02:54 PM EDT, 07/19/2024 (MT Newswires) -- Albertsons ( ACI ) fiscal Q1 results could highlight an improvement in core grocery sales as it benefits from unit improvement on the back of continued disinflation, RBC Capital Markets said in an earnings preview emailed Friday.

The firm said it expects Q2 identical sales to grow 1.2%, above the consensus of 0.6%. However, the firm said it was "slightly more cautious" on adjusted EBITDA which it expected to drop 12.6% year over year to $1.15 billion.

"The primary reason for our conservatism is the continued mix impact of outsized pharmacy growth," RBC said in its note.

Meanwhile, RBC said that it was estimating around a 60% probability that the company's proposed merger with Kroger (KR) could fall apart.

"In the case of a break, we think shares could trade as low as $18 inclusive of break-up fee," UBS said.

RBC had an outperform rating on the stock with a price target of $22. Shares were up nearly 1%.

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