Supermarket Sweep In The Bag For Tesco?
Spreadex | Jun 08, 2018 12:02
Will Tesco make it a supermarket sweep following its first quarter statement next Friday?
The British behemoth has had quite a stupendous 2018 market-wise, all centred around April’s full year results. Before then the stock was largely chugging along between £2 and £2.10, with other the briefest forays either side of that bracket.
However, that annual update sparked an 11.5% rise in the 48 hours that followed its release, propelling the firm out of its rut. Subsequent gains then saw it hit a 4 year-plus peak of £2.51 towards the end of May – remarkable given the ostensible threat of the Sainsbury's (LON:SBRY)/Asda merger. Tesco now sits at a current trading price of £2.45.
What was so magic, then, about April’s full year results? Well, while the sales figures were typically solid – thanks to an extra 260,000 new customers, group revenue rose 2.8% to a whopping £57.5 billion with UK like-for-likes jumping 2.2% – it was the company’s profit turnaround that really impressed.
Operating profit before exceptional items surged 28.4% to £1.64 billion, with pre-tax profit rocketing a ludicrous 795% higher to £1.3 billion. The cherry on top was a dividend of 3p per share, the first payout since the implementation of a cost-cutting strategy following the firm’s costly accounting scandal in 2014.
As for next week’s Q1 figures, investors are going to want to see the company maintain the like-for-like sales momentum discovered in 2017/18. Any comment on the integration of Booker Group will also be welcome, given Tesco stated it was looking at an extra £2.5 billion in revenue ‘over the medium term’ from the acquisition. That the stock has done so well in 2018 may make it difficult for the stock to satisfy the markets, however.
Tesco PLC (LON:TSCO) has a consensus rating of ‘Hold’ alongside an average target price of £2.36.
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