FNB | Week Ahead & Economics Weekly

Locally, the following stocks are scheduled to release results next week:

PPC (Interim results): Management guided for headline earnings per share (HEPS) to be between 35% and 45% lower y/y (Bloomberg FY21: -26%). The decline is primarily due to non-cash related items. Revenue is expected to be 1% to 5% higher (Bloomberg FY21: +2%), while EBITDA is expected to be 12% to 17% higher. The group experienced a strong recovery in cement sales in 2Q21, which contributed to the improved operating performance

Sygnia (Interim Results): In a recent trading statement, the company announced that HEPS would increase by between 62% and 67%, which was positively received by the market. However, this reflects a slowdown in the second half (as market volatility eased) from a very strong 1H20 result (1H20 HEPS: +102.2%).

From a corporate actions perspective, Tuesday marks the last day to trade in Balwin Properties, Combined Motor Holdings, Coronation Fund Managers, Investec PLC, Investec Property Fund, Life Healthcare, Ninety One PLC and SPAR Group shares to receive their most recently declared distribution. Mpact, Omnia and Super Group will host GMs while City Lodge Hotels and Spur Corporation will host AGMs in the upcoming week.

US earnings releases gain momentum next week with over 200 S&P 500 companies expected to release quarterly numbers. These include spirits and wine business Brown-Forman, multinational computer software company Adobe and wholesale warehouse chain Costco Wholesale. So far, the blended earnings decline for the S&P 500 has been 6.3% for 3Q20. According to the most recent Earnings Insights report, 84% of S&P 500 companies have reported a positive EPS surprise and 78% of S&P 500 companies reported a positive revenue surprise. If 84% is the final percentage, it will tie the mark for the highest percentage of S&P 500 companies reporting a positive EPS surprise.

Brown-Forman, best known for its Jack Daniel’s Tennessee Whiskey and premium-priced bourbons, remains exposed to headwinds associated with Covid-19 as shipment volume to restaurants and pubs is very weak due to government-mandated closings in many of the markets that the company serves. In addition, elevated agave costs and unfavourable channel sales mix trends may also weigh on short-term operating margins. Second-quarter numbers are due out on Tuesday, with Bloomberg guiding for a contraction of 13.7% and 2.2% in earnings and revenue respectively.

Adobe is expected to release fourth-quarter results on Thursday, with Bloomberg guiding for earnings growth of 16% with top-line expansion of 12.3%. The group’s resilient portfolio of creative and document products may offset weakness in its digital experience unit, driving double-digit sales gains over the next 12 months, despite macroeconomic weakness. According to Bloomberg Intelligence the pace of digital transformation across most industries is accelerating, creating new growth opportunities, as more enterprises and consumers embrace electronic documents to conduct transactions.

Looking at Costso Wholesale, the group has seen an ongoing recovery in shopping patterns with the return to a more typical operating environment following coronavirus-related disruption. E-commerce is expected to remain elevated amid persistent demand for contactless shopping. Spending on discretionary items is resuming as well and should keep building momentum into the first half. Double-digit earnings (+18.3%) and revenue growth (+14%) is expected over the first fiscal quarter.

Earnings announcements from other key regions, including Europe and Asia-Pacific, are expected to remain limited next week.

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FNB | Week Ahead

Economics Weekly – 4 December 2020

Listen to Thabiso Mamathuba, Investment Analyst at FNB:


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