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Morgans says hold onto your Wesfarmers Ltd shares for now

Morgans has rated diversified supermarket giant Wesfarmers Ltd (ASX: WES) as a hold after the release of “slightly better” than expected March quarter results.

Strong like-for-like sales growth of 7.7% out of Bunnings Australasia, and Coles sales growth of 1.3% impressed the broker enough to suggest shareholders hold onto their Wesfarmers shares for now.

As expected, Bunnings UK & Ireland produced sales falls of 15.4% despite efforts by Wesfarmers to refine its offerings and the Morgans broker says the flailing business is still a long way from where it needs to be to justify its continuation by Wesfarmers.

Morgans raised its price target on Wesfarmers from $44.65 to $44.74.

Elsewhere in the supermarket sector grocery distributor Metcash Limited (ASX: MTS) has been kicking goals, with its share price up 63% from its $2.19 price at this time last year to an May 1 close of $3.58.

Woolworths Group Ltd (ASX: WOW) hit a 52-week high on April 30, closing down slightly at $27.74 on May 1 with improved investor sentiment after Deutsche Bank put a buy rating and a $30 price target on the Wesfarmers competitor.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. 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 Scott Phillips.

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