Broker snap: Tesco on undemanding valuation

21st Apr 2010 11:50

The market's reaction to Tuesday's results from Tesco was lukewarm but Charles Stanley thinks the supermarket's full year results were solid and creditable given the tough economic environment.The broker has left its earnings per share forecasts unchanged at 32.5p for 2011 and 35.8p for 2012 but believes "forecast risk is on the upside.""Going forward, we expect Tesco to continue to deliver high single-digit / low double-digit growth in underlying earnings and dividends," writes Charles Stanley analyst Sam Hart. "International and Retailing Services (Tesco Bank, Tesco Mobile etc) are expected to be the growth drivers, with the core UK food retailer business being used as a cash cow to fund growth in these areas. We believe long term earnings growth prospects remain the best in the sector," Hart proclaims.The valuation still looks undemanding in the broker's eyes, and it has reiterated its 'accumulate' recommendation. Elsewhere, Societe Generale has changed its view on Tesco from 'sell' to 'hold' while Credit Suisse has upped its price target for the supermarket titan to 460p from 400p.