Ahead of its fourth-quarter earnings report, Kroger received an upgrade based on the grocery chain's growth trajectory. "We believe we have higher visibility and confidence into Kroger's multi-year omni-channel growth runway," Telsey Advisory Group's Joseph Feldman said. Telsey changed its rating on Kroger to outperform from market perform. The firm also raised its price target on the stock to $54 from $47. The new projection implies 15.4% upside from Monday's closing price. Kroger is slated to report fourth-quarter results Thursday and to hold a business update meeting Friday. Telsey is particularly bullish on Kroger's focus on locally sourced products and private brands. This focus should help with supply chain issues, according to Telsey. The firm also likes Kroger's investment in the digital sphere with its loyalty program, online marketplace and automated warehouses . "Kroger's focus on improving operations, reducing costs through greater use of technology, and expanding in higher margin areas, such as alternative profit sources, should improve profitability, partly offset by the ability to pass on inflation, elevated costs, and competition," Feldman said. Kroger shares have outperformed the market this year, up 3.4% in 2022 versus the S & P 500's 8.2% decline. The company's shares rose nearly 2.9% in premarket trading Tuesday. "In 2022, we expect Kroger's business to come in better than what is anticipated by the Street, primarily helped by the increase in at-home consumption, inflation, and greater utilization of digital, despite two years of strong growth," Feldman said. — CNBC's Michael Bloom contributed reporting.
A shopper holding an umbrella walks towards a Kroger Co. grocery store in Louisville, Kentucky, U.S., on Sunday, April 26, 2020.
Stacie Scott | Bloomberg | Getty Images
Ahead of its fourth-quarter earnings report, Kroger received an upgrade based on the grocery chain's growth trajectory.