ShoreCap reiterates 'buy' on Tesco in anticipation of 'strong' first half numbers

Analysts at ShoreCap reiterated their 'buy' recommendation on Tesco shares, telling clients they anticipated "strong" first half numbers.

In spring, the grocer had shown "understandable" caution when providing guidance to which one could add the lingering fragility and uncertainty around the overall environment, with industry operating costs a clear example.

Nonetheless, the analysts revised their estimates for Tesco Retail's full-year earnings before interest and taxes higher by approximately 5%.

They also expected the company to refresh its group capital allocation strategy at its upcoming interim results presentation on 6 October - although no distributions were expected to begin at that time.

Margins over the half had been "robust" - particularly in fuel - and warm weather had boosted an already robust summer, the analysts added, with Tesco having executed very well in terms of core ranges, store set-up and check-out services.

All in all, UK like-for-likes were seen rising at a broadly similar pace in the second quarter to the 0.5-1.0% clip seen over the first three months of the year.

Full-year sales meanwhile were now seen coming in at approximately £60.66bn, for adjusted profits before tax of £1.98bn and earnings per share of 19.8p.

"We reiterate our long-standing view of Tesco as cash-compounding business where earnings growth, income and shareholder friendliness can drive rating expansion. BUY."