Tesco share price subdued as analysts weigh in on results

on Oct 6, 2016
Updated: Oct 21, 2019
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Shares in Tesco (LON:TSCO) have retreated this morning, giving up some of yesterday’s strong gains, with analysts and investors mulling over the group’s interim results. Shore Capital reaffirmed the company as a ‘hold’, pointing to the supermarket’s indebtedness.

As of 08:33 BST, Tesco’s share price had lost 1.76 percent to 203.45p, underperforming the benchmark FTSE 100 index which currently stands 0.07 percent lower at 7,028.67 points. The group’s shares have gained more than six percent over the past year, and are up by some 36 percent in the year-to-date.
Shore Capital reiterated its ‘hold’ rating on Tesco yesterday, with a price target of 189p on the shares, after the supermarket revealed that its sales had grown in the first half of its financial year, and unveiled plans to lift its operating margin.
“The results themselves represent demonstrable operational improvement from the business,” the broker commented, as quoted by Sharecast, adding that it welcomed the supermarket’s progress. The analysts, however, also pointed to “the burden of broad level indebtedness and the corresponding high solvency ratios,” which, they argue, continues to prevent them “from taking a more positive view on the group’s shares”.
Tesco’s pension deficit, which has spiked by £3.2 billion to £5.9 billion, has also fuelled concerns among analysts.
Richard Farr, managing director at Lincoln Pensions, told The Times that the group’s ‘ballooning deficit’ was a ‘wake-up call’ for British business and revealed a ‘huge tipping point’ for many other pension schemes. He further noted that even with a turnaround underway at Tesco under chief executive Dave Lewis, the pension trustees were still “running for cover with a much more prudent and realistic funding assumption and the funding obligation ballooning to £5.9 billion”.
As of 08:49 BST, Thursday, 06 October, Tesco PLC share price is 166.03p.

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