What analysts expect from the Woolworths (ASX:WOW) first half result

Is the Woolworths Group Ltd (ASX:WOW) share price in the buy zone ahead of its half year results? Here’s what this broker thinks…

| More on:
Woolworths share price

Source: Woolworths

With earnings season on the horizon, I thought I would start to take a look at what is expected from some of Australia’s most popular companies.

Earlier today I looked at Coles Group Ltd (ASX: COL). You can read about that here. Whereas on this occasion, I’m going to take a look at its rival Woolworths Group Ltd (ASX: WOW).

What is expected from Woolworths in the first half of FY 2021?

Due to the favourable changes in consumer spending because of COVID-19, expectations are high for Woolworths in FY 2021.

However, one leading broker that suspects the retail giant could fall short of expectations is Goldman Sachs. In light of this, it will come as no surprise to learn that it has a neutral rating on the Woolworths share price.

According to a broker note, Goldman is expecting Woolworths to deliver total revenue of $35,789.7 million in the first half. This will be a 10.1% increase on the prior corresponding period.

Its analysts expect this to be driven by a 10.9% lift in Australian Food sales to $23,520.1 million, a 17.6% jump in Endeavour Drinks sales to $5,616.2 million, a 15.3% increase in Big W sales to $2,477.6 million, and a 1.1% rise in NZ Supermarket sales to $3,403.6 million.

Partially offsetting this will be its Hotels business, which has struggled during the pandemic from closures and social distancing restrictions. Goldman is forecasting a 25.5% decline in sales to $684.7 million.

What about its earnings?

While Goldman is actually ahead of the consensus by 0.9% on its sales estimates, it sits well and truly behind the consensus on its earnings estimates.

The broker doesn’t expect its margins to be as strong as the market is forecasting. It is expecting a net profit of $1,030.2 million for the first half. This will be up 5.3% on the prior corresponding period but is 4.7% lower than the consensus estimate of $1,080.6 million.

It is a similar story for Woolworths’ interim dividend, which Goldman is expecting to come in at 48.8 cents per share. This compares to the consensus estimate of a 54 cents per share interim dividend.

Is the Woolworths share price a buy?

As I mentioned above, as things stand, Goldman Sachs is sitting on the fence with this one. It has a neutral rating and $39.90 price target on Woolworths shares.

This compares to the latest Woolworths share price of $39.54.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ ASX Shares