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On Thursday, Citi analysts upheld their Buy rating and a price target of GBP4.25 on Tesco (OTC:TSCDY) Plc (TSCO:LN) (OTC: TSCDY), signaling confidence in the company’s performance despite some challenges. The analysts adjusted their model for Tesco ahead of the full-year 2024/2025 results expected on April 10, 2025. The retail giant, currently valued at $31.8 billion, has demonstrated strong momentum with a 38.4% return over the past year. According to InvestingPro analysis, the stock appears undervalued at current levels. They made a slight reduction in the forecasted sales excluding fuel by 0.5%, attributing this to weaknesses in Booker and the Central and Eastern Europe (CEE) regions. Nevertheless, they anticipate that the core UK business will remain strong, building on the company’s impressive annual revenue of $91.4 billion and stable operations reflected in its low volatility (Beta: 0.5).
The forecast for Tesco’s fourth-quarter 2025 like-for-like (LFL) retail sales is set at a positive 3.3%, with the UK segment expected to outperform with a 4.1% increase, which is slightly above the market consensus of 4.0%. This optimism is supported by recent Kantar data and the resilience of the Republic of Ireland (ROI) market, which is also expected to see a 4.4% increase, in line with consensus. CEE is predicted to show robust performance as well, with expectations of a 3.0% rise against a 2.1% market consensus.
However, Citi analysts anticipate ongoing difficulties for Booker, Tesco’s wholesale division, projecting a 1.2% decline in sales, which is more pessimistic than the consensus estimate of a 0.7% decrease. Despite these challenges, the analysts have left their full-year 2024/2025 Retail EBIT (earnings before interest and taxes) forecast for Tesco unchanged at £2,942 million, which is closely aligned with both the consensus of £2,950 million and the company’s guidance of approximately £2.9 billion.
The forecast for Tesco’s Retail Free Cash Flow (FCF) also remains unchanged at £1,806 million, surpassing both the consensus of £1,696 million and the company’s guidance range of £1.4 billion to £1.8 billion. The earnings per share (EPS) estimates for the financial years 2025/2026 have been slightly modified, with an insignificant decrease of 0.1% for 2025 and an increase of 0.1% for 2026. InvestingPro data reveals the company maintains a "GOOD" overall financial health score of 2.88, with particularly strong marks in price momentum and growth metrics. Subscribers can access 8 additional exclusive ProTips and detailed financial analysis. The analysts’ price target of 425 pence remains firm, suggesting a calendar year 2026 price-to-earnings (P/E) ratio of approximately 13 times, which aligns with Tesco’s five-year average.
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