Kroger's (KR) top-line growth is rising, and a recent turnaround in market share should support ongoing strength, Morgan Stanley said in a note Sunday.

The analysts said this is being driven by "strong" cost management and some favorable factors, including a possible uptick in food-at-home inflation and the return of Express Scripts to Kroger's identification base. These elements could support an acceleration in earnings before interest and taxes growth to mid-single-digit percentages over the remainder of the year, compared to just 1.3% growth in Q1.

The analysts added that this improvement comes at a time when there are broader concerns about consumer confidence and the macroeconomic environment, partially due to tariffs. In this context, Kroger's defensive business model and limited tariff exposure make it more appealing. However, elevated competition and the risk of a broader slowdown in consumer spending still present downside risks.

With Ron Sargent stepping in as interim chief executive officer and Yael Cosset appointed as senior vice president and chief digital officer of Kroger's newly formed e-commerce business unit, the company appears to be restructuring its digital operations, the analysts said, adding that this reorganization centralizes all aspects of e-commerce under one unit, which should help drive more holistic growth.

Morgan Stanley adjusted its price target on Kroger to $76 from $71 while keeping equalweight rating.

Price: 73.71, Change: +1.74, Percent Change: +2.42