Here's the earnings forecast through to 2028 for Coles shares

The future looks promising for Coles.

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How much earnings a business makes can significantly impact a stock's ability to generate shareholder returns. Investors often value a business based on its profit, so an increase in profit can lead to a higher share price. And the projected profit could be very influential on Coles Group Ltd (ASX: COL) shares.

Dividends are paid from profit, so rising earnings can also lead to a growing payout. However, Coles' passive income is not going to be my focus today.

Let's instead examine where broker UBS sees Coles' profit generation going over the next few financial years.

FY24

UBS was impressed by the company's recent FY24 third-quarter sales update, which showed that supermarket sales growth of 5.1% was stronger than its peers, with growth in areas like exclusive brands and online sales. The broker also referred to trade feedback that Coles' in-store execution is improving.

The broker suggests that theft issues in 2023 provide a basis for gross margin recovery and expansion, the new Witron automated distribution centres can provide cost savings, and Coles' other cost-saving efforts can lead to "improved earnings momentum".

For FY24, UBS predicts that the supermarket business will generate revenue of $43.8 billion, earnings before interest and tax (EBIT) of $1.97 billion, and net profit after tax (NPAT) of $1.07 billion.

FY25

UBS currently has a price target of $18.25 on Coles shares, which suggests there could be capital growth of 7.2% over the next year.

The improvements that UBS mentioned will flow through in FY25, leading to (projected) increased profit margins. UBS suggests Coles could generate $44.3 billion in revenue, $2.1 billion in EBIT, and $1.15 billion in NPAT in FY25.

If that happens, it would represent a sales increase of 1.2% and an NPAT rise of 8.2%, implying a sizeable rise in the NPAT margin.

FY26

Top line and bottom growth could continue into FY26 according to UBS' projections, which could support Coles shares.

The broker has predicted that the company could generate $45.9 billion in revenue, $2.3 billion in EBIT, and $1.28 billion in NPAT.

Those numbers imply the revenue could increase by 3.6% year over year, and NPAT might rise by 10.9%.

FY27

In the 2027 financial year, UBS has projected yet another rise for Coles shares' financial metrics.

The broker has projected that the company could generate $47.55 billion in revenue, $2.45 billion in EBIT, and $1.36 billion in NPAT.

These numbers suggest that Coles could see a 3.6% increase in revenue and a 6.25% growth in NPAT.

FY28

UBS thinks FY28 could be another positive year for Coles (shares), with projections of further growth.

Coles is predicted to deliver $49.2 billion in revenue, $2.6 billion in EBIT, and $1.4 billion in NPAT.

If the company delivers on those projections, it would translate into 3.6% revenue growth and 5.8% NPAT growth.

If UBS is right with its estimates, then Coles shares seem likely to see multiple years of earnings growth, which could be positive for shareholders.

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 has positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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