What to expect from the Coles (ASX:COL) first half result

Is the Coles Group Ltd (ASX:COL) share price in the buy zone ahead of its half year results?

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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.

On this occasion, I'm going to take a look at supermarket giant Coles Group Ltd (ASX: COL).

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

With the Coles share price up strongly over the last 12 months, expectations certainly are high for the company next month.

According to a note out of Goldman Sachs, its analysts are expecting Coles to report group sales of $20,585.9 million for the half, which will be an increase of 9.2% on the prior corresponding period.

This is expected to be driven by an 8.7% jump in Food sales to $18,022.6 million, a 16% jump in Liquor sales to $1,961.9 million, and a 5.1% increase in Coles Express sales to $601.4 million.

In respect to earnings, Goldman is forecasting earnings before interest, tax, depreciation and amortisation (EBITDA) of $1,784.2 million for the half. This will be a 7.2% increase on the prior corresponding period.

And on the bottom line, an underlying net profit after tax of $540.4 million has been pencilled in. This represents a 10.5% increase on the same period last year.

Finally, the broker expects this strong form to lead to the Coles board declaring an interim fully franked dividend of 34 cents per share, which will be a 13.3% increase on last year's interim dividend.

Is the Coles share price in the buy zone?

According to the note, Goldman Sachs believes the Coles share price is in the buy zone right now.

This morning it has retained its buy rating and lifted its price target on the company's shares to $21.10.

Based on the current Coles share price, this implies a potential total return of ~22% over the next 12 months including dividends.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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