The four S&P/ASX 200 Index (ASX: XJO) shares that I'm going to cover in this article are the ones that I'm backing for success in FY24 and beyond.
FY23 was a very volatile year, and the next financial year could be just as surprising. The four I'm going to write about could generate resilient earnings and I like the prices they're valued at.
While outperformance is certainly not guaranteed, I think these four ASX 200 shares could be good chances to do it.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is the parent company of businesses like Bunnings, Kmart, Wesfarmers chemicals energy and fertilisers (WesCEF), Officeworks, and Priceline.
The company's boss has already commented that the business is well-positioned for good performance because businesses like Bunnings and Kmart can offer the best value products. These are particularly attractive in this inflationary, high-interest environment.
I like that the ASX 200 share continues to invest for growth in new areas, such as healthcare. It recently announced the acquisition of digital health business InstantScripts. Healthcare is usually a defensive sector, which can further help the resilience of Wesfarmers.
Since 26 April, the Wesfarmers share price has fallen almost 10%. At the current Wesfarmers share price, it's valued at 22 times FY23's estimated earnings. Bear in mind, there will be lithium earnings on the way in future financial years once the company's Mt Holland project is finished.
Metcash Ltd (ASX: MTS)
Metcash supplies a large number of independent food and liquor stores around Australia, including IGA, Foodland, Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, Big Bargain Bottleshop, and Duncans.
I think both food and liquor are defensive sectors, and Metcash can continue to benefit from sustained local neighbourhood shopping.
At this stage, it's tricky to say how the company's hardware earnings will perform amid the current economic uncertainty. However, I believe that growing the network of Mitre 10, Total Tools, and Home Timber & Hardware stores will help support earnings, whatever happens next.
Since 12 May 2023, the Metcash share price has dropped around 10%. Certainly, I think it's at a good price to deliver outperformance considering it's valued at just 12x FY24's estimated earnings. It could pay a grossed-up dividend yield of 8.3%, which would be a real help for returns.
Brickworks Limited (ASX: BKW)
Brickworks is one of the largest building products manufacturers in Australia. The company makes bricks, masonry, roofing, cement, and other products. It's also a major brickmaker in the United States.
But what attracts me to the ASX 200 share is its other assets.
It owns a 26.1% interest in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), a large investment conglomerate. The earnings from Soul Pattinson's portfolio are somewhat defensive. It has major investments in sectors like telecommunications, resources, agriculture, swimming schools, and others.
Brickworks' stake in Soul Pattinson is worth $3.04 billion. In comparison, Brickworks' current market capitalisation is $4.18 billion.
It also has two 50% interests in industrial trusts alongside Goodman Group (ASX: GMG). Those two trusts have a combined value of more than $2.2 billion. While higher interest rates may challenge these valuations, rising rental income is offsetting this. As well, the industrial trusts continue to complete property projects which are increasing the value of the portfolios.
The growing investment income from these two assets is helping increase the Brickworks dividend.
To me, Brickworks seems to be trading at a significant discount compared to its underlying asset base.
Johns Lyng Group Ltd (ASX: JLG)
Johns Lyng describes itself as an "integrated building services group delivering building and restoration services across Australia and the US". Johns Lyng Group's core business rests on its ability to rebuild and restore properties and contents following insured events, including natural disasters.
The ASX 200 share is exposed to the extensive aftermath of major flood and fire events in Australia.
It's doing so well that it recently increased its guidance by around 10% for both revenue and earnings before interest, tax, depreciation and amortisation (EBITDA). Total normalised EBITDA is now expected to be $115.9 million.
The business said the upgrade is being driven by "ongoing strong demand for the group's core business-as-usual services, and an increase in catastrophe activity which is expected to continue into FY24 and beyond".
Since 5 June 2023, the ASX 200 share has fallen by more than 20%. Certainly, I think it's a great time to invest.
According to Commsec, the Johns Lyng Group share price is valued at 24 times FY24's estimated earnings.
