Deutsche Bank upgrades Morrisons, downgrades Tesco
Food & Drug Retailers
3,798.50
15:20 24/04/24
FTSE 100
8,047.48
15:20 24/04/24
FTSE 350
4,423.86
15:20 24/04/24
FTSE All-Share
4,378.39
15:20 24/04/24
Morrison (Wm) Supermarkets
286.40p
16:55 26/10/21
Tesco
292.10p
15:20 24/04/24
Shares of rival supermarket chains Wm Morrison and Tesco were heading in opposite directions on Thursday after Deutsche Bank upgraded its rating for the former and downgraded the latter.
The bank lifted Morrisons from 'sell' to 'hold' and kept its 190p target price after an 8% share-price underperformance against the wider market over the last three months.
It forecasts an in-line interim report from the company in two weeks' time, with like-for-like sales excluding fuel expected to have fallen by 6.9% in the 26 weeks ended 4 August.
Adjusted earnings before interest and tax are estimated to have dropped by 24% to £289m in the first half.
However, Deutsche said: "Without property proceeds or margin rebound, we expect [the company] to cut dividend to deleverage." The bank reckons that Morrisons will reduce its payout by 50%.
As for Tesco, the stock was lowered from 'buy' to 'hold' due to the "low visibility" from recent management changes.
The bank's analysts said that while it continues to see valuation support for the shares, the imminent arrival of new chief executive Dave Lewis and chief financial officer Alan Stewart "introduces the possibility for a change in strategy and competitive actions".
"Given low visibility as to potential changes, and their implications, and a lack of identifiable catalysts in the coming months, we lower our price target from 313p to 280p," the bank said.
Morrisons was up 1.5% by 10:24, while Tesco had fallen 1.1%.
BC