11:51 AM EDT, 09/13/2024 (MT Newswires) -- Kroger's ( KR ) margins are "being well managed within a soft consumer backdrop," but the company's upside also seems to be limited, Morgan Stanley said in a note to clients Friday.

The investment firm highlighted the fact that Kroger's ( KR ) 2024 adjusted EPS guidance of between $4.30 and $4.50 was reiterated, while many peers in the retail sector decreased their 2024 outlooks following Q2 results.

Kroger ( KR ) is "managing a more promotional environment well given the solid gross margin performance," the note said. "However, OG&A deleverage should weigh on EBIT margin expansion as long as comps remain below-average."

Morgan Stanley noted, however, that Kroger's ( KR ) "fundamental investment case takes a back seat to the proposed merger" with Albertsons (ACI), which makes Kroger ( KR ) a "special situation until the merger is resolved."

The investment firm kept Kroger's ( KR ) equal-weight rating and raised its price target to $58 from $57.

Price: 55.70, Change: +0.50, Percent Change: +0.91