Should you buy JB Hi-Fi after its earnings? Latest broker views

Results overview:

Key metrics / Highlights

• Total sales -0.4% to $9.59 billion

• Net profit after tax -16.4% to $438.8 million, but +3.7% better than consensus

• Final dividend -10.4% to 103 cents per share (BUT! special dividend of 80 cents per share fully franked declared)

• "Sales driven by continued customer demand for technology and consumer electronic products and supported by well-executed and successful Black Friday, Boxing Day and Tax Time promotional periods."

• "Cost of doing business was 12.6%, up 54 basis points and in absolute terms grew 5.5% with disciplined cost controls helping to manage inflationary cost pressures."

• Has also entered into an agreement to acquire E&S Trading Co, with an initial acquisition of 75% for $47.8m cash

• By segment Revenue / EBIT (*consensus estimates via StreetAccount by Factset):

  • JB Hi-Fi Australia: $6.61 billion vs consensus $6.59 billion / $491.2 million vs consensus $473.5 million

  • JB Hi-Fi NZ $327.9 million vs consensus $299.3 million / -$2.3 million vs consensus -$2.0 million

  • The Good Guys $2.68 billion vs consensus $2.67 billion / $158.1 million vs consensus $155.8 million

Outlook

• July sales growth: “Sales are in line with the Group’s expectations, with sales momentum

• in Australia continuing into July”

• Australia +5.6% (+5.2% comparable same stores)

• NZ +12.2% (-4.9% comparable same stores)

• Good Guys +2.7% (+2.7% comparable same stores)

• No FY25 earnings guidance provided

Broker response

Citi

Rating: BUY | Price target: $85.00⬆️ vs $74.00

Views:

• Approves of E. & S. acquisition as it will compliment Good Guys operation, offering margin upside via supplier synergies

• Special dividend was a positive surprise

• Sees comparable same stores growth around 6.7% for FY25 at JB Hi-Fi and 5% at Good Guys as margins improve on lower costs, particularly labour

CLSA

Rating: OUTPERFORM | Price target: $77.75⬆️ vs $68.50 

Views:

• Notes the company’s outperformance despite a tough retail environment, also that company has maintained its dominant share of the local market (over 40%)

• Sees the outlook for consumer electronics demand as strong as upgrade cycle for many appliances commences in 2025 and as consumer spending rebounds

Jarden

Rating: UNDERWEIGHT | Price target: $64.80⬆️ vs $50.50

• Results were generally ahead of consensus, JB Hi-Fi July sales was impressive

• Notes strong market share and improving sales trends

• Margins are of continued concern, noting cost pressures and market competition

Jefferies

Rating: UNDERPERFORM | Price target: $61.00⬆️ vs $55.50

Views:

• Results were ahead of expectations, driven by stronger sales and margin performance in JB Hi-Fi

• Broker remains concerned about the stock’s lofty PE ratio / valuation

• July sales impressive, but broker remains cautious given lack of valuation support

Macquarie

Rating: OUTPERFORM | Price target: $77.00⬆️ vs $71.90

Views:

• Result was strong, July shows FY25 off to solid start

• Likes E. & S. acquisition, noting its strategic sense and whitegoods growth potential

• Broker views FY25 outlook as positive, increasing it’s earnings forecasts for the period as economic tailwinds should support a recovery in consumer spending

Morgan Stanley

Rating: UNDERWEIGHT | Price target: $54.70

Views:

• Results were ahead of consensus expectations, but in line with the broker’s expectations

• E. & S. acquisition makes sense as broadens company’s offering in home appliances

Morgans

Rating: HOLD | Price target: $69.00⬆️ vs $62.00

Views:

• Results were well ahead of the broker’s expectations, particularly due to prudent cost control and reduced discounting

• Broker lauds the company’s strong balance sheet, which allowed for the better-than-expected special dividend

Ord Minnett

Rating: HOLD | Price target: $68.00

Views:

• Broker notes a “bumper” result and is particularly impressed with the special dividend

• The broker remains positive on the margin outlook

• The E. & S. acquisition make strategic sense

• Earnings per share forecast (EPS) for FY25 and FY26 upgraded by 13% and 15% respectively

UBS

Rating: SELL | Price target: $64.00⬆️ vs $60.00

Views:

• Broker acknowledges results were ahead of consensus, noting an expected decline in margins did not materialise to the extent that was expected

• Cash flow generation was solid, facilitating the special dividend

• The broker upgrades is EPS forecasts for FY25 and FY26 by 7.3% and 6.7% respectively on improving sales and margins

Broker consensus changes

JBH broker consensus changes

To obtain a broker consensus rating, I like to assign a value of +1 to any rating better than HOLD/NEUTRAL/MARKETWEIGHT, 0 for HOLD/NEUTRAL/MARKETWEIGHT, and -1 to any rating worse than HOLD/NEUTRAL/MARKETWEIGHT. I associate an average rating value of greater than 0.5 as a BUY consensus, values between 0.5 and -0.5 a HOLD consensus, and values less than -0.5 as a SELL consensus.

Using this method, JBH’s average rating value of -0.09 (unchanged) earns it a consensus HOLD rating.

The highest broker price target is $85, held by Citi, allowing for around +13% upside. The lowest broker price target is $54.70, held by Morgan Stanley, allowing for around 27% downside.

JBH’s consensus price target rose to $68.06 from $62.96 (+8.1%). This implies the major brokers believe JBH shares are as much 9.5% overvalued on average based on the price at the time of writing of $75.17.