The Woolworths Group Ltd (ASX: WOW) share price avoided the market selloff on Wednesday.
The supermarket giant's shares rose 1% to close the day at $38.96.
This compares favourably to a 1% decline by the ASX 200 index.
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Why did the Woolworths share price push higher?
Today's gain appears to have been driven by a positive reaction to the company's third quarter update from a number of brokers.
One of those was Goldman Sachs, which has retained its conviction buy rating with an improved price target of $42.80.
This suggests that its shares can rise 10% from current levels. Goldman commented:
2Q23 signals high quality earnings in 2H23: WOW reported better than expected 3Q23 with group sales of A$16.34B in-line with GSe. The key positive was the AU Foods comp sales at 6.6% (vs COL +6.5% and GSe of +3.0%), which was better than expected as recent discussions with suppliers suggested that COL was more aggressive in driving market share via discounting.
In light of this strong result, the broker has bumped its earnings estimates higher. It adds:
[W]e tweak our FY23-25e group sales by ~+1% and NPAT by 0.4%-1.1% respectively. This is due to slightly higher sales across all key business segments while our margin views remain intact. Our updated forecasts imply FY22-25e ~3.4% sales CAGR and ~9.6% CAGR for EBIT/NPAT respectively.
Who else is bullish?
Another broker that responded positively was Citi, which retained its buy rating and $42.20 price target.
It notes that "consumer caution [is] not hurting sales." The broker adds:
Woolworths reported Australian Food 3Q23 LFL sales growth of 6.6% (Citi: 5.1%). This was a strong result and in line with Coles (6.5%). NZ Food and BIG W were also ahead of our expectations with LFL sales growth of 6.8% and 5.5% respectively. Looking into FY24e, we continue to believe there is upside to consensus LFL sales growth for Australian Food of 3.5% (Citi: 5%) with our industry feedback suggesting inflation around mid-single digits and population growth of ~2%. We make minor earnings revisions to our above consensus forecasts. Our target price is $42.20 and we retain our Buy rating.
