Shore Capital continues to see Tesco (LON:TSCO) as a ‘hold’, following the group’s interim update. The analysts have adopted a cautious approach, despite noting that Britain’s biggest supermarket had ‘left the medical ward’ following the 2014 accounting scandal.
Tesco’s share price lost ground yesterday, shedding 3.21 percent to 183.95p, underperforming the broader UK market, with the benchmark FTSE 100 index, losing 0.53 points to end the session 0.01 percent lower at 7,467.58. The group’s shares are up by about 0.6 percent over the past year, but have given up some 11 percent in the year-to-date.
Shore Capital retained its ‘hold’ rating on Tesco yesterday, noting that the grocer’s interim results for full-year 2018 had beat expectations and the analysts were expecting to be upgrading their “forecasts with respect to our full-year 2018 pre-tax profit and earnings per share”. The comments came after Britain’s biggest supermarket reported a rise in sales and profits and restored its payout to shareholders, about three years after it was rocked by an accounting scandal.
Citywire quoted ShoreCap’s analyst Clive Black as commenting that the recommendation of a 1p dividend payment was “a sign that the group has left the medical ward”.
“All in all, we believe that Tesco is doing very good, focused and diligent work that is evident in the consistent execution of improved store standards across the piece,” the analyst pointed out. He, however, also warned that the “high core price/earnings ratio multiple, low free cashflow yield and still fulsome prevailing solvency ratios mean that we still sit on our hands for what our preview note characterised as a sideways story”.
Interactive Investor meanwhile quoted Bernstein’s Bruno Monteyne as calling the return of Tesco’s dividend ‘an important symbolic milestone’. Analysts expect 3-4p per share for the full-year.