Tesco PLC's (LSE:TSCO) strong set of annual results reinforces the supermarket chain's status as a "high-class" and reliable performer in uncertain markets, said Shore Capital.
The broker reiterated its 'buy' rating, arguing that the FTSE 100 remains “a high-class defensive stock” thanks to strong cash generation, disciplined execution and consistent returns to shareholders.
Earnings per share were ahead of expectations at 29p, alongside robust free cash flow of around £2 billion. Dividend growth of 6% and buybacks were also highlighted as key drivers of total shareholder returns.
The group paid £937 million of dividends and completed a £1.45 billion share buyback programme during the year, and today announced a new £750 million buyback to be completed by next April.
More broadly, analyst Clive Black frames Tesco as “a consummate cash compounder”, benefiting from its scale, pricing power and non-discretionary demand.
However, he struck a more measured tone on valuation. With the shares already re-rated, the broker said further upside will depend on stronger underlying earnings growth rather than multiple expansion.
Guidance for the 2027 financial year, including profit of £3-3.3 billion, was seen as prudent given geopolitical uncertainty, particularly around the Middle East and its impact on costs.
While the outlook remains supportive, Black suggested the investment case is shifting from recovery to delivery, with steady earnings growth and cash returns now the main pillars.