Kroger (KR), the biggest US supermarket operator, is among the best performers in the consumer sector. We believe that the company’s shares still have upside potential. The company’s advantages include large-scale business, a strong portfolio of popular brands, which allows it to maintain customer loyalty, as well as efficient management.The company continues to deliver double-digit growth. According to the financial report for Q3 2014, total revenue rose 11% y-o-y driven by a 5.6% y-o-y increase in LFL sales in supermarkets (stores operating for at least five full quarters). In addition, the acquisition of Harris Teeter positively affected sales. Operating profit surged 22% y-o-y, and adjusted EPS climbed 30% y-o-y. Korger upgraded its financial forecast for FY14 due to strong financial results for Q3. Company’s management expects LFL sales to grow 4-5% in Q4. Adjusted EPS was revised up from USD 3.22-3.28 to USD 3.32-3.36. Kroger plans to increase EPS by 8-11% per year in the long-term. Notably, Kroger generates significant cash flows, allowing the company to spend USD 1.8 bn for buyback program and dividend payouts in the last four quarters. Dividend amounted to USD 0.185 in Q3 2014 (up 12% y-o-y), matching a 1.1% dividend yield. We believe that improving financial performance, higher dividend and a buyback program will boost the company’s share performance. We raised the target price of Kroger shares to USD 77 and confirm a Buy recommendation in the mid-term. The short-term technical target is USD 75.