Metcash Ltd (ASX: MTS) shares have risen an impressive 21% for the year to date.
That's significantly ahead of the S&P/ASX 200 Index (ASX: XJO), which is up around 3% over the same time frame.
Metcash is a wholesaler and retailer in the consumer staples sector, operating in the food, liquor, and hardware businesses.
Its food business supplies IGA supermarkets around Australia, while the liquor segment supplies independent retailers such as Cellarbrations, The Bottle-O, IGA Liquor, Porters, and Thirsty Camel. The Hardware business is the second-largest hardware brand in Australia with a focus on the Trade customer.
Yesterday, Metcash shares rose 5% after the company posted its most recent full-year results.
Revenue increased 9% to $17.3 billion, driven by strong performances across its Food, Liquor, and Hardware pillars. Recent acquisitions, including Superior Foods, contributed to this.
Given the company's strong recent performance, investors may be wondering whether the stock has further to run or is fully valued.
Will Metcash shares continue to outperform?
Let's see what leading broker Macquarie Group Ltd (ASX: MQG) had to say.
After reviewing the result, the broker retained its 'outperform' rating on the stock in a research note dated 23 June.
Macquarie also assigned a price target of $4 on the stock. With Metcash shares currently changing hands for $3.80, this suggests 11% upside from here over the next 12 months, including dividends and capital gains.
Metcash shares currently offer a dividend yield of 4.47%, which may be especially appealing to those seeking passive income.
Commenting on the result, the broker noted that earnings had come in towards the upper end of guidance provided earlier in June. Underlying NPAT came in at $275.5 million, compared to guidance of between $273 million and $277 million.
Macquarie also said EBIT and EBITDA were approximately 2% ahead of its expectations.
The broker flagged the Hardware result as the highlight:
The key positive from the Hardware result was an improvement in EBIT margin, with ~40bps of expansion in 2H25A vs. 1H25A. This was driven by IHG, with margins up ~70bps h-h on execution of cost management initiatives. This compared to Total Tools with ~80bps of compression, although management called out improving retail margins through 2H25 and into FY26.
Meanwhile, Tobacco was a major detractor:
Tobacco sales continue to drag on total sales growth in Food, down ~20% in FY25, with an acceleration into early FY26, down ~29%. Tobacco sales currently comprise ~17% of Food sales having declined ~40% from the peak, although is a low margin contributor to earnings. Illicit tobacco sales now make up 39% market share. MTS noted law enforcement had been largely ineffective, but said proposed laws in QLD are encouraging.
Foolish Takeaway
Despite outperforming the market by a wide margin for the year to date, Macquarie has retained an outperform rating on Metcash shares. The ASX 200 stock ticks plenty of boxes for investors. It has a relatively defensive earnings profile, along with an attractive dividend yield. This may be especially appealing in the current environment.
