Goodman Group (ASX: GMG) shares experienced a dip on Thursday, bringing the industrial property giant’s stock price significantly closer to its 52-week low than its 52-week high. This movement has prompted questions about whether this presents a compelling buying opportunity for investors. Analysts at Bell Potter have weighed in, offering their perspective on the company’s recent performance and future outlook.
Bell Potter’s Take on Goodman’s Half-Year Results
Bell Potter has noted that Goodman recently delivered a half-year result that surpassed expectations. The company announced its first-half 2026 (1H26) results, reporting operating earnings per share (EPS) of 58.5 cents. This figure was slightly ahead of Bell Potter’s own estimates (BPe) by 0.7% and significantly exceeded the wider analyst consensus (VA consensus) by 7.6%.
While the company had initially anticipated a stronger second half (2H26), its full-year 2026 (FY26) operating EPS guidance has been reiterated at a healthy 9% year-on-year growth. This implies an EPS of approximately 128.6 cents, which aligns closely with Bell Potter’s forecast of 129.9 cents (a 10% year-on-year increase) and the VA consensus of 129.8 cents (also a 10% year-on-year increase). Furthermore, the dividend per share (DPS) guidance of 30.0 cents has been maintained, consistent with Bell Potter’s expectations and slightly above the VA consensus of 30.3 cents.
Surging Work-in-Progress and Data Centre Focus
A key highlight from Goodman’s update, according to Bell Potter, is the substantial increase in its work-in-progress (WIP) pipeline. The company now anticipates its WIP to be higher in 2026 than previously projected.
Development WIP has seen a robust increase of 12% half-on-half, reaching $14.4 billion. Goodman now expects its end-FY26 WIP to climb to $18 billion, up from its prior expectation of over $17.5 billion. This upward revision is largely driven by an increasing contribution from data centre-related projects. This shift is expected to elevate the development yield on cost during the period to an impressive 8.1%.
Leasing Progress and Future Demand Dynamics
Bell Potter also examined Goodman’s leasing progress in the context of long-term demand trends. The firm observes that the longer-term supply and demand imbalance within the industrial property sector bodes well for Goodman. However, they point out that shorter-term customer signings at early-stage data centre projects, such as those in Vernon and Artarmon, have been slower than anticipated.
This slower uptake may be attributed to the targeted tenant types, with a potential shift from hyperscale clients to colocation providers. Management feedback suggests that this leasing activity might become more prominent in FY27 rather than in the remainder of FY26.
Investment Recommendation and Upside Potential
Despite the nuances in leasing progress, Bell Potter has maintained its “Buy” recommendation on Goodman Group shares. However, the broker has slightly trimmed its price target to $36.45, down from a previous target of $37.40.
Based on Goodman’s current share price of $29.82, this revised price target implies a potential upside of approximately 22% for investors over the next 12 months.
While Bell Potter expressed satisfaction with Goodman’s recent results, they were somewhat surprised that the management did not issue an earnings upgrade. This is a notable point, as Goodman has a history of upgrading guidance at its half-year results, having done so in 8 out of the last 10 years.
The firm concludes that the current share price reaction appears to reflect the absence of an earnings upgrade, a pattern that has recurred in 8 of the last 10 half-year results. Bell Potter remains constructive on Goodman’s development pipeline, particularly its growing focus on data centres, which now constitute 73% of WIP compared to 46% in the prior corresponding period. However, they acknowledge that these projects require extended timeframes and significant capital investment compared to traditional industrial assets. The market, they suggest, is looking for further milestones, especially concerning tenant customer signings and clearer visibility on profit-realising milestones to track delivery progress.
Key Takeaways for Investors
- Solid Half-Year Performance: Goodman Group’s recent half-year results exceeded analyst expectations, demonstrating resilience and strong operational execution.
- Expanding Data Centre Pipeline: The company’s strategic pivot towards data centres is accelerating, with a significant increase in WIP and a projected higher yield on cost.
- Long-Term Demand Outlook: The underlying supply and demand dynamics in the industrial property sector remain favourable for Goodman’s long-term growth prospects.
- Leasing Pace: While overall leasing is progressing, some early-stage data centre projects are experiencing slower tenant acquisition, potentially shifting focus to FY27.
- Analyst Confidence: Bell Potter maintains a “Buy” rating, citing a potential 22% upside, despite a slight reduction in its price target.
- Market Expectations: Investors are keen for further clarity on tenant signings and profit realisation milestones, particularly given the company’s historical trend of earnings upgrades at interim results.
