Coles Group Ltd (ASX: COL) shares came crashing down to earth on Friday.
Investors were selling the supermarket giant’s shares after the release of its half-year results.
Is this a buying opportunity? Let’s see what Bell Potter is saying about this blue chip.
What is the broker saying?
Bell Potter was pleased with its half-year results, noting that its profit was ahead of its expectations. It said:
COL reported a 1H26 underlying NPAT modestly ahead of our expectations but inline with market at $676m (BPe $648m).
Revenue of $23,618m was up +2.5% YOY (vs. BPe $23,793m and VA $23,792m). EBITDA of $2,205m was up +7.8% YOY (vs. BPe of $2,201m and VA $2,215m). Underlying NPAT of $676m was up +12.4% YOY (vs. BPe of $648m and VA $674m). Headline NPAT of $511m includes an after-tax charge of $165m related to historical staff underpayments.
However, due to a poor performance from the Liquor business, the broker has trimmed its estimates. It adds:
Key outlook comments included: (1) Supermarket sales growth through first 7wks was +3.7% YoY (+5.3% YoY ex-tobacco); (2) liquor sales growth through first 7wks are down -2.5% YoY; and (3) Liquor is expected to incur $7m NRI’s in FY26e, which when combined with the $9m incurred in 1H26 would imply a total of $16m, modestly lower than the original $20m guidance.
NPAT changes -1% in FY26e, -2% in FY27e and -4% in FY28e, with the majority of the reduction in the liquor business. Our target price falls to $22.35/sh (prev. $24.30/sh) reflecting earnings changes are higher risk free rate assumption.
Should you invest?
According to the note, Bell Potter has retained its buy rating on Coles shares with a trimmed price target of $22.35 (from $24.30). Based on its current share price of $20.56, this implies potential upside of 9% for investors over the next 12 months.
In addition, the broker is forecasting a fully franked 3.6% dividend yield, which boosts the total potential return beyond 12%.
Commenting on its buy recommendation, the broker said:
Continued delivery against ‘Simplify & Save’ initiatives ($133m delivered in 1H25 and $698m to date vs. a target of $1Bn by FY27e) and generating a return on ADC/CFC investments (~$1.45Bn investment). COL has returned to a discount to WOW, though this is likely warranted given the lower level of forecast growth.
The post What is Bell Potter saying about Coles shares? appeared first on The Motley Fool Australia.
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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.