Metcash earnings preview: analysts bullish heading into FY20 results
We examine when Metcash is set to release its full-year results, the company’s recent trading update, and the current analyst consensus.
When will Metcash release its full-year results?
With operations spanning food, liquor and hardware – Metcash (MTS) – is set to release its full-year, FY20 results, next Monday, 22 June. The diversified conglomerate is also set to hold its Annual General Meeting next Friday, 26 June.
Recent developments at a glance
In April, Metcash raised $330 million in fresh capital – in a move aimed at strengthening the company's balance sheet and making sure the business was well positioned to seize new opportunities that aligned with the its strategic direction.
Looking at the specifics of those opportunities, the company said that it would 'continue to invest in the MFuture growth program, as well as complete three bolt-on acquisitions that are expected to close in 1H21 (~45m investment)’ and 'fund contingent liabilities' as they emerge.
At the time of that funding push, Metcash also provided the market with a trading update in regards to the performance of its core business segments. Here it was reported that across the five months ending March 2020:
- Total food sales were up 4.3%
- Supermarket wholesale sales (excluding tobacco) were up 5.5%
- Liquor sales were up 3.2%
- Hardware sales were down 1.3%
Ultimately, it’s been a volatile and somewhat strange year for Metcash, with its share price hitting a high of $3.47 per share in March – during the height of the coronavirus market meltdown – before tapering off somewhat over the last few months.
Examining Metcash’s potential full-year dividend, it was noted that the company's 'Board will consider the payment of a FY20 full year dividend in the ordinary course (utilises surplus franking credit).'
In June 2019 Metcash paid a Final dividend of $0.07 per share.
Moreover, as part of the conglomerate’s FY20 results, investors will also likely be eager to gain further clarity on the outlook of Metcash’s core business arms.
For example, in April the company said the FY21 outlook for liquor remained unclear due to Covid-19; that hardware sales were expected to be negatively influenced 'by a slowdown in construction activity' and that in FY21 Metcash will see reduced sales from 7-Eleven following the convenience store-chain terminating its supply agreement with the company.
At the time of writing Metcash traded at $2.88 per share, representing a still impressive YTD increase of ~13%.
Metcash share price: the analyst view
At the time of the above discussed capital raise, Goldman Sachs analysts reiterated their Buy rating on Metcash, though lowered their 12-month price target on the stock to $3.10 per share, due primarily to the dilutive impact of the raise.
For reference, Metcash issued 118 million new shares – at $2.80 per share – as a result of the raise.
Goldman analysts went on to say that while the company’s ‘Free cash flow for FY20 is expected to be negative, the group’s balance sheet position should be strong with a Net cash balance from FY20E onwards. Additionally, we forecast the free cash position to sharply improve in FY21 with the Net cash position further strengthened.’
Overall, heading into the full-year results next week, Metcash remains well-liked by analysts, with an Overweight analyst consensus rating, according to the Wall Street Journal (WSJ).
On a more granular level, according the WSJ, Metcash currently has 7 Buy ratings, 3 Hold ratings and 2 Underweight ratings.
How to trade Metcash – long and short
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