Bunnings drains Wesfarmers shares despite rave party excitement

It’s been party time for shareholders in Bunnings owner Wesfarmers over the past year, and rave party time this weekend, but is the tide turning?

The Bunnings Warehouse Party Preston was held on August 31. Picture: Supplied

Shares in $82bn Aussie conglomerate Wesfarmers have had a good year, rising more than 34 per cent in value.

But the Perth-based company – which owns brands including Bunnings, Kmart and Officeworks plus chemicals and fertilisers businesses – has divided this week’s share tips columnists.

One rates it a hold and one a sell, and with the stock slipping 6 per cent last week, it will be interesting to see where it goes from here after its financial results disappointed the market.

More popular stocks among our experts include BHP, footwear and clothing company Accent Group, and COG Financial Services.

Bell Potter Securities private client adviser Christopher Watt:

BUY

Accent Group (AX1)

Accent Group is a compelling buy due to its strong market position in footwear retail and robust financial performance, indicating potential for continued growth.

BHP Group (BHP)

BHP is recommended as a buy because of its resilient operations, diversified commodity exposure, and strong cost control measures, positioning it well for future profitability.

People partied at Bunnings on August 31, but its shares look shaky. Picture: Supplied

HOLD

Fortescue Metals Group (FMG)

The iron ore miner’s outlook is mixed. While it has a strong dividend yield, its subdued growth prospects and margin pressures warrant a hold recommendation​.

Wesfarmers (WES)

Wesfarmers’ diversified portfolio and stable earnings support a hold rating, particularly as its Bunnings growth slows.

SELL

Perpetual Limited (PPT)

Concerns over the quality of earnings and lower-than-expected dividend payouts lead to a sell recommendation for Perpetual.

Johns Lyng Group (JLG)

The recommendation to sell Johns Lyng Group is driven by uncertainties in its growth trajectory and the potential for earnings volatility.

CC Equities director Sean Conlan:

BUY

HyTerra (HYT)

Fortescue will acquire a strategic 39.8 per cent interest in HyTerra for $21.9 million and enter into a strategic alliance agreement to progress the Nemaha Hydrogen Project in the USA.

COG Financial Services (COG)

COG offers value at current levels, being cash generative with exposure to margin leverage, organic growth and a pipeline of inorganic opportunities.

Chris Watt from Bell Potter Securities

Sean Conlan from CC Equities

HOLD

Mineral Resources (MIN)

A strategy to strengthen its balance sheet and flexibility to cut discretionary costs is a key focus. However, we see limited upside in the near term without commodity price help.

Webjet (WEB)

Business-to-business will successfully scale but in our view this is already reflected in the share price. Its $10bn target is already factored into consensus, and margins are below expectations.

SELL

Wesfarmers (WES)

The downturn in trade is having a greater-than-expected impact on Bunnings’ top line, suggesting a flatter outlook

IGO (IGO)

Its earnings and share price will continue to be under pressure until lithium prices begin to improve, or at least stop declining.

Originally published as Bunnings drains Wesfarmers shares despite rave party excitement