The Wesfarmers Ltd (ASX: WES) share price may have traded flat over the past year, but it could be in for a strong second half to 2017 after the gun analysts at Macquarie Group Ltd (ASX: MQG) lifted their rating on Wesfarmers shares to outperform.
According to financial news wires Macquarie has penciled in the Coles supermarket operator to deliver $2.385 per share on earnings of $2.76 over FY 2018. As a result of its forecast, Macquarie values Wesfarmers shares at $44, which is a little under today's share price of $42.36.
Wesfarmers' Coles supermarkets are facing margin-crunching competition from discount overseas operators such as Aldi and Costco, although the supermarkets business still offers reasonably defensive earnings with steady long-term growth prospects.
The jewel in the conglomerate's crown is its Bunnings Warehouse home improvement business that generates giant profit margins and also retains a dominant competitive position as the only large-scale operator in its field across Australia.
Based on Macquarie's forecasts, Wesfarmers trades on 15.3x earnings with an estimated forward yield of 5.6%. As such it could be an attractive opportunity for defensively-minded investors.
