Wesfarmers Ltd (ASX: WES) shares are charging higher today.

Shares in the diversified S&P/ASX 200 Index (ASX: XJO) retailer – whose subsidiaries include household names like Bunnings Warehouse, Kmart Australia, Officeworks and Priceline – closed yesterday trading for $74.70. In late morning trade on Thursday, shares are changing hands for $76.92, up 2.9%.

For some context, the ASX 200 is up 0.9% at this same time.

Today's outperformance is par for the course for Wesfarmers shares this past year, with the stock up 32.4% over 12 months. Wesfarmers stock also trades on a 2.6% fully franked trailing dividend yield.

Here's why UBS just lifted its outlook for the surging ASX 200 company.

UBS boosts price target for Wesfarmers shares

As The Australian Financial Review reports, UBS believes that investors are underestimating the sales growth potential of Bunnings Warehouse

Noting that it expects Bunnings to rebound from its post-COVID hangover, the broker upgraded Wesfarmers shares to a neutral rating. UBS also raised its price target by more than 10%, to $76 a share from its prior $69 a share.

However, you'll note that with today's rise, Wesfarmers stock has already shot past that revised price target.

What's been happening with Bunnings Warehouse?

Wesfarmers reported its FY 2024 results on 29 August, with Bunnings Warehouse bringing in a lot of the revenue for Wesfarmers shares.

For the full year, Wesfarmers reported revenue of $44.2 billion, up 1.5% year on year. Bunnings FY 2024 revenues contributed $18.97 billion to that figure, up 2.3% from FY 2023.

"Bunnings demonstrated the resilience of its offer and ability to deliver growth through a range of market conditions, with higher sales growth recorded in the second half," managing director Rob Scott said at the time.

Scott added:

Sales growth was recorded in both consumer and commercial customer segments with pleasing growth in the second half supported by sustained demand for ongoing repairs and maintenance, growth in online channels and range innovation, partly offset by a market-wide softening in building activity.

Pleasingly, this year Bunnings continued to deliver growth in transactions and units sold. With continued pressure on many household budgets, consumer sales growth was supported by Bunnings' strong value credentials.

Are Wesfarmers shares still a good buy today?

After the strong run higher, Wesfarmers shares are now about 0.5% above UBS' revised price target.

But Goldman Sachs sees more room for the ASX 200 stock to run.

In late January, the broker upgraded Wesfarmers from a neutral rating to a buy.

Goldman's analysts said they expect 2025 will see:

Continued market share gains in Bunnings/Kmart/Officeworks, and that management commentary will highlight still significant room for Bunnings to grow sales/productivity via a combination of category evolution and omni-channel expansion.

The broker has a target price of $78.70 on Wesfarmers shares.