The Tesco PLC (LON: TSCO) share price has risen by 7.55% from its mid-August lows to current prices and seems to be headed higher. The move higher has left many investors wondering whether the stock is a buy. In this article, we shall analyse the stock in depth to determine if it is a buy.
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Tesco recently announced a separate earnings report for its Irish business unit, which showed that the division made a €120.3 million operating profit in its last financial year, which ended in February 2023. The unit recorded just under €3 billion in sales during the 12 months, slightly improving from the €2.84bn sales from the previous year.
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The groceries and general merchandise retailer also spent over €80m acquiring Joyce's Supermarket chain in Galway. However, the latest financial report indicates that Tesco’s Irish profits have fallen 15% compared to the previous year. The profit decline was driven by higher energy costs, inflation increases, and a property impairment charge of €21.3m.
The Irish unit also nearly doubled the dividend payment to its parent company by raising it to €120 million compared to the previous year. Tesco, the biggest grocery retailer in Ireland and Dunnes Stores, expects sales in the country to grow 4.7pc this financial year.
The company also expects a busy Christmas shopping period, similar to last year’s, despite the record comparables of the COVID-19 lockdown Christmases’ of 2020 and 2021.
A recent investor note by UBS revealed that the investment firm was bullish on the grocery retailer and considers Tesco as being “intriguingly cheap”. UBS has a buy rating on Tesco and recently raised its earnings forecast.
UBS believes that Tesco can reach a price target of 300p and that the retailer can pivot investor attention away from deflation concerns and back to its record of solid trading and potential for upgrades once it releases its earnings results on 4 October 2023.
The investment bank has a full-year estimate for underlying earnings of £2.62 billion, which is ahead of Tesco’s current guidance, with free cash flow at the top of the retailer’s £1.4 billion-£1.8 billion range.
Tesco share price.
The Tesco share price has risen 7.55% from its August low of 244.45p to its current price of 262.90p.
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