Results preview: What to expect from Wesfarmers Ltd

Credit: wikimedia

The Wesfarmers Ltd (ASX: WES) share price has climbed around 6% since the blue-chip conglomerate released its full year results for the 2015 financial year (FY15) in August last year.

That’s an impressive performance, particularly when you consider that the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has slumped 9% over the same period!

The last six months have certainly been an exciting time for Wesfarmers, which owns leading retail brands such as Coles, Bunnings and Officeworks as well as a host of other non-retail businesses.

Without doubt, the biggest news has been the company’s recent announcement that it has agreed to acquire the UK retailer Homebase for £340 million, which will not only mark its first significant move offshore but it will also spearhead the entry of the Bunnings brand into the UK.

With the group scheduled to release its results for the six months ending December 31 on Wednesday, February 24, shareholder attention will shortly be focussed on how the group is tracking compared with expectations.

Here’s how market expectations stand at present:

  • Management guidance for the 2016 financial year (FY16) provided at the time of the 2015 full year (FY15) results in August stated that the group was “well placed to strengthen and build upon existing businesses with a focus on seeking to deliver improved shareholder returns.”
  • An analyst consensus forecast suggests earnings per share (EPS) will rise to $2.22 in FY16 from $2.20 in FY15. Wesfarmers reported $1.21 for the six months in the first half of FY15, so investors will be looking for a similar result.

With the share price currently trading at $42.75, the consensus estimate above implies a price-to-earnings multiple for Wesfarmers’ stock of just over 19 times. That’s a pretty full multiple given the low year-on-year rate of earnings growth. It could mean that if the market receives any negative surprises at the upcoming interim result that the share price might come under some selling pressure.

Discover the 'new breed' of blue chips that could take your portfolio higher in 2016

Forget BHP and Woolworths. These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

Motley Fool contributor Tim McArthur 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. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.