Broker snap: Mixed reaction to Tesco's update

8th Dec 2011 10:07

Today's update from Tesco has prompted a mixed reaction from brokers Nomura and Evolution Securities, who have given contrasting assessments of the supermarket chain's third quarter figures.Nomura is generally pleased with the statement, saying that the figures came in line with expectations. The broker highlights improving non-food like-for-like (LFL) sales and positive electricals LFL sales, as well as in-line international LFL numbers."We hold our earnings numbers in the wake of a resilient quarter from Tesco with encouraging undertones, underscoring the company's position of relative strength," said Nomura. "The quarter reinforces our conviction for the Tesco investment thesis with a growing sense of momentum."Nomura kept a buy rating on the stock with a 500p target price.Evolution, however, has reiterated its reduce recommendation on the company, saying that the statement is "yet again disappointing in its content." The broker claims that the firm's performance has been subdued and notes a "clear lack of momentum going into Christmas"."UK LFLs continue to markedly underperform peers while international growth offers little reason for cheer," said analyst Dave McCarthy. "Downgrades beckon and structural and strategic concerns remain. Tesco's valuation does not reflect this adequately and we see further downside in the shares," McCarthy said. A 350p target is given.The market seems less than enthused with the statement, with shares trading down 1.05% at 392.75p by 11:13 on Thursday morning.BC