Monday’s Top Upgrades (and Downgrades): The Kroger Co. (KR), Masco Corporation (MAS), Olin Corporation (OLN)

Page 1 of 2

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines include a downgrade for The Kroger Co. (NYSE:KR) , balanced out by upgrades for both of Masco Corporation (NYSE:MAS) and Olin Corporation (NYSE:OLN). Let’s dive right in.

Kroger cools
First up, analysts at investment banker Hilliard Lyons (now owned by PNC Financial Services (NYSE:PNC)) warned that they’re cooling their enthusiasm for supermarketeer The Kroger Co. (NYSE:KR) Monday. Formerly a “buy” recommendation of the banker, The Kroger Co. (NYSE:KR)’s now considered only a “long-term buy” — meaning it’s probably worth owning… but just not at this price.

The Kroger Co. (NYSE:KR)That’s a surprising conclusion, considering that last week, The Kroger Co. (NYSE:KR) “beat earnings” pretty soundly, reporting $0.77 per share in profits on $24.2 billion in Q4 revenue. Guidance-wise, management also stuck by its long-term goal of promising 8% to 11% earnings growth in 2013 — $2.71 to $2.79 per share. Nor do the shares look particularly expensive. Even after gaining 6% in the wake of last week’s results, The Kroger Co. (NYSE:KR) only costs a little more than 11 times earnings. It’s growing at nearly 10% per year, and pays a 1.9% dividend.

All that being said, I think Hilliard’s right to be cautious, and for two reasons. First, The Kroger Co. (NYSE:KR)’s free cash flow — never particularly strong — currently stands at just $771 million for the past 12 months. That’s barely half the company’s $1.5 billion in reported net income. The Kroger Co. (NYSE:KR) also carries a sizable debt load — $8.6 billion — which isn’t factored into its market cap. Between the cash deficit on the balance sheet, and the little cash coming in on the cash flow statement, The Kroger Co. (NYSE:KR) is a more expensive stock than meets the eye. Honestly, I’m not sure it deserves even the title of “long-term buy.”

Ogling Olin
Next up, chemicals company Olin Corporation (NYSE:OLN). The stock won an upgrade to “buy” from brokerage house Monness, Crespi, Hardt this morning, but I’m hard pressed to say why. Sure, as the manufacturer of “Winchester” brand ammunition, Olin’s enjoying boom times from rising fears over gun and ammo regulation these days. On the other hand, though, Olin Corporation (NYSE:OLN)’s recent good fortune seems fully priced into its stock.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Biggest Airports in the World

The 5 Most Gang Infested Cities In America

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!