For some ASX 200 shares, it has been the toughest year in living memory. Especially for companies most negatively affected by COVID-19 lockdowns and global mobility.
For others like major retailers, the demand for their goods and services is at all-time highs. Goldman Sachs upgraded the following ASX 200 shares last week after outstanding results that topped expectations.
Wesfarmers Ltd (ASX: WES)
Wesfarmers delivered a robust HY21 result driven by stronger in-house consumption that lifted its Bunnings, Officeworks and Kmart Group revenues. Management noted its improving confidence in the economic recovery, an improvement on prior cautious commentary from the company.
The conglomerate delivered a stronger than expected first-half FY21 EBIT growth of 27.4% to $2.057 billion compared to Goldman’s forecasted 12.3%. As a result, Goldman revised its FY21/22 NPAT forecasts for this ASX 200 share to 16.3% and 21.9%, respectively, with a 12-month price target of $59.70. This offers a potential return of 13.43% based on the current Wesfarmers share price.
Wesfarmers was upgraded from a neutral to buy rating based on Goldman’s renewed positive outlook for the company. This included factors such as favourable housing cycles that could continue earnings momentum in Bunnings due to its exposure to DIY and trade home improvement categories, a turnaround for its Target business and potential for M&A opportunities.
Super Retail Group Ltd (ASX: SUL)
How the tables have turned. Retail shares have reported tech-like growth figures this reporting season, driven by increased online sales, in-house consumption and broad consumer spending recovery. Super Retail reported a 23.1% increase in group sales to $1.776 billion, while underlying NPAT soared 139% to $177.1 million.
Goldman believes Super Retail will continue to see elevated sales as it benefits from exposure to domestic travel. The company was upgraded to a buy rating with a 12-month price target of $14.80, nearly 22% above the current Super Retail share price.
Bank of Queensland Limited (ASX: BOQ)
More broadly speaking, banks have experienced a significant rebound in earnings and a surprise fall in bad debts.
In Bank of Queensland’s case, the upgrade wasn’t so much to do with an earnings report but a ‘strategically attractive acquisition’ of ME bank. BOQ announced an agreement to acquire 100% of ME Bank for $1.325 billion. A $1.35 billion capital raise will fund the acquisition.
Goldman reiterates its buy rating on BOQ given the sustained strength in housing volumes combined with the company’s overweight position in housing and sturdy position in the current low net interest margin environment.
The broker believes that management will put to work the company’s strong capital position to improve its growth outlook. The BOQ 12-month price target was lifted by 17% to $9.63 from $8.25. This represents an upside of 10.5% to the BOQ share price at the time of writing.