Issues with the Albertson’s (NYSE: ACI) merger aside, The Kroger Co. (NYSE: KR) is one attractive stock at a critical juncture regarding price action. The price action in The Kroger Co. has corrected its pandemically-induced high and is now back in line with reality. What does that mean? Kroger began an uptrend before the pandemic started; the pandemic kicked that trend into overdrive and pushed the price action well above the trend.

The price action has returned to the trend, confirmed by the Q4 results, the 2023 outlook, and the post-release activity in shares. What this means for investors is a textbook entry into an affordable, relatively high-yielding blue-chip dividend growth stock. 

The Kroger Company Gains On Mixed Results 

The Kroger Company issued a mixed report regarding the Marketbeat.com analyst's consensus figures, but the news is only good for investors. The $34.8 billion in revenue missed the consensus by a slim margin but is up 5.45% compared to last year and compounded by margin improvement.

On a comp basis, sales are up 6.2% ex-fuel compared to only 4% last year, accelerating growth and a catalyst for higher share prices. Digital sales, central to the growth strategy, grew by 12% while sales of private label offerings were also strong at 10.1%. 

Margin is another bright spot in the report. The gross margin contracted by a single basis point due to company efforts to manage supply chain issues, better product sourcing and other efficiencies while the operating margin expanded. The only bad news is that GAAP operating profit fell from last year due to a more significant LIFO charge, a non-cash impairment, so not the issue it could be.

On an adjusted basis, earnings of $0.99 are up 1000 basis points from last year, outpaced revenue growth by 350 basis points, and beat the consensus by $0.09. Nothing wrong with that performance, and the guidance is favorable. 

The Kroger Company expects comp store growth from 1% to 2%, 2.5% to 3.5% core, with EPS of $4.45 to $4.60. The revenue guidance is slightly below the consensus but compounded again by the margin. Margin improvement is expected to continue in 2023 and deliver adjusted EPS of $4.45 at the low end of the range, which is nearly $0.25 better than the analysts' average target.

The takeaway is that earnings and cash flow are strong, the dividend is safe and growing, and the company is hoarding cash to deleverage after the Albertson’s merger rather than buying back shares. 

The Analysts Put A Bottom In Kroger Stock 

The analyst's sentiment toward Kroger has been slowly firming over the last year and has the Marketbeat consensus rating from a weak Hold to verging on Buy with a price target also trending higher. The price target is up $10 or almost 25% in the last 12 months, predicting about 25% of upside for the market. There have not been any new commentaries yet, but investors can assume this trend will continue to support the price action. 

Regarding the chart, Kroger's price action has returned to a critical juncture. At this juncture, the uptrend line crossed a vital support level and produced a bullish signal. KR price action is up more than 4% in premarket trading and indicates a bottom at this level.

If the market follows through on this signal, KR shares should begin to move higher now and trend upward through the end of the year. Upside targets for resistance are near $48, $52 and $56. A move above any of these should help the market reach the next target.