Coles Group Ltd (ASX: COL) shares will be watched closely next week when the supermarket giant releases its half year results.
Ahead of the release, letâs look at what the market is expecting from the company on 21 February.
What is the market expecting from the Coles half year result?
According to a note out of Goldman Sachs, its analysts expect first half group sales of $21,354 million, up 3.7% over the prior corresponding period. This comprises supermarket sales of $18,729 million, liquor sales of $2,014 million, and convenience sales of $611 million.
However, unlike rival Woolworths Group Ltd (ASX: WOW), which is expected to deliver strong earnings growth, Goldman Sachs expects Coles to report a decline in profits. It is forecasting underlying net profit after tax of $542 million. This will be a 1.3% decline over the prior corresponding period and driven by margin contraction. The broker explained:
From a margin perspective, we also expect COL to see ~10bps EBIT margin contraction in 1H23 on the back of lower GPM and higher implementation cost for supply chain transformation including Witron and Ocado. This is in contrast to ~30bps EBIT margin expansion we expect for WOW. Net net, we are looking for flat EBIT growth YoY for COL vs. +11% for WOW in 1H23. We are ~3.6% below Visible Alpha consensus EBIT for 1H23.
And while Goldman hasn’t provided an interim dividend estimate, for the full year it is forecasting a 60.9 cents per share fully franked dividend. This will be down 1.1% year over year and could mean the interim dividend will be down by a similar percentage.
Finally, the broker has warned that if its forecasts are accurate, it could cause Coles shares to tumble. It concludes:
COL is currently trading at 23.3x FY24 P/E on vs. historical average of 21.6x, and is only at ~1x P/E discount vs. historical average of ~4x relative to WOW. We expect that a disappointment in 1H23 margins will result in stock underperformance.
The post Own Coles shares? Here’s what the market is expecting from its half year results appeared first on The Motley Fool Australia.
Should you invest $1,000 in Coles Group Limited right now?
Before you consider Coles Group Limited, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Coles Group Limited wasn’t one of them.
The online investing service heâs run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
See The 5 Stocks
*Returns as of February 1 2023
(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}
setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()
More reading
- These are the growing ASX dividend shares to buy now: analysts
- Can Coles shares deliver 8% upside AND tasty dividends in 2023?
- Get an income boost with these ASX dividend shares: broker
- With interest rates heading higher again, the risk is to the downside for these popular blue chip ASX shares
- 2 ASX stocks I’d buy in February for lifelong passive income
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
from The Motley Fool Australia https://ift.tt/ZrLIG3N
Stock Pick 