The Woolworths Group Ltd (ASX: WOW) share price will be one to watch on Wednesday when it releases its highly anticipated first quarter update.
Ahead of the release, I thought I would take a look to see what the market was expecting from the retail conglomerate.
What is the market expecting from Woolworths during the first quarter?
According to a note out of Goldman Sachs, it expects the company to report revenue of $17.5 billion for the quarter. This will be a 9.8% increase on the prior corresponding period.
The key driver of this growth is expected to be is supermarket business. This is thanks to a successful collectibles promotion, the outperformance of its online channel, and strong demand because of the pandemic.
Goldman Sachs is forecasting comparable store sales growth for the key Australian Food segment of 9%.
Supporting this growth will be its Endeavour Drinks and New Zealand supermarkets businesses. Goldman is forecasting first quarter comparable store sales growth of 18% for Endeavour Drinks and 8.5% comparable store sales growth for its New Zealand supermarkets.
Another highlight is expected to be the Big W business. The broker expects it to deliver 24% growth during the first quarter.
What does Goldman Sachs think of Woolworths?
Ahead of the result release, Goldman Sachs is sitting on the fence with its recommendation. The broker has a neutral rating on the company’s shares on valuation grounds.
It explained: “Our 12-month target price is derived from a 50:50 EV/EBIT-based SOTP and DCF methodology. Our SOTP, based on FY21E EBIT, results in a valuation of A$37.50 (prior A$37.30) and our DCF valuation is at A$41.10 (prior A$40.30). Our revised blended target price is at A$39.30 (prior A$38.80). We are Neutral on WOW.”
Though, the broker will no doubt be updating its recommendation (for the better or worse) following this release. So stay tuned for that.
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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 Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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