All eyes will be on the Wesfarmers Ltd (ASX: WES) share price next week when the conglomerate releases its first full year result since the demerger of the Coles Group Ltd (ASX: COL) business.
Ahead of the release, I thought I would take a look at what one leading broker is expecting from Wesfarmers on August 27.
What is expected?
According to a note out of Goldman Sachs, it expects Wesfarmers to report underlying revenue of $28 billion and earnings before interest and tax (EBIT) of $2,841 million. The broker's forecast is 0.2% higher than the consensus estimate for revenue and 1.6% lower than the consensus estimate for EBIT.
Its analysts have forecast 4% same store sales growth and $13.2 billion of revenue from the Home Improvement division. Segment EBIT is expected to rise 6.3% year on year to $1,598 million according to the broker.
It expects the company's Officeworks business to achieve same store sales growth of 5% and total revenue of $2,304.9 million. Segment EBIT is expected to be $172.5 million, up 10.6% on the prior corresponding period.
Elsewhere, Goldman has forecast the Department Stores division achieving EBIT at the mid-point of its guidance range. Its analysts are expecting segment EBIT of $541.8 million, compared to guidance of between $515 million and $565 million. The broker expects a weak second half margin to weigh on the segment's profitability.
Finally, the note reveals that the broker has forecast CEF division revenue of $1,932 million and Industrials and Safety division revenue of $1,750 million. This will be 5.6% growth and flat, respectively, on the previous year. And in respect to earnings, Goldman estimates CEF division EBIT of $382.3 million and Industrials and Safety division EBIT of $96.3 million.
Dividend.
Goldman Sachs has pencilled in a final dividend per share of 80 cents fully franked. This "implies a payout ratio of 110% for 2H19 and 168% for FY19 on an underlying basis, as a result of the inclusion of 7 months worth of dividend payment for Coles Group's earnings while it was still a part of WES. We assume the dividend payout ratio resumes at 85% from FY20."
Based on its payout ratio estimate for FY 2020, Wesfarmers' shares currently offer a forward fully franked 3.8% dividend yield. Which I think is quite attractive in this low interest rate environment. Though, it may be prudent to wait for its results release before picking up shares.
