Shares of leading food and drug retailer Albertsons Companies, Inc. (ACI) have advanced 7.2% in price since the company reported its second-quarter results on October 18. Its same-store sales in the quarter exceeded analysts’ expectations. The stock has gained 74.4% year-to-date and 51.4% over the past three months to close yesterday’s trading session at $30.65.

The Boise, Idaho, company expects higher inflation in the coming months, driven by higher supply-chain and labor costs across the food industry. But it offers cheaper alternatives to high-priced products.

ACI has been strengthening its digital presence. To that end, it unveiled three innovations in August 2021—the launch of its free Deals & Delivery app; ‘Albertsons for U’ shopper loyalty program; and FreshPass. The company increased its quarterly dividend by 20% to $0.12 per share, payable on November 12. Furthermore, it also raised its full-year 2021 guidance. So, ACI’s near-term prospects look promising.

Here’s what could influence ACI’s performance in the near term:

Impressive Financials

For its fiscal second quarter, ended September 11, 2021, ACI’s net sales and other revenue increased 4.7% year-over-year to $16.51 billion. This was driven primarily by its 1.5% increase in identical sales and higher fuel sales. Its digital sales increased 5% year-over-year. Its net income came in at $295.20 million, compared to $284.50 million in the year-ago period. Also, its EPS was $0.52, versus $0.49 in the year-ago period.

Raised Fiscal 2021 Outlook

ACI raised its fiscal year 2021 outlook and now expects its adjusted net income per Class A common share to be in the range of $2.50 -$2.60 per share, compared to the $2.20 - $2.30 per share previous guidance. Its adjusted EBITDA is expected to be between $3.95 billion and $4.05 billion, compared to $3.70 - $3.80 billion predicted earlier. And its effective tax rate is likely to be between 23% - 24%, compared to the 25% previous guidance.

Discounted Valuation

In terms of forward non-GAAP P/E, ACI’s 11.98x is 39.1% lower than the 19.67x industry average. The stock’s 1.70x and 0.40x respective forward non-GAAP PEG and EV/S are lower than the 2.67x and 1.98x industry averages. Moreover, its 0.21x forward P/S is 85.5% lower than the 1.43x industry average.

POWR Ratings Reflect Rosy Prospects

ACI has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ACI has a B grade for Growth and Sentiment, which is in sync with favorable analyst sentiment.

The stock has a B grade for Quality, consistent with ACI’s 30.36% and 2.56% respective trailing-12-month ROCE and Asset Turnover Ratio, which are higher than the 11.38% and 0.87% industry averages.

Also, ACI has a B grade for Value, which is in sync with its lower-than-industry valuation ratios.

Beyond what I’ve stated above, we have also given the stock grades for Momentum and Stability. Get all ACI’s ratings here. Also, ACI is ranked #2 of 41 stocks in the A-rated Grocery/Big Box Retailers industry.

Bottom Line

ACI is currently trading above its 50-day and 200-day moving averages of $29.90 and $23.71, respectively, indicating an uptrend. Furthermore, it is expected to continue gaining as consumer spending rises and its digital presence improves with further developments. So, we think it could be wise to scoop up its shares now.

How Does Albertsons Companies (ACI) Stack Up Against its Peers?

While ACI has an overall POWR Rating of A, one  could also check out these other A-rated stocks within the Grocery/Big Box Retailers industry: Woolworths Holdings Limited (WLWHY), Koninklijke Ahold Delhaize N.V. (ADRNY), and George Weston Limited (WNGRF).

ACI shares were unchanged in premarket trading Tuesday. Year-to-date, ACI has gained 77.14%, versus a 23.04% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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