Woolworths Group Ltd (ASX: WOW) shares will be in focus next week when the supermarket giant releases its eagerly anticipated FY 2024 results.
Ahead of the release, let's look at what the market is expecting from the retailer on 28 August.
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Woolworths FY 2024 results preview
According to a note out of Goldman Sachs, its analysts are expecting a reasonably solid result from Woolworths next week.
The broker is forecasting total sales of $67,261 million for the 12 months ended 30 June. This will be a 4.6% increase on FY 2023's numbers.
The main driver of this growth is expected to be the key Australian Food segment. Goldman expects this side of the business to report a 5% increase in sales to $50,313 million in FY 2024.
This will be supported by growth in its Australian B2B and NZ Supermarkets businesses, which are expected to offset declining sales in the struggling Big W business.
Goldman believes that margin pressure will weigh slightly on Woolworths' earnings. It is forecasting a 2.85% increase in earnings before interest and tax to $3,205 million and largely flat net profit after tax of $1,725 million.
Nevertheless, the broker believes the Woolworths board will still lift its final dividend by 3.4% to 60 cents per share. This will bring its total dividends to $1.07 per share in FY 2024. This represents a 2.9% increase year on year.
Should you invest?
With Goldman Sachs expecting Woolworths' earnings growth to accelerate from FY 2025, it sees now as a good time to snap up its shares.
According to the note, the broker has a buy rating and $40.20 price target on them. This implies potential upside of 15% for investors over the next 12 months.
Commenting on its buy recommendation, Goldman said:
WOW is the largest supermarket chain in Australia with an additional presence in NZ, as well as selling general merchandise retail via Big W. We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as its ability to pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock.
