Investors are gearing up for a busy reporting season with some analysts suggesting the market will be underwhelmed by lacklustre earnings growth in the 2015 financial year (FY) and tepid outlook statements for the current 2016 FY.
Two blue-chip stocks whose results will most certainly be highly anticipated and closely scrutinised are Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES).
Here's some key factors to be alert to…
Woolworths Limited – Australia's largest retailer is scheduled to report its full year results on 28 August.
In a release to the market on the 17 June the company provided the following guidance:
- On track to exceed forecast of $500 million in cost savings across FY15 and FY16.
- Sales within the Australian Food and Liquor division in April, May and early June were "disappointing".
- The General Merchandise division has seen sales impacted as the transformation plan is implemented.
- Management stated that it was "pleased with the performance" of the new format Home Improvement stores.
- Woolworths' management guided the market towards a full year net profit after tax but before significant items figure below the analyst consensus forecast range, which at the time was for growth of 1.8%. Rather management suggested the FY 2015 profit result would be "broadly in line with the prior year, which was $2.45 billion".
Based on analyst consensus data provided by Morningstar, Woolworths is currently expected to report financial year (FY) 2015 earnings per share (EPS) of 194.4 cents per share (cps) which implies a price-to-earnings (PE) ratio of 14.7x.
Wesfarmers Ltd – Australia's leading conglomerate and owner of the Coles retailing network is scheduled to report its full year results on 20 August.
Based on details provided at the group's Strategy Day on 20 May here's what investors can expect:
- OfficeWorks – "Variable trading conditions to continue"
- Bunnings – "Strong trading momentum"
- Chemicals, Energy and Fertilisers – "Continue to expect growth in our chemicals businesses leveraged to the resources sectors". Fertilisers' "performance remains dependent upon farmers' terms of trade and seasonal breaks". "Kleenheat earnings remain dependent upon LPG production economics, particularly global prices and gas input costs."
- Resources – "Difficult export markets to continue in 2H15".
Based on analyst consensus data provided by Morningstar, Wesfarmers is currently expected to report FY 2015 EPS of 215.1 cps which implies a PE ratio of 19.9x.
