Safeway: S&P Intraday Gainer

NEW YORK ( TheStreet) - Safeway ( SWY) was one of the best-performing stocks in the S&P 500 on Friday.

The index was dropping 11.91 points, or 0.86%, to 1,375.66 in midday trades as China's latest economic growth report failed to live up to the hype and investors worried about the heavy reliance of Spanish banks on borrowing from the European Central Bank.

Shares of Safeway, a Pleasanton, Calif.-based supermarket operator increased 2.9% Friday morning to $21.26. Credit Suisse attributed the move to scuttlebutt about a potential acquisition.

"Safeway's stock appears to be up today on market speculation that the company is up for sale," the firm wrote Thursday. "We believe this idea may stem from a recent revision in the company's change in control (CIC) provision from single trigger to a double trigger vesting, which would make retention of management easier/cheaper in a take-out. While this is an interesting development, we do not believe it signals that Safeway is suddenly up for sale and do not view the company as an attractive take-out candidate."

Safeway shares rose 2.4% on Thursday.

JPMorgan analysts weighed in on the situation Friday. "In our opinion, six actions have been taken by Safeway lately that, considered together, potentially increase the likelihood that the company could be considering a corporate action," the firm said. "The company has not indicated it is planning any M&A activity; indeed, on its own, each of the company's recent actions arguably has an alternate purpose. But the combination of such activities in a short period of time makes us wonder whether a corporate action such as a Reverse Morris Trust (RMT) or a leveraged buyout (LBO) is a possibility."

Safeway shares trade at an estimated price-to-earnings ratio of 10.07 times; the average for food wholesalers and retailers is 14.87X. For comparison, Kroger ( KR) has a lower forward P/E of 9.52X; Sysco's ( SYY) forward P/E is 14.25X.

Ten of the 23 analysts who cover Safeway rate it at hold. Seven analysts give the stock a sell rating and six rate it at buy.

TheStreet Ratings gives Safeway a B grade with a buy rating and $22.78 price target. The stock has risen 18 cents, or 0.86%, year to date.

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-- Written by Alexandra Zendrian in New York.

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