Wesfarmers Ltd (ASX: WES) shares will be on watch next week.
That's because the Kmart, Bunnings, Officeworks, and WesCEF owner (to name just four) is scheduled to release its highly anticipated half year results on Thursday 20 February.
Ahead of the release of its latest results, let's see what analysts are expecting from the conglomerate.
Wesfarmers half year results preview
According to a recent note out of Goldman Sachs, its analysts are expecting a solid result from Wesfarmers next week.
The broker is forecasting a 6.3% increase in sales over the prior corresponding period, with Bunnings recording 2.6% growth and Kmart posting 2.9% growth. It said:
We forecast 1H25 Bunnings sales +2.6% YoY to be above ABS Home Improvement category +1% YoY (Jul-Nov 24);
In respect to earnings, Goldman believes that Wesfarmers will reveal a 2.4% increase in earnings before interest and tax (EBIT) for the half. This reflects Bunnings EBIT growth of 1.3% and Kmart EBIT growth of 3.4%.
Commenting on its expectations for the half, the broker said:
While we expect 1H25 results to be largely in-line with consensus expectations with +6.3% sales/+2.4% EBIT growth, we expect that it will evidence: 1) continued market share gains in Bunnings/Kmart/Officeworks, and that management commentary will highlight still significant room for Bunnings to grow sales/productivity via a combination of category evolution and omni-channel expansion. As an example, Home Depot's (Covered by Kate McShane) current sales/sqm gap is almost double that of Bunnings, per our estimates.
Additionally, we expect portfolio investments in Lithium/Health/Retail media to begin delivering material contributions from FY26 onwards, driving acceleration in EBIT growth from 3% in FY25 to 14% in FY26, expanding ROIC from ~20% to ~23%. This takes WES' EPS CAGR to the highest amongst the Top 5 AU focused consumer peers by sales in ANZ for GS estimates in FY24-27e and the highest ROIC improvement, in our view justifying continued valuation premium.
Should you buy Wesfarmers shares?
Goldman Sachs currently has a buy rating and $78.70 price target on its shares. However, this is only a fraction above its latest share price of $77.58, implying potential upside of just 1.5% for investors.
In light of this, investors may want to wait for a better entry point before making an investment. Especially given how expectations are high for next week's results and an earnings miss could pose significant downside risk.
Wesfarmers shares are up 33% over the past 12 months.
