Wesfarmers Ltd (ASX: WES) shares have been on a strong run in recent weeks.
So much so, the conglomerate's shares have risen 13% since the start of December.
Clearly, the market is feeling very positive about the company's prospects in FY 2024.
But what is it actually pricing in for the first half? Let's find out.
First half results preview
According to a note out of Morgans, its analysts aren't expecting an overly strong result from Wesfarmers later this month.
This is due to its WesCEF business, which the broker expects to act as a drag on its performance during the first half and offset growth across other segments. The broker commented:
WesCEF is expected to be a drag on earnings. We forecast group 1H24 EBIT to be down 5% mainly due to materially lower WesCEF earnings reflecting weaker global ammonia prices and higher gas costs. All other segments are expected to deliver higher earnings.
What about the full year?
Looking further ahead, Goldman Sachs expects Wesfarmers' EBIT to be largely flat for FY 2024.
Once again, the WesCEF business is expected to weigh on its profitability for the period. Goldman expects the business to report a 24.2% decline in EBIT to $449 million in FY 2024.
This is expected to offset a solid 5.1% increase in EBIT to $2,343 million from the key Bunnings business.
Should you buy Wesfarmers shares?
Goldman believes it will be onwards and upwards for Wesfarmers' earnings after FY 2024.
In light of this, it sees value in Wesfarmers shares at the current level and recently put a buy rating and $62.90 price target on them.
This implies an 8% annual return for investors before dividends and an 11% return including them.
