Own Wesfarmers (ASX:WES) shares? Here's what to look for during reporting season

About Latest Posts James MickleboroJames Mickleboro has been a Motley Fool contributor since late 2015. After studying economics at university …

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Wesfarmers Ltd (ASX: WES) shares have been a very strong performers in 2021.

Since the start of the year, the conglomerate's shares have risen a sizeable 20%. This means Wesfarmers shares are now up 34% over the last 12 months.

Unsurprisingly, given these strong gains, expectations are high for Wesfarmers next month when it hands in its full year results.

In light of this, I thought I would take a look to see what the market is expecting from the retail giant.

Here's what to look for during reporting season

The market is expecting favourable trading conditions to lead to solid revenue and profit growth in FY 2021.

For example, according to a recent note out of Goldman Sachs, its analysts are expecting Wesfarmers to report full year revenue of $34,132.1 million. This will be a 10.6% increase on FY 2020's revenue.

In respect to earnings, the broker is forecasting a 9.6% increase in earnings before interest and tax (EBIT) to $3,508 million. This is expected to be driven largely by a 16.7% increase in Bunnings earnings to $2,268 million and a 30% jump in Department store earnings to $678 million.

Goldman expects this to lead to Wesfarmers declaring a full year dividend of $1.84 per share. Based on where Wesfarmers shares trade today, this will mean a 3% fully franked dividend yield.

Another thing that could be worth watching out for is commentary around its plan to acquire Australian Pharmaceutical Industries Ltd (ASX: API). If successful, management plans to create a new healthcare division.

Are Wesfarmers shares good value?

While Goldman Sachs currently has a buy rating on Wesfarmers shares, its price target of $59.70 has recently been surpassed. Based on this, it appears as though the market is expecting the company to outperform expectations in FY 2021.

Time will tell if that is the case, but all will be revealed in late August when Wesfarmers releases its results.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. 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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