Metcash Ltd (ASX: MTS) shares are leaping higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) wholesale food, liquor, and hardware distributor closed yesterday trading for $3.51. In afternoon trade on Wednesday, shares are changing hands for $3.65 apiece, up 3.9%.
For some context, the ASX 200 is up 0.3% at this same time.
With today's intraday gains factored in, Metcash shares are up 16.6% in 2025.
Atop those capital gains, the stock is also popular among passive income investors for its reliable, fully franked dividend payments. With a full-year dividend payout of 17 cents per share, the ASX 200 stock currently trades on a fully franked trailing dividend yield of 4.7%.
Which brings us back to our headline question.
Following this strong year-to-date performance, how much more upside does Macquarie Group Ltd (ASX: MQG) forecast for Metcash shares?
Metcash shares in the spotlight
In a new research report published on Tuesday, Macquarie raised Metcash shares to an outperform rating.
This followed the release of Metcash's FY 2025 earnings guidance and a strategic update earlier in the day.
On the earnings front, Metcash forecasts full-year earnings before interest and tax (EBIT) will be in the range of $504 million to $508 million. Management expects FY 2025 underlying profit after tax to be in the range of $273 million to $277 million.
Metcash shares also got a boost (up 3.5% on Tuesday) after the company revealed that it will merge its Independent Hardware Group (IHG) and Total Tools businesses into one business, Total Tools and Hardware Group.
Metcash CEO Doug Jones said that combining the two businesses "underpins our commitment to maximise the opportunities for profitable growth in the sector".
And the team at Macquarie appears to agree, noting that the merger provides upside risk to the Metcash earnings outlook in the medium to long term.
According to the broker:
There may not be material benefit to earnings from the merger of the Hardware segments in the short-term as the group refocuses on people and the offering across its brands.
However, in the long-term we see an opportunity for upside risk via: i) Cost management; ii) more favourable trading terms with suppliers; and iii) integration between brands driving cross-selling.
Macquarie added that it had previously been cautious "given significant de-leverage and negative earnings surprises in Hardware".
The broker concluded, "However, with FY25 Hardware EBIT ahead of our expectations, we now look to position for a recovery, with Food & Liquor proving resilient."
Macquarie has a 12-month target price of $3.70 on Metcash shares. While that's a modest upside of 1.4% from current levels, this target doesn't include the two upcoming Metcash dividend payments.
