Woolworths Group Ltd (ASX: WOW) shares will be on watch later this month when it hands in its first results since the Endeavour Group Ltd (ASX: EDV) demerger.
Ahead of the results release, I thought I would look to see what the market is expecting from the retail giant.
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What is the market expecting from Woolworths in FY 2021?
Due to the aforementioned demerger of its drinks and hotels business, Woolworths' results will be a little messier than normal.
According to a note out of Goldman Sachs, its analysts expect Woolworths to report sales of $55,415 million and earnings before interest and tax (EBIT) from continuing operations of $2,796 million for the 12 months.
The latter comprises:
- Australian Food EBIT growth of 7.4% to $2,398 million
- NZ Food EBIT growth of 18.1% to $672 million.
- BigW EBIT growth of 315% to $162 million.
- A 28.5% reduction in corporate expenses to $108 million.
On the bottom line, Goldman expects this to lead to continuing net profit after tax of $1,474 million and reported net profit after tax of $2,158 million. The latter includes contributions from discontinued operations.
Lastly, a fully franked final dividend of 33 cents per share is expected to be declared. This will bring the Woolworths dividend to 86 cents per share for FY 2021.
What else could impact the Woolworths share price?
The Woolworths share price could be given a boost from commentary on management's capital return plans.
During the Endeavour demerger, Woolworths advised that it intends to return between $1.6 billion and $2 billion shareholders via a special dividend.
And given its balance sheet strength, there has even been speculation of a share buyback in the near future too.
Are its shares in the buy zone?
Goldman Sachs isn't in a rush to invest and continues to prefer Coles Group Ltd (ASX: COL) at current levels.
The broker has a neutral rating and $36.80 price target on Woolworths' shares at present. This compares to the current Woolworths share price of $39.26.
