Investors aren’t too hot on grocery stores right now. Consumers are eating more in restaurants after months of lockdown, but Katai believes the supermarket industry deserves more attention, both for its defensive nature and for the continuing strength of home food trends.

In addition, argues the analyst, many supermarkets are able to pass most of the food price inflation to their customers, thus limiting the decline in margins.

Albertsons (ACI) and Sprouts Farmers Market (SFM) both have Katai buy ratings.

For Albertsons, which releases its first quarter results on July 29, Katai not only reiterated a buy note, but also raised its price target to $ 28 from $ 26. It also raises its earnings per share estimate by a dime, to 74 cents, above the consensus estimate of 66 cents per share.

The analyst believes Albertsons will raise its annual forecast, bolstered by strong results in both the first quarter and the previous quarter, but will remain cautious about the second half of the year, given uncertainties over the return of many. workers in the office this fall. . The company seems uniquely positioned to offset higher food costs, she notes, given its size and product line.

Katai maintains its price target of $ 34 on Sprouts Farmers Market (SFM), which is expected to release its second quarter results on August 5. She increased her EPS estimate by 2 cents, to match the consensus estimate of 45 cents. She believes Sprouts will benefit from the same trends as its competitors, which is to offset inflationary pressures with price increases and the continued popularity of home cooking, despite the reopening.

Albertsons has climbed more than 54% since Barron’s recommended the stock in September, and Sprouts has gained 22% since our recommendation in October.

Write to Teresa Rivas at [email protected]