BofA Upgrades Tesco Rating, Price Objective Amid Rising Returns, Expected Market Share Gains

08:23 AM EDT, 07/24/2026 (MT Newswires) -- BofA Global Research upgraded its investment case for Tesco (TSCO.L), citing the grocery retailer's expanding return on invested capital and expectations that the company can capture additional market share. "We upgrade Tesco to Buy and raise our PO to 540p. Investor focus remains on weaker UK demand and tougher trading comparisons, but we believe the key story is improving returns. Tesco generates a 10.8% ROIC versus an 8.5% cost of capital, with further improvement ahead. The market continues to value Tesco as a mature food retailer rather than a business creating sustainable economic value," analysts said Thursday. Amid an "increasingly fragmented" UK grocery market, the research firm still believes Tesco is well-placed to take share from "structurally weaker" peers due to its 28.5% market share, "superior" scale and more robust execution. "Our thesis does not rely on meaningful margin expansion, with margins increasing only modestly from c4.3% to c4.4%. Tesco is improving returns through productivity, asset [utilization] and disciplined capital allocation. Higher volumes, retail media, automation and data [monetization] should continue driving ROIC, earnings and free cash flow," the note said. Within this context, BofA increased its EPS forecasts for fiscal 2027 to 2029 by 1.4%, 4.6% and 7.6%, respectively, as the research firm expects Tesco's "structural advantages" to translate to higher earnings and returns.