Tesco (LON: TSCO) shares are up over 1% Tuesday, ahead of the release of its preliminary results for 2022/23 on Thursday, April 13. Investors will be watching closely to see how the British supermarket chain has fared in the face of elevated inflation during the period.
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Analysts expect the company to post a drop in profits due to the continuously rising food and drink inflation, but they anticipate sales to be strong, with Tesco one of the cheaper supermarket options behind Aldi, Lidl, and Sainsbury's for a basket of 41 items, according to a recent report.
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Tesco is expected to report an adjusted operating profit of £2.6 billion for the period, representing a decline from the £2.8 billion a year earlier.
In its third quarter and Christmas trading statement, Tesco said it sees its retail adjusted operating profit coming in between £2.4 billion and £2.5 billion in FY22/23, with retail free cash flow of at least £1.8 billion and a bank adjusted operating profit of around £120 million to £160 million.
In the statement, Tesco Chief Executive, Ken Murphy, said the company was heading into 2023 with “good momentum,” and he was confident the company can continue to maintain its competitiveness and “deliver a strong performance relative to the market despite the challenging conditions ahead.”
At the end of March, Morgan Stanley analyst Izabel Dobreva upgraded Tesco to Overweight from Equal Weight, raising the firm's price target on the stock to 296p from 263p per share.
The analyst told investors in a research note that the shares are not accounting for upside from Tesco's margin recovery as headwinds begin to roll over from 2024. She added that in the meantime, Tesco's 9% yield “pays for the wait.”
Overall, The Financial Times shows that 17 analysts have a Buy rating on Tesco, with four at Hold and one at Sell, while the median price target is 290p out of the nine analysts offering a 12-month price target for Tesco.
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