Wesfarmers Ltd (ASX: WES) shares report significant profit each year. But how large will the earnings total be in 2023?
For readers who don't know, Wesfarmers is the parent company of a number of businesses including Bunnings, Kmart, Officeworks, Target, Priceline, and various industrial businesses.
Retail is currently a considerable part of the business, though Wesfarmers' chemicals, energy, and fertilisers segment (WesCEF) is generating a very sizeable amount of profit these days.
Investors may be wondering how the company is going to perform in 2023 considering the negative impacts of inflation and higher interest rates. But the company may still report a solid year of earnings as consumers keep spending.
The conflicting factors are probably why the Wesfarmers share price has been so volatile over the last year.
Let's look at some of the projections for the 2023 financial year.
Earnings estimates for Wesfarmers shares
Current forecasts on Commsec suggest the ASX share could generate good profit after a solid first half.
Wesfarmers may make $2.22 of earnings per share (EPS), which represents growth of close to 7% compared to the 2022 financial year.
If Wesfarmers were to make that much net profit after tax (NPAT) per share, it would mean the Wesfarmers share price is valued at 22 times FY23's estimated earnings.
That level of profit would allow Wesfarmers to pay a very healthy dividend of $1.86 per share. This translates into a potential forward grossed-up dividend yield of 5.4%.
Profit growth is also expected in FY24, according to the numbers, with potential EPS of approximately $2.31. That would put it at 21 times FY24's estimated earnings.
Is it good value today?
Commsec collates the opinions of a number of different analysts. I think it's fair to say the ratings are mixed – there are three buy ratings, four holds, and three sell ratings. Goldman Sachs is one of the brokers that rates it as a sell, with a target price of just $40.60, according to Commsec. That implies a possible fall of close to 20%.
With the Wesfarmers share price up more than 6% over the past month, it's not as cheap as it used to be.
At close to a six-month high, it may see some more volatility ahead. But, with its growing exposure to long-term tailwinds, such as healthcare and lithium, it could be one that may be able to keep performing for shareholders.
