Australian earnings preview – Coles

Australia

Full Year Earnings Preview:

Coles Group Limited (COL) is an Australian public retail company, primarily concerned with food, groceries, household goods, liquor, fuel, and financial services via its store network and online platforms. It reports its full-year numbers on the 18th of August.

Coles is one of the few defensive stocks that has benefitted from Coronavirus's impact. The panic buying of toilet paper and pasta in the early days of the pandemic and subsequent lockdowns, eating at home and overconsumption at the checkout has driven strong revenue growth. During the March quarter 2020, Coles sales rose by 13% on revenue of around $8.3 billion.

Coles appears to be more defensive than Woolworths (main competitor) in the short to medium term because its stores were less severely affected by the December-2019 bushfires and the weaker foot traffic due to the coronavirus.

Coles is expected to report strong sales and profit growth with a consensus statutory EPS estimate at around 95 cents per share. It is expected to pay out between 80% to 90% of its earnings resulting in a dividend yield of ~3.5% fully franked.

Last week, the Coles share price reached an all-time high of $18.99 reflecting the strong fundamentals outlined above, before pulling back to trendline support and previous highs $18.30. Due to its recent outperformance there is some risk of a “buy the rumour sell the fact” reaction after it reports it’s full year numbers next week. In this instance, dips should find some support in $17.50/25 region. 

Australian earnings preview – Coles

Source Tradingview. The figures stated areas of the 10th of August 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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