Here’s why the Wesfarmers Ltd share price is soaring today

Photo credit: AS 1979

The share price of Wesfarmers Ltd (ASX: WES) is surging higher today, rising as much as 4% to a $40.90 before retreating after 11am (Sydney time). It’s currently sitting $1.23 or 3.1% higher at $40.55, which compares to a 1% loss for the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

Source: Google Finance

Source: Google Finance

The impressive gain comes as a result of Woolworths Limited’s (ASX: WOW) announcement to either wind-up or sell its failed Masters Home Improvement business, which has acted as a drag on the group’s earnings performance in recent years.

The decision should benefit the Wesfarmers-owned Bunnings Warehouse business which has, by comparison, experienced strong earnings growth and same-store sales growth.

Woolworths’ shares have also risen nearly 5% for the day after climbing as much as 7.9% earlier, perhaps due to short-sellers exiting their positions. While it is debatable as to whether Woolworths’ decision will be beneficial for its own shareholders in the long-run, it certainly looks as though Bunnings and Wesfarmers will benefit.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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