Wesfarmers reports 1Q FY18 sales on 25th of October and industry feedback suggests that Coles is not executing as well as it was and is losing market share back to Woolworths.
We expect 10% growth from Bunnings and Coles to deliver flat or low single digit growth.
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FY18 forecast revenue is $70b, EBIT $4.3b with net profit after tax of $3 billion.
EPS $2.60 and DPS of $2.35 places the stock on a forward yield of 5.5%. We see relatively flat earnings for the conglomerate over the next 2 – 3 years.
Buying WES and selling an at the money European call option will provide investors with access to the dividend, franking credits and an additional 6% per year of income, on top of the 5.5% dividend yield.
Wesfarmers
