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%.

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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%.

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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.

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As 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.

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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.

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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.

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