2 high-quality ASX 200 shares experts rate as buys

These two ASX blue chips are rated as buys by brokers.

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Key points

  • These two ASX 200 shares are rated as buys by experts 
  • Goodman is a global industrial property owner and developer 
  • Wesfarmers is a diversified company, which owns businesses like Bunnings and Officeworks 

The Australian Stock Exchange has a number of high-quality S&P/ASX 200 Index (ASX: XJO) shares within its ranks. Experts have named some of them as buys.

ASX 200 shares are large enough that some of them are the biggest in their sector in Australia.

These two ASX 200 blue-chip shares are liked by leading brokers:

Goodman Group (ASX: GMG)

Goodman describes itself as an integrated property group – it owns, develops and manages property.

The business has a global portfolio of industrial properties and projects. Its total assets under management (AUM) was $68.2 billion at 31 December 2021.

Looking at the rental side of the business, the portfolio occupancy was “high” at 98.4% and like for like net property income growth was 3.4% in the FY22 half-year result.

It also has a large amount of development work in progress (WIP). In HY22, the WIP was $12.7 billion across 81 projects with a forecast yield on cost of 6.7%.

Goodman says that its strategy of providing essential infrastructure for the digital economy is “delivering” and it’s performing “strongly” across all segments. The ASX 200 blue-chip share says that the operating outlook for the business is “strong”.

Due to the level of the performance, Goodman recently upgraded its market guidance for FY22 with operating earnings per security (EPS) growth projected to be 20%.

It’s currently rated as a buy by the broker Morgan Stanley, with a price target of $27.88. That implies a potential upside of almost 20% over the next year.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is a diverse ASX 200 blue-chip share, though most of its earnings come from its retail operations. The retail businesses it owns include Bunnings, Kmart, Target, Officeworks and Catch.

In the six months to December 2021, over two thirds of Wesfarmers’ earnings before tax (excluding significant items) came from Bunnings. However, there are multiple businesses within the Bunnings division that can help longer-term earnings including Tool Kit Depot and Beaumont Tiles.

At the moment, growth has slowed for the retail businesses after the COVID boom. However, the ASX 200 blue-chip share is looking to other industries to expand and diversify the business.

Management said with Wesfarmers’ FY22 half-year result that it is delivering good progress on the construction of the Mt Holland lithium project. It has also acquired the Australian Pharmaceutical Industries business which will be the start of a health, wellbeing and beauty segment.

Wesfarmers has told investors of the difficulties that its supply chain is facing, but the company’s retail businesses will continue to focus on price leadership for customers.

It’s currently rated as a buy by the broker Morgans. The price target is $58.50, suggesting potential upside of almost 20% over the next year. Morgans’ projections suggest that the Wesfarmers share price is valued at 22 times the estimated earnings for FY23.

Motley Fool contributor Tristan Harrison 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 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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