Firm interest rates and modest inflation levels have been good for the Tesco (TSCO), share price. The UK’s largest supermarket is one business that is benefitting from the continuing drop in Sterling price levels as it trades at all-time highs.
On April 10, UK’s largest grocer posted a 7.2 percent rise in group sales, to a staggering £61 billion. Free cash flow from its retail division hit £2 billion; while net debt dropped by almost 7 percent to £9.8 billion.
“Inflationary pressures,” observed Tesco’s CEO Ken Murphy, “have lessened substantially.” As a result, pre-tax profits for the year jumped nearly 160 percent to a pleasing £2.3 billion. Moreover, the CEO anticipated that “we have strong momentum in our business, and are encouraged by signs of improving consumer sentiment.”
With this positive outlook in mind, Tesco, the grocer launched another round of share buyback. Over the next 12 months, the company will retrench another £1 billion from the market, on top of the £1.8 billion buyback completed in the past three years. Meanwhile, dividend for 2023 rose by 11 percent to 21p.
All this sustained Tesco shareholder returns are starting to excite investors. Tesco’s share price have rallied significantly since late 2022 – and this bull trend is still intact.
Tesco at new long-term prices highs
After a period of sideways trading at 270-300p in the first quarter, the share has finally ventured tentatively above the critical 300p resistance. By the look of it, this ceiling is giving way slowly but surely. In light of Tesco’s latest set of solid results, new long-term highs are probable. What is interesting is that Tesco’s dividend yield is still hovering near 4 percent these days. Surely this will attract more value buyers. Therefore, I anticipate Tesco’s share prices to advance towards the next target at 320p.
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored nearly 200 articles for GoodMoneyGuide.com.
