Albertsons stock slides 8% after earnings beat: Time to buy?

When a stock sinks almost 8% after beating earnings and revenue estimates, it may pique the interest of investors as to why – and if it’s worth buying at a discount.

That may be the case for grocery store chain Albertsons (NYSE:ACI), which reported solid fiscal fourth quarter earnings that surpassed estimates. However, the stock price dropped 8% to just under $20 per share on Tuesday.

In this case, it was not necessarily Albertsons earnings that sparked the selloff, but its outlook.

Q1 earnings beat

Albertsons increased its revenue and net sales by 3% to $18.8 billion in the quarter, which topped estimates of $18.6 billion. The cost of sales rose an equal amount, about 3% to $13.6 billion.

Net income fell about 31% to $172 million, or 29 cents per share, but that was mainly due to a $36 million loss on property dispositions and impairments.

Adjusted earnings were $270 million, or 46 cents per share, off 14% year-over-year, but better than estimates of 41 cents per share.

A bright spot for Albertsons in the quarter was a 24% increase in digital sales, which is something that the company has invested in through its Customers for Life initiative. Also, loyalty members increased 15% to 45.6 million, which also stems from the Customers for Life effort.

Further, identical or same store sales increased 2.3% in the quarter, which beat estimates. Identical store sales were boosted by strong growth in pharmacy sales.

“We delivered solid results in the fourth quarter and closed fiscal 2024 with positive momentum as we continued to invest in our Customers for Life strategy,” CEO Vivek Sankaran said. “This strategy has firmly positioned the Company for its next chapter of growth and value creation for shareholders.”

Softer than expected outlook for fiscal year

That next chapter begins May 1, as the current COO Susan Morris takes over as CEO, replacing the retiring Sankaran.

Morris takes over at a challenging and pivotal time for the company. It had been looking to merge with Kroger (NYSE:KR), but the merger fell through in December when the Federal Trade Commission blocked it on the grounds that it would take a big competitor off the market. Albertsons later sued Kroger claiming it took a “willfully deficient approach to securing regulatory clearance.”

On top of that, the company expects some headwinds. In its 2025 outlook, the company calls for identical sales growth in the range of 1.5% to 2.5%, which is below estimates.

Further, it anticipates adjusted EBITDA in the range of $3.8 billion to $3.9 billion, which would be below the $4.0 billion in fiscal 2024. And adjusted earnings share is targeted at $2.03 to $2.16 per share, which falls below the $2.34 EPS last year and short of analysts’ estimates.

Tariffs and investments

Morris called 2025 an “investment year” for Albertsons as capital expenditures are projected to be $1.7 billion to $1.9 billion.

“While fiscal 2025 will be an investment year, beginning in fiscal 2026 we expect to drive growth consistent with our long-term algorithm of 2+% identical sales and Adjusted EBITDA growth higher than identical sales growth,” Morris said.

One positive is that the company expects a relatively limited impact from tariffs.

“We procure more than 90% of our products domestically. So that’s a very different position than some of the competitive set out there,” a company spokesperson said on the earnings call. “We also recognize though that even in those domestic purchases there are impacts from ingredients that are sourced from tariff impacted areas. The situation as you know is very fluid, we’re staying very close to it.”

The company has appointed a task force to better understand the complexities of the tariffs and mitigate any impacts.

Time to buy?

Today’s selloff opens up a decent opportunity for investors to buy low on Albertsons stock.

The stock is in value territory with a P/E of 12 an a forward P/E of 9, and while this year could be challenging, it should perform relatively well due to its limited exposure to tariffs.

Analysts have set a $23.50 median price target, which suggests 18% growth. That’s not a bad return in this environment, and as a consumer staple, it should hold up relatively well in this choppy market.