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Wesfarmers upgraded to outperform

Broker Credit Suisse appears to have changed its view on diversified conglomerate Wesfarmers (ASX: WES). According to a report in the Australian Financial Review, the broker has upgraded its rating on the company from ‘underperform’ to ‘outperform’.

Credit Suisse is reported to have cited “an improvement in consumer sentiment and the housing sector” that would lead the stock higher as a factor in its decision to upgrade the stock. The broker also increased its earnings forecast for the Coles business by 2% and 4% over the next two financial years.

Wesfarmers’ share price is currently hovering around the $41.50 mark, which provides reasonable upside to Credit Suisse’s price target of $46.

Foolish takeaway

The purchase of the Coles Group by Wesfarmers significantly increased the conglomerate’s exposure to retailing. With consumer confidence rising to its highest point since 2010, investors are increasingly looking for exposure to retail stocks that will benefit from this rise in confidence. With a number of retailers including Kathmandu (ASX: KMD) and The Reject Shop (ASX: TRS) already hitting 52-week highs, investors will have to select carefully.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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