What to expect when Wesfarmers releases its full year results

Next week Wesfarmers Ltd (ASX:WES) will release its first full year results since the Coles Group Ltd (ASX:COL) demerger. Here's what the market is expecting…

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All eyes will be on the Wesfarmers Ltd (ASX: WES) share price next week when the conglomerate releases its first full year result since the demerger of the Coles Group Ltd (ASX: COL) business.

Ahead of the release, I thought I would take a look at what one leading broker is expecting from Wesfarmers on August 27.

What is expected?

According to a note out of Goldman Sachs, it expects Wesfarmers to report underlying revenue of $28 billion and earnings before interest and tax (EBIT) of $2,841 million. The broker's forecast is 0.2% higher than the consensus estimate for revenue and 1.6% lower than the consensus estimate for EBIT.

Its analysts have forecast 4% same store sales growth and $13.2 billion of revenue from the Home Improvement division. Segment EBIT is expected to rise 6.3% year on year to $1,598 million according to the broker.

It expects the company's Officeworks business to achieve same store sales growth of 5% and total revenue of $2,304.9 million. Segment EBIT is expected to be $172.5 million, up 10.6% on the prior corresponding period.

Elsewhere, Goldman has forecast the Department Stores division achieving EBIT at the mid-point of its guidance range. Its analysts are expecting segment EBIT of $541.8 million, compared to guidance of between $515 million and $565 million. The broker expects a weak second half margin to weigh on the segment's profitability.

Finally, the note reveals that the broker has forecast CEF division revenue of $1,932 million and Industrials and Safety division revenue of $1,750 million. This will be 5.6% growth and flat, respectively, on the previous year. And in respect to earnings, Goldman estimates CEF division EBIT of $382.3 million and Industrials and Safety division EBIT of $96.3 million.

Dividend.

Goldman Sachs has pencilled in a final dividend per share of 80 cents fully franked. This "implies a payout ratio of 110% for 2H19 and 168% for FY19 on an underlying basis, as a result of the inclusion of 7 months worth of dividend payment for Coles Group's earnings while it was still a part of WES. We assume the dividend payout ratio resumes at 85% from FY20."

Based on its payout ratio estimate for FY 2020, Wesfarmers' shares currently offer a forward fully franked 3.8% dividend yield. Which I think is quite attractive in this low interest rate environment. Though, it may be prudent to wait for its results release before picking up shares.

Motley Fool contributor James Mickleboro 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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