeded analyst expectations, with adjusted EPS of $1.49 and revenue of $9.94 billion. The company reaffirmed its full-year adjusted EPS guidance of $5.10-$5.45, citing a commercial services backlog exceeding $140 billion as a key factor supporting its outlook.
In response to heightened tariffs, GE Aerospace is implementing strategic measures, including cost controls and price adjustments, aiming to offset approximately $500 million in tariff-related expenses. CEO Larry Culp emphasized the company’s efforts to mitigate these impacts through operational optimizations and leveraging available trade programs.
The company also announced plans to invest nearly $1 billion in its U.S. factories and supply chain in 2025, doubling its investment from the previous year. This initiative underscores GE Aerospace’s commitment to strengthening its manufacturing capabilities and supporting long-term growth
❖ Lockheed Martin (LMT) reported first-quarter 2025 earnings that surpassed analyst expectations, driven by robust demand across its defense segments. The company posted earnings per share of $7.28, far exceeding the consensus estimate, and revenue of $17.96 billion, up 4.5% year-over-year and slightly above analysts’ expectations.
The Missiles and Fire Control division led the growth, with a 13% increase in revenue, attributed to ramp-ups in tactical and strike missile programs. The Aeronautics segment, which includes the F-35 fighter jet, saw a 3.1% rise in sales, despite ongoing delays in a technology upgrade for the aircraft.
LMT reaffirmed its full-year 2025 guidance, projecting earnings per share between $27 and $27.3 and revenue ranging from $73.75 billion to $74.75 billion. The company anticipates mid-single-digit sales growth, a return to 11% operating profit margins, and double-digit growth in FCF per share.
Lockheed expressed optimism about increasing its backlog in 2025 and reaffirmed confidence in meeting profit targets. The company expects to deliver 170–190 F-35 aircraft this year and noted that its outlook factors in some tariff impact, with ongoing coordination with customers. Management also forecast stronger sales growth through 2027 compared to prior expectations and reiterated its commitment to future-focused investments.
In other company news, the U.S. offered India F-35 fighter jets to replace its Russian fleet, signaling potential future defense cooperation. No formal negotiations have begun yet, and Lockheed Martin noted any sale would occur via government-to-government talks. However, if formal talks begin, it could add to LMT’s already strong international order book.
❖ Microsoft (MSFT) announced a significant advancement in AI infrastructure with the rollout of a new AI model designed to run on CPUs instead of the traditionally required GPUs. The company revealed that its CPU-based AI delivers performance on par with, and in some cases exceeding, GPU-driven models, while consuming far less memory and energy.
This development has the potential to fundamentally reduce the cost and complexity of AI deployment. By leveraging widely available CPU infrastructure, enterprises could bypass the high expenses and supply constraints associated with GPU-centric systems. This is particularly relevant as demand for AI services grows and access to specialized hardware and affordable energy becomes increasingly challenging.
In addition, Microsoft is collaborating with Western Digital to repurpose older data center components, including processors and storage hardware. This initiative could extend the usable life of existing infrastructure, further lowering capital expenditures tied to AI expansion.
These moves position Microsoft to offer more cost-effective and scalable AI solutions, strengthening its competitive edge in cloud and enterprise markets. While still in its early stages, the shift toward CPU-powered AI could ease hardware bottlenecks and improve energy efficiency – key advantages as AI adoption accelerates globally.
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Portfolio Stocks Under Review
❖ We are placing Alphabet (GOOGL) under review ahead of its April 24 earnings release. The company remains a dominant force across search, digital advertising, cloud computing, AI, and video streaming, supported by a fortress balance sheet and strong cash flow. Its leadership in core industries, from Google Search and YouTube to Google Cloud and generative AI, provides a diversified foundation that few can match.
But Alphabet now faces a critical juncture. A federal judge recently ruled that Google unlawfully monopolized parts of the online advertising market by tying its ad server with its exchange—opening the door to structural remedies, including a potential forced divestiture of its Ad Manager platform. This comes on top of an earlier antitrust ruling targeting Google’s search dominance, with a remedies trial already underway. Proposals range from breaking up Chrome to restricting key distribution deals. Both cases are likely headed for prolonged appeals, but the regulatory overhang is real.
Meanwhile, macro turbulence adds further pressure. Trade tensions, tariff risks, and slowing global ad spend weigh on sentiment across tech, particularly for ad-reliant names like Alphabet. JPMorgan notes these headwinds but remains confident in Google’s ability to navigate uncertainty, citing its AI leadership and cost controls – maintaining an Overweight rating with a $180 target. Encouragingly, no top analysts have downgraded the stock despite the noise.
We are not turning bearish on Alphabet’s long-term prospects. Its financial strength, diversified business lines, and innovation pipeline offer resilience few peers can replicate. However, with legal outcomes uncertain and macro headwinds persisting, short- to medium-term visibility is clouded.
With that in mind, we’re placing GOOGL under review until we assess management’s outlook and risk management strategy in the upcoming earnings call. The situation is fluid, and we will be watching regulatory developments, ad market trends, and AI-driven growth initiatives closely in the days ahead.
❖ We are placing RTX (RTX) under review following its Q1 2025 earnings report. The company remains a global leader in aerospace and defense, with strong positions across commercial aviation through Collins Aerospace and Pratt & Whitney, and a solid footprint in defense systems. RTX’s diversified portfolio, deep order backlog, and focus on advanced technologies provide a resilient foundation, supported by healthy cash flow and disciplined capital allocation.
However, RTX now faces a challenging environment. While Q1 results exceeded expectations, management warned that ongoing tariffs could reduce full-year operating profit by as much as $850 million if current trade policies persist. This potential hit comes at a time when RTX’s defense segment is already under pressure, posting a 5% sales decline due to recent divestitures. Although the company reaffirmed its full-year guidance, it does not yet reflect the full extent of tariff-related risks, raising concerns about downward revisions ahead.
Broader macro headwinds, including supply chain constraints and geopolitical tensions, add further uncertainty. The sharp market reaction reflects investor unease with how these factors could weigh on margins and future earnings stability.
For now, we remain constructive on RTX’s long-term outlook. The company’s scale, technological leadership, and exposure to commercial aerospace recovery provide enduring strengths that few competitors can match. Its solid balance sheet and proven ability to manage through complex environments offer additional reassurance.
However, with tariff pressures mounting and limited visibility on potential guidance revisions, near-term uncertainty persists. We’re placing RTX under review as we assess management’s strategy to mitigate external headwinds and protect margins. We will closely track developments in trade policy, defense contracting trends, and the pace of recovery in commercial aviation over the coming months.
❖ We are placing Amazon (AMZN) under review, as mounting macro and operational headwinds cloud near-term visibility. Amazon remains a global leader in e-commerce, cloud computing, and digital advertising, supported by unparalleled scale, logistics infrastructure, and a highly profitable AWS business. Its diversified model has historically allowed it to absorb sector-specific pressures better than most peers.
However, Amazon now faces a convergence of challenges. The escalating U.S.-China trade war poses a direct risk to its retail operations, with approximately 30% of gross merchandise value linked to China. Higher tariffs could compress margins or dampen consumer demand if costs are passed through.
In its cloud segment, reports indicate that AWS has paused portions of its data center leasing, signaling a reset in growth expectations. While management describes this as routine capacity management, analysts have flagged that AI-driven demand may not monetize as quickly or strongly as markets anticipated. Adding to concerns, Amazon is pressing forward with an ambitious $100 billion capital investment plan, largely focused on AWS infrastructure and AI initiatives. In the current macro environment, this raises questions about near-term cash flow pressure and return on investment if growth underwhelms. Raymond James recently downgraded the stock, citing both limited AI monetization and tariff exposure as key risks.
Despite these headwinds, Amazon’s structural strengths remain intact. AWS continues to generate significant profits, its advertising business is expanding steadily, and recent geopolitical developments could unlock new growth opportunities. Ongoing U.S.-India trade talks may grant Amazon expanded access to India’s $125 billion e-commerce market, where restrictive regulations have historically limited its operations. If successful, this could provide Amazon with direct exposure to one of the world’s largest and fastest-growing consumer markets, offering a meaningful long-term growth catalyst.
Despite recent price target reductions – many of which were sector-wide adjustments – Amazon continues to hold a “Strong Buy” consensus among top analysts, reflecting confidence in its ability to navigate near-term volatility while positioning for strategic growth opportunities.
That said, with trade tensions, tempered cloud growth expectations, and heavy capex commitments, short- to medium-term downside risk has increased. We will reassess our position after Amazon’s earnings and guidance update on May 1, focusing on management’s commentary regarding tariff mitigation, AWS growth outlook, and capital allocation discipline. Until then, we are keeping AMZN under review as we monitor macro developments, sector sentiment, and operational execution in the face of evolving challenges.
❖ We are keeping Charles Schwab Corporation (SCHW) under review despite its blockbuster earnings report, detailed in the “Portfolio News” section above, and several price-target upgrades from top Wall Street analysts. As a leading brokerage and financial services firm, Schwab has shown resilience through various market cycles, benefiting from a robust client base and a comprehensive suite of investment products.
However, recent developments call for a reassessment of its position within our portfolio. Shareholder activist John Chevedden has submitted proposals advocating for the declassification of Schwab’s board structure, aiming to enhance shareholder influence over the company’s management and make the board more accountable to shareholders. The board has expressed opposition to these changes ahead of its upcoming annual meeting on May 22, 2025.
This internal governance dispute comes during broad market turmoil driven by a global trade war, with elevated economic uncertainty triggering investor panic and driving heavy losses in major stock indices. Schwab’s internal dispute may lead to larger losses than at its peers due to the added uncertainty pressuring investor sentiment.
Schwab’s core business remains fundamentally sound, and we are not turning bearish on its long-term viability. However, in a market where stability and clarity are in short supply, we believe it is prudent to reassess exposure to companies facing both internal and external headwinds. We are keeping SCHW under review and will revisit its position following the outcome of the shareholder meeting and further clarity on the direction of markets and trade policy.
❖ We are maintaining Howmet Aerospace (HWM) under review. As a key supplier to Airbus and Boeing, Howmet recently invoked a force majeure clause, citing the latest tariffs announced by President Trump.
Howmet, a major player in the $150 billion jetliner supply chain, sources materials like aluminum and steel globally – many of which were already impacted by earlier tariffs. The new duties target additional countries critical to its operations, amplifying the pressure. This legal move allows the company to suspend certain contractual obligations under unforeseen circumstances, indicating potential shipment disruptions if compliance becomes economically or logistically unviable.
While no shipments have been halted yet, Howmet has opened discussions with customers about sharing the burden of these tariffs. This unprecedented step has prompted other aerospace firms to reassess their contracts, highlighting the strain on an industry still recovering from supply chain shocks. At the same time, analysts from Jefferies noted tariffs add “an extra layer of complexity” to an already strained industrial recovery, particularly in the first half of 2025, which could keep HWM volatile.
However, there are counterbalancing factors that may limit the downside or even support a rebound. Howmet’s CEO has emphasized the strength of existing contracts, which may allow tariff costs to be passed through to customers. If successful, this could protect profitability, though negotiations could delay resolution. Additionally, HWM’s role as a Tier 2 supplier provides structural leverage – Boeing and Airbus cannot easily replace it without deepening their own supply chain bottlenecks. The company’s underlying fundamentals and profitability remain solid, and its financial flexibility should help it weather near-term turbulence. Analysts recognize the company’s resilience, with Benchmark citing Howmet as a “primary flight-to-safety name.”
We believe that long-term, HWM remains one of the best long ideas in the Industrials space, but will closely monitor developments, particularly the upcoming earnings report on May 1, 2025. The company’s ability to navigate tariff-related challenges and maintain strong customer relationships will be critical in our ongoing assessment.
❖ We are keeping Uber (UBER) under review for a potential sale. The company remains a leader in ride-hailing and food delivery, backed by a scalable platform, strong brand presence, and growing international operations. Its asset-light model continues to offer flexibility in navigating economic headwinds, while its mobility services play a critical role in urban transportation markets.
However, Uber faces mounting external pressures. The FTC recently filed a lawsuit alleging deceptive practices tied to its Uber One subscription service, accusing the company of unauthorized billing and making cancellations unnecessarily difficult. While this raises regulatory concerns, analysts, including Bank of America, view the financial impact as limited. Uber One membership reached 30 million by end-2024, contributing stable, recurring revenue – estimated at 5% of total revenue – with strong user engagement and minimal churn risk.
Broader macro risks persist. Rising tariffs and inflation could weigh on consumer spending, particularly in food delivery. Higher vehicle costs may strain Uber’s driver network, while regulatory uncertainty in Europe and other regions continues to cloud visibility.
Despite these challenges, Bank of America reiterated a “Buy” rating with a $95 price target, citing Uber’s resilient subscription growth, strong gross bookings from engaged members, and a favorable outlook for the gig economy within the internet sector.
We remain constructive on Uber’s long-term platform strength but recognize that regulatory scrutiny, cost pressures, and consumer demand shifts could impact near-term performance. We will reassess after the company’s May 7 earnings report, focusing on guidance, regulatory responses, and macro trends affecting both mobility and delivery segments. Until then, we continue to monitor Uber closely as these dynamics evolve.
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Portfolio Earnings and Dividend Calendar
❖ The Q1 2025 earnings season is in full swing, with several Smart Portfolio companies reporting in the next several days. These are: Amphenol (APH), IBM (IBM), Alphabet (GOOGL), Visa (V), EMCOR Group (EME), MetLife (MET), Public Service Enterprise Group (PEG), and Microsoft (MSFT).
❖ There are no ex-dividend dates for Portfolio companies this week.
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New Buy: Kroger Company (KR)
The Kroger Co. is the largest supermarket operator in the United States by revenue and the third-largest general retailer nationwide, behind Walmart and Amazon. Its operations span traditional supermarkets, multi-department stores, and e-commerce platforms, with over 2,700 stores operating under various regional banners in urban and suburban markets. Kroger’s vertically integrated structure includes in-house manufacturing and distribution networks that support its extensive private-label portfolio. The company derives most of its revenue from food and everyday essentials, providing relatively stable cash flows across economic cycles. Kroger continues to invest in technology – including AI, robotics, cloud computing, and automation – to strengthen its digital fulfillment infrastructure, boost e-commerce performance, and drive customer retention in a highly competitive retail landscape.
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Cart Full of Strategies
Kroger’s corporate history reflects a strategy of steady expansion through acquisitions, vertical integration, and operational innovation. Founded in 1883, Kroger distinguished itself early by combining bakery, meat, and grocery under one roof, a model that over time became standard in modern retail.
Throughout the 20th century, Kroger accelerated growth by acquiring regional chains, broadening its geographic footprint while maintaining strong local brand identities. Landmark mergers such as Dillon Companies in 1983 and Fred Meyer in 1999 transformed Kroger into a national powerhouse with diversified store formats beyond traditional supermarkets. Later, the acquisitions of Harris Teeter in 2014 and Roundy’s in 2015 further strengthened its presence in key markets across the Midwest and Southeast.
This acquisition-driven growth, combined with a focus on private-label development and control over manufacturing and logistics, allowed Kroger to scale efficiently in a low-margin industry. By consolidating purchasing power and streamlining supply chains, Kroger secured its position as the largest supermarket operator in the U.S., competing effectively on price and selection across diverse markets.
In the past five years, Kroger has pivoted from M&A-led expansion toward digitalization and technology-driven efficiency. The company has invested heavily in AI, robotics, and cloud infrastructure to support automated fulfillment, personalized marketing, and e-commerce growth. In March 2025, Kroger launched a dedicated e-commerce business unit, aiming to accelerate online sales and enhance customer experience across digital channels.
In 2022, as a strategic move beyond its organic-growth focus, Kroger proposed acquiring competitor Albertsons Companies for nearly $25 billion. The deal aimed to expand market share and unlock operational synergies to better compete with retail giants like Walmart and Amazon. However, federal and state regulators blocked the merger in late 2024 due to antitrust concerns, triggering legal disputes initiated by Albertsons over alleged breach of contract, with Kroger filing counterclaims. In the aftermath, Kroger’s interim management has shifted focus back to organic growth, emphasizing digital transformation and operational efficiency to reinforce its competitive position within a consolidating retail landscape.
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Tariff Basket Case
The tariff wave of 2025 has rattled retailers, but Kroger stands more insulated than most. While no grocer is entirely shielded from rising import costs, Kroger’s domestically anchored supply chain and flexible sourcing have kept it ahead of the storm.
New U.S. tariffs – 25% on goods from Mexico and Canada, prohibitive 125% duties on Chinese imports, and a looming 21% levy on Mexican tomatoes – are driving up costs across fresh produce, packaged foods, household goods, and general merchandise. A planned “universal reciprocal tariff” could widen the net further. Yet for Kroger, these pressures are more of a manageable headwind than a crisis.
KR’s interim CFO Todd Foley noted that imported goods account for only a small share of sourcing, particularly in core grocery categories. Even if all produce tariffs take full effect, the impact would stay below 1% of total sales, with much of it offset through price pass-throughs and supplier adjustments. Household goods, where Chinese imports are most concentrated, represent a minor portion of Kroger’s business, as opposed to Walmart and Target. Foley called Kroger’s Chinese-sourced goods a “really, really small, single-digit” share of its total sourcing, minimizing the tariff impact on overall COGS.
While some shelf price increases are inevitable, Kroger’s proactive sourcing – shifting to tariff-free regions, leveraging domestic suppliers, and adjusting private-label production – has cushioned the blow. Thanks to its vertical integration and scale, Kroger has flexibility in sourcing most of its products. Unlike peers warning of margin squeezes, Kroger has held steady on earnings guidance, with analysts highlighting its domestic focus and agile procurement as key advantages. Moreover, CFRA analysts suggested that higher food inflation from tariffs could boost Kroger’s top-line sales growth, as groceries become a haven while other retail prices surge.
Beyond tariffs, Kroger is also well-positioned against broader economic risks. With most revenue tied to essential goods, demand remains resilient in downturns. Its scale provides volume-based cost leverage, while an expanding private label portfolio – over 900 new products launched in 2024 – offers consumers affordable alternatives to national brands. Predominantly U.S.-made, these store brands grant Kroger greater control over costs, shielding margins from both trade pressures and macroeconomic headwinds. Kroger isn’t immune, but its limited import reliance, supply chain flexibility, and focus on essentials place it in a stronger position than competitors navigating the same turbulent environment.
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Earnings on the Shelf
Kroger’s financial profile reflects its core identity as a high-volume, low-margin retailer with disciplined capital management and operational resilience. While not a growth stock in the traditional sense, Kroger has delivered consistent earnings performance. Revenues have grown at a 2.2% CAGR over the past three years, while EPS expanded at over 19% CAGR, supported by a focus on essentials, private-label strength, cost control, and shareholder-friendly capital allocation.
In fiscal 2024, Kroger reported adjusted EPS of $4.47, a modest decline from the prior year due to merger-related costs and inflationary pressures. Adjusted FIFO operating profit reached $4.7 billion, in line with expectations, while identical sales (excluding fuel) rose 1.5% year-over-year, reflecting stable demand in a cautious consumer environment.
Kroger’s gross margin improved by 50 basis points over two years, driven by efficiency gains, private-label performance, and reduced shrink. These gains were partially offset by pharmacy margin pressures and rising labor costs. Despite absorbing tariff impacts and legal expenses, Kroger preserved profitability without aggressive pricing actions or asset sales.
The company’s balance sheet remains robust, with net total debt to adjusted EBITDA at 1.79x, well below the target range of 2.3x-2.5x, signaling conservative leverage and strong liquidity. In 2024, Kroger generated $2.5 billion in adjusted free cash flow, funding dividends and ongoing share repurchases.
For 2025, Kroger guides to 2%-3% identical sales growth, adjusted EPS of $4.60-$4.80, and adjusted FIFO operating profit of $4.7-$4.9 billion. Adjusted FCF is projected at $2.8-$3.0 billion, supporting continued investment and shareholder returns.
Importantly, Kroger’s focus on essential goods, private-label expansion, and a domestic supply chain provides resilience against tariff shocks and consumer spending shifts. In a volatile retail landscape, Kroger offers predictability – steady earnings, strong liquidity, and operational discipline – positioning it to weather near-term pressures while delivering sustainable value.
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Price Tags and Buybacks
Kroger’s stock has steadily climbed in the past year, outperforming the S&P and some of competitors. However, the largest outperformance has been registered since the tariff storm hit the markets, as investors noted the company’s relative insulation from their impact, while its large percentage of consumer necessity sales shelters it from economic headwinds. These factors have highlighted KR as a classic “safe haven” stock, leading to nearly 19% gain year-to-date (versus S&P 500’s loss of about 12%).
Despite the industry-leading performance since the start of the year – on top of the previous steady stock increase – KR remains attractively valued, trading at a slight discount to the Consumer Staples sector average, while coming at the middle of the peer valuation scale. Moreover, based on the future cash flows, Kroger appears to be undervalued by about 30%.
KR’s share performance is supported by buybacks. Kroger has a $7.5 billion share repurchase authorization in place since December 2024. This program provides the company flexibility to return excess capital to shareholders over time, depending on market conditions and internal capital needs. At the same time, Kroger launched a $5 billion Accelerated Share Repurchase (ASR) program, which is being executed under this broader $7.5 billion authorization. The ASR is expected to be completed by the third fiscal quarter of 2025. Outside of the ASR, Kroger also executed smaller opportunistic buybacks earlier in 2024, but the bulk of activity was driven by the accelerated program, under which the company repurchased over $4 billion worth of shares during fiscal Q4. Kroger still has approximately $2.5 billion in remaining capacity under its total repurchase authorization outside of the ASR program.
Beyond stock-price appreciation, Kroger offers its shareholders additional returns through dividends. The company has been paying and raising its dividends annually for 17 years, with the payouts growing at an annualized rate of ~15%. Despite the fast growth, its current dividend yield of 1.75% remains below the sector average. However, Kroger’s strong free cash flow growth and modest payout ratio support its capital allocation strategy, which includes continued focus on steady dividend increases.
As market volatility and economic pressures persist, Kroger’s disciplined capital returns and defensive positioning are likely to keep it in focus as investors weigh stability over speculative growth.
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Investing Takeaway
The Kroger Co. is a leading U.S. supermarket operator with a business model anchored in consumer essentials, private-label strength, and a largely domestic supply chain. Operating in a low-margin, high-volume industry, Kroger delivers stable earnings and cash flow through disciplined cost management, vertical integration, and resilient demand across economic cycles. The company complements its defensive profile with ongoing investments in digital infrastructure and operational efficiency. Supported by a consistent track record of shareholder returns through buybacks and dividend growth, Kroger maintains financial flexibility amid trade disruptions and macroeconomic uncertainty. While not positioned for aggressive growth, its valuation reflects stability and prudent capital allocation. In a volatile market environment, Kroger stands out as a defensive, cash-generative operator with a focus on long-term value preservation.
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Smart Investor’s Winners Club
The 30% Winners Club includes stocks from the Smart Investor Portfolio that have risen at least 30% since their purchase dates.
The markets have been volatile, but our list of Winners remained unchanged, still including 11 stocks: GE, AVGO, TPL, HWM, ANET, EME, TSM, ORCL, APH, PH, and IBKR.
The first contender is still BRK.B with a 23.37% gain since purchase. Will it join the Club, or will another stock outrun it to the finish line?
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
