What to expect from the Wesfarmers (ASX:WES) first half result

Here's what to expect from the Wesfarmers Ltd (ASX:WES) half year results next month…

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With earnings season on the horizon, I have been looking at what is expected from some of Australia's most popular companies.

On this occasion, I'm going to take a look at conglomerate Wesfarmers Ltd (ASX: WES).

What is expected from Wesfarmers in the first half of FY 2021?

According to a note out of Goldman Sachs, it is expecting a strong half year result from Wesfarmers next month.

Goldman is forecasting underlying revenue of $17,616.2 million for the six months ended 31 December. This is up 15.5% on the prior corresponding period. It is also 2.6% higher than the consensus estimate of $17,171 million.

This is expected to be driven by growth across almost the entirety of the business. Though, the biggest driver will be the key Bunnings business, which Goldman is expecting to deliver a 22.3% increase in revenue to $8,899.4 million.

This is expected to be supported by an 8.4% jump in Department Stores revenue to $5,406.7 million and a 25.6% increase in Officeworks revenue to $1,546.1 million.

And thanks to margin expansion of 120 basis points, offset slightly by a lower property earnings contribution, Goldman estimates that the company will report a 12.5% increase in earnings before interest and tax (EBIT) to $1,831.8 million.

Finally, underlying net profit after tax is forecast to grow 12.7% to $1,269.8 million, allowing the Wesfarmers board to declare an interim dividend of 84.1 cents per share. This will be up 12.2% on last year's interim dividend.

Though, it is worth noting that in respect to its dividend, Goldman does see upside risk. It commented: "However, we note that there is risk to the upside through a special dividend given the strong balance sheet position and the guidance for c. 85% of payout ratio (which we forecast on a full year basis)."

Is the Wesfarmers share price in the buy zone?

At present, Goldman feels Wesfarmers' shares are fully valued and has reaffirmed its neutral rating and lifted its price target to $48.30.

This compares to the latest Wesfarmers share price of $55.27.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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