Wesfarmers' (WES) rating has been lifted by two notches to "outperform" by Credit Suisse as improving consumer sentiment bolsters the company's potential for higher earnings.
Credit Suisse lifted its one-year forward price target by 22.3%, or $8.50, to $46, at the upper end of market expectations and well above the stock's share price of $41.42 at last night's close.
What's changed the broker's outlook is the vastly improved and rising consumer confidence after the federal election. This and lower interest rates are expected to drive lower household savings rates, boosting discretionary activity.
Discretionary spending makes up 40% of Wesfarmer's earnings before tax, with another 40% from supermarket retailing.
Other positive factors are higher coal prices driving earnings growth into 2015, as the broker says they are currently at their cyclical bottom, and improving domestic activity benefiting industrial earnings.