Tesco PLC (LSE:TSCO) shares rose 4% to 446p to top the FTSE 100 on Thursday morning after it upgraded guidance and was boosted by news of a potential tax break in the upcoming Budget.
The supermarket giant reported an operating profit of £1.67 billion, which came in ahead of the £1.59 billion expected, while adjusted earnings per share of 15.4 pence also exceeded forecasts of 14.4 pence.
First-half sales of £33.05 billion for the 26 weeks to 23 August missed the company-compiled consensus of £35.91 billion, however.
Tesco said it now expects group adjuisted EBIT of £2.9-3.1 billion for the full year, up from £2.7-3 billion. This compared to a consensus forecast of £3 billion.
Free cash flow guidance remained unchanged at £1.4-1.8 billion, with the City consensus just over £1.6 billion.
The results and upgrade "caps a remarkable period of market share momentum, inflationary help, and weather-driven consumer spending uplift", said Jefferies analyst Frederick Wild.
UBS analyst Sreedhar Mahamkali said he expected Tesco to raise its lower end of guidance for EBIT but the group raised its top-end as well.
Q: How would we expect investors to react?
"We expect a positive response notwithstanding a slightly softer Q2 LFL," he said "Our conversations suggested that investors expected the lower end of the Group EBIT guidance to be raised but not necessarily the top end."
The raised outlook still suggests 4% decline in group EBIT in the second half, Mahamkali said, "unlikely except in the scenario of a step up in the intensity competition from Asda."