Goldman Sachs upgraded Supervalu (SVU ) to outperform from in-line.
Analyst John Heinbockel says he believes the wholesale and retail food-store chain can deliver a 20% total return over next year. He notes earnings per share momentum is poised to accelerate beyond the fiscal third-quarter and fiscal 2004 (Feb.). Supervalu will record an $1.4 billion accretion related to its purchase of some of the Midwest operations of supermarket chain Fleming via an asset exchange with C&S Wholesale -- a deal that expanded Supervalu's distribution business. Heinbockel also notes the company's top-line driven retail turnaround.
Heinbockel says after remaining flat, on average, during the past year, earnings per share (excluding items) are projected to rise an average of 14% over the next four quarters. He says shares remain generally inexpensive, with a p-e of only 10.2 times, based on his $2.40 2005 earnings per share estimate, as well as a 2.4% dividend yield.