Shoe Carnival NASDAQ: SCVLMondeles NASDAQ: MDLZand Kroger New York Stock Exchange: KRannounced large buybacks in December, which should help support their price action over time. Today’s question is whether this stock will be classified as a buy, sell or hold in 2025, and the answer is buy, although for different reasons for each stock. Here’s a look at why investors should be interested in them.
Shoe Carnival: An undervalued small-cap company with a solid dividend
Shoe Carnival today
(As of 3:02 p.m. ET)
- 52 week range
- US$24.94
▼
$46.92
- Dividend yield
- 1.51%
- P/E ratio
- 13.19
- Target price
- $42.00
Shoe Carnival, like all retailers, will face challenges in 2024, but continues to deliver strong enough results and sufficient cash flow to support its ROE guidance. This includes repurchasing up to $50 million worth of shares, which is about 5% of the market capitalization, but that’s why this stock is worth buying. Company share repurchases are the basis for stock-based compensation and are not reliable as a return of capital. Highlights for 2024 include no share repurchases, a moderately higher share count and significant shareholder value gains from operations and acquisitions. This company is worth buying for its balance sheet and dividend.
The company’s operations and balance sheet allow it to make acquisitions such as the purchase of Rogan, which increased its store network by 28, or about 7%. At the end of the third quarter, balance sheet highlights included increases in cash, current and total assets, partially offset by increases in liabilities. The end result was an 11% increase in equity capital and total leverage of less than 0.8x equity. The cash flow and balance sheet also allows for a healthy and reliable dividend of 1.6% with the stock yielding around $34.25. Dividends represent less than 20% of projected earnings, and their distribution is growing. The company has grown for 12 consecutive years and plans to achieve another double-digit growth in early 2025.
Mondelez Authorizes $9 Billion Buyout: Share Number Falls
Mondeles International today
Mondeles International
(As of 2:58 pm ET)
- 52 week range
- $58.90
▼
$77.20
- Dividend yield
- 3.14%
- P/E ratio
- 21.20
- Target price
- $79.07
Mondelez’s approval to buy back $9 billion of shares is more of a treat for investors. This stock is a strong buy due to its dividends and buybacks, which led to a 1.9% year-over-year decline in the third quarter and a 1.7% year-to-date decline. The new approval replaces the old one and is enough for the company to continue buying shares at its current pace for several quarters. Return on equity, including dividends, will be $2.9 billion in the first nine months of the year and will exceed $3 billion by the end of the year.
Dividends are attractive. The stock yields more than 3% and trades at 17x, more than double the broad market average for value and high yield relative to its peers. The company is also expanding its distribution at a double-digit rate, which it is able to maintain thanks to underlying growth and decline in shares. On the balance sheet, the company uses debt to improve cash flow, but is well managed with equity at just 0.6x, leaving it in a healthy position.
Analysts agree that this stock has value. Consensus estimates have declined slightly year-to-date but remain relatively stable compared to last year and earlier in 2024, implying a 30% discount at a share price of around $59.50.
Kroger is buying back shares! Albertson merger canceled
Kroger today
(As of 3:04 p.m. ET)
- 52 week range
- $44.48
▼
$63.59
- Dividend yield
- 2.04%
- P/E ratio
- 16.57
- Target price
- $65.79
Kroger failed to buy Albertson’s company. New York Stock Exchange: ACIbut it doesn’t matter. The company’s financial position was strong and only strengthened as the process expanded. The end result is that Kroger built up an incredible cash position in preparation for the acquisition and is now using that money to buy back shares.
The company approved a $7.5 billion buyback plan, about 17% of its market capitalization, with $5.5 earmarked for an accelerated purchase completed in mid-December. The remainder is worth mid-single digit shares and is likely to be exercised in 2025 with cash and then raised.
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