The Woolworths Group Ltd (ASX: WOW) share price was a positive performer on Wednesday following the release of its half year results.
The retail conglomerate's shares overcame the market weakness and rose 1% to $39.50.
This leaves the Woolworths share price trading within sight of its record high of $42.97.
How did Woolworths perform?
For the six months ended 31 December, Woolworths reported a 10.5% increase in revenue to $35.8 billion and a 15.9% increase in net profit after tax to $1,135 million.
This was driven by strong sales growth across all businesses, with the exception of its COVID-impacted Hotels.
Management notes that Australian Food, BIG W, and Endeavour Drinks all reported sales growth well above trend.
Can the Woolworth share price go higher?
According to a note out of Goldman Sachs, its analysts believe the Woolworths share price is close to peaking.
This morning the broker reaffirmed its neutral rating but lifted its price target to $41.40.
Based on the current Woolworths share price and Goldman's dividend forecast, this price target implies a potential total return of 7.7% over the next 12 months.
What did Goldman say?
Goldman was pleased with its half year results. It said:
"Woolworths reported 1H21 revenues of A$35.9bn, +10.6%, EBIT increased 10.5% to A$2092mn (+7.1% vs. GSe), implying an EBIT margin of 5.8% (flat on pcp). The larger divisions of Aus and NZ Food and Endeavour Drinks performed in line; however, Hotels and Big W significantly outperformed."
"The recovery in Hotel EBIT precedes the timing of the Endeavour Group separation, which WOW now expects to take place by mid-year with documents to be released in 4QFY21. We see this as an important potential catalyst, given a separation would help facilitate a capital management event for the core supermarket operations."
Looking ahead, Goldman Sachs has upgraded its earnings and dividend forecasts. It explained:
"We have upgraded FY21E EBIT by 7.6% to A$3.67bn, reflecting the stronger than expected earnings conditions for Hotels and Big W. We raised FY22E EBIT 3.0% to A$3.84bn. Lower interest expense has increased our upgrade at the NPAT level to 12.7% in FY21E and 6.2% in FY22E. Dividend forecast has been increased to A$1.13 for FY21E and A$1.20 for FY22E."
And while this has supported an increase in its price target to $41.40, there isn't enough upside in the Woolworths share price to warrant a change of rating.
Goldman appears to prefer Coles Group Ltd (ASX: COL) at current levels. The broker has a buy rating and $20.70 price target on its shares.
