Some of the local earnings releases to take note of this week include:
- Remgro (Full Year Earnings): Management guided for headline earnings per share to fall by between 24% and 28%, which was behind market expectations. The decline was a result of R788 million associated with Mediclinic’s rights issue, as well as the acquisition and derivative liability for Al Noor amounting to R730 million. Excluding the impact of one-off expenses, HEPS was in-line with market expectations.
- Choppies Enterprises (Full Year Earnings): In a recent trading update, the company guided for HEPS to be between 32% and 52% lower y/y. Earnings fell on the back of pre-operative expenses relating to Zambian and Kenyan stores, new acquisition expenditure and challenging trading conditions in South Africa.
Things remain quiet in the US this week although a few big names are scheduled to release results. FedEx releases first quarter results on Tuesday. Revenue is expected to increase 12% and earnings are anticipated to grow just under 13% y/y. FedEx’s revenue has steadily increased since 2009, mainly due to the explosion of e-commerce. The maker of Cheerios, Betty Crocker, Pillsbury, and Haagen-Dazs, General Mills, will also announce first quarter numbers on Wednesday. Open source software giant Red Hat and home retailer Bed Bath & Beyond release second quarter numbers on Wednesday. We now look towards 3Q16 and according to Factset, the estimated earnings decline for the S&P 500 is expected to be -2% and will mark the first time that the index has recorded six consecutive quarters of year-over-year declines in earnings since 3Q08. For the quarter 78 companies on the S&P 500 have issued negative EPS guidance whilst 35 companies have issued positive EPS guidance. The US has been in a state of corporate recession for three quarters now and this is not expected to dissipate until the first half of the 2017 calendar year.
Some excitement is expected in Europe with the world’s largest clothing retailer Inditex , and second largest home improvement retailer Kingfisher releasing first half earnings this week. The Zara parent company experienced strong constant currency sales growth in the first quarter (+17%) but the gross margin came under pressure mainly due to Euro strength. Kingfisher, meanwhile, saw like for like sales growth decline by 4.7% as a result of poor weather conditions. Profits also fell in the first quarter.
Australia is a bit busier this week with Nufarm and TPG Telecom schedules to release full year numbers this week. Nufarm is one of the world’s largest crop protection companies. The company has manufacturing and marketing operations throughout Australia, New Zealand, Asia, the Americas and Europe and sells products in more than 100 countries around the world. TPG is the second largest internet service provider in Australia and operates the country’s largest mobile virtual network.
From a local corporate actions perspective, Tuesday marks the last day to trade in Bidvest, Cashbuild, Group Five, Growthpoint, Imperial, Old Mutual,Santam and Sibanye Gold to receive their latest distributions. These counters will trade ex-dividend on Wednesday. Omnia and Novus will host AGMs later in the week.