Tesco shares rose 4% to 493p on Thursday after the supermarket delivered a solid set of half-year results and lifted both its profit outlook and share buyback programme.
Analysts at Shore Capital and Jefferies were slightly less ebullient, with both maintaining 'hold' ratings with price targets implying the shares are currently running a little ahead of fair value.
ShoreCap's Clive Black called the performance solid and resilient, welcoming the tightened profit guidance range of £3.15 billion to £3.30 billion, the expanded buyback and the 5.2% increase in the interim dividend.
He cautioned, however, that the UK grocery market has become more competitive as inflation eases.
And he noted that Tesco's second-quarter like-for-like sales growth came in just above 1%, with the company leaning more heavily on promotions than it might have expected earlier in the year.
Black also flagged the possibility that building cost pressures could create a tougher backdrop in coming quarters, and raised the prospect of further consolidation in the UK grocery sector.
He suggested Tesco's strong market position of around 27.8% made it a central player in any industry shake-up.
Jefferies analyst Frederick Wild said the results confirmed a softer end to the first half on sales, but that margins had held up well and that these trends were already well known to the market.
He said the combination of raised capital expenditure guidance, the higher buyback and a relatively reassuring outlook statement should provide comfort to investors looking for defensive consumer exposure.
Wild added that he expected the focus at the morning analyst call to centre on evolving industry dynamics, the new capital spending plans and the shifting competitive environment.
Neither broker expects meaningful changes to full-year profit or cash flow consensus forecasts from today's numbers.
