The Week Ahead – 28 November 2016

  • Stock Market Analysis
  • Editor's Pick

Some of the local earnings releases to take note of this week include:

  • Alexander Forbes (Interim Results): Consensus is looking for 2.5% increase in headline earnings per share, representing a slowdown from the prior period. Our focus will be effect of currency translation on the operating income result, the impact of the new share based long term management incentive plans, and the influence of market volatility on assets under management (AUM).
  • Omnia (Interim Results): In a recent trading statement, management guided for HEPS to fall by between 20% and 25% y/y, which was behind expectations. Management noted that volume and margin pressure weakness from FY16 is expected to continue in to FY17.
  • Sygnia (Full Year Results): In its latest AUM statement, the company said that its AUMA increased 15.3% y/y to R158 billion in 3Q16, with retail and institutional AUMA up 27.3% and 14.8% y/y, respectively.
  • Bidvest will release a trading update on Tuesday.

Scheduled earnings releases in the US are limited this week with just a few retail counters due to release sales reports. It is expected that Costco Wholesale , L Brands and The Gap, would have benefited recent momentum in US retail sales. Retail sales in the US have been growing steadily over the last two months, recording growth of 0.8% m/m in October and an upwardly revised 1% for September. Airline companies Alaska Air Group and Delta Air Lines as well as vehicle producer Ford are also scheduled to release November sales figures this week. On the earnings front, American luxury jewellery and specialty retailer Tiffany & Co is likely to generate some hype as the group prepares to report on third quarter results – this will be an interesting read-across for locally listed luxury giant Richemont. 3Q earnings season is almost at an end with ~98% of S&P 500 companies having reported already 72% of these companies have reported earnings above the mean estimate and 54% have reported sales above the overall expected average with the blended earnings growth for the quarter coming in at 3.2%. Looking at the overall trend for 3Q earnings, the quantum of the robust earnings surprises appeared to be larger than expected due to the initial exaggeration of earnings downgrades. Despite the 3Q improvement, for FY16 an overall a decline of 5% is still expected for the market. For FY17, estimates are also still pointing to declining earnings, although this could change over the next few months as 3Q16 is digested further and the 4Q16 earnings season gets under way.

We expect a quiet week in Europe too. The UK’s largest pub retailer and brewer Greene King is scheduled to report first half results and one of the largest British soft drink producers Britvic , is set to release full year numbers. Both Greene King (1H17: +14.14%) and Britvic (FY16: +6.61%) are expected to report positive growth in revenues.

In the Asia Pacific region, the focus will likely be on Metcash, an Australian company distributing and marketing groceries, fresh produce, alcoholic beverages, hardware, and other consumer goods. During FY16, the group reported revenue growth of 1.3% y/y whilst EBIT fell 7.4% on the back of a poor performance in Food & Grocery. FY17 estimates are pointing towards a recovery in revenue (+4.34%) and EBIT is expected to be flat (+0.02%).

From a local corporate actions perspective, Tuesday marks the last day to trade in Adcorp , Ascendis Health , Indluplace Properties, Investec Plc, Raubex, Rebosis, Steinhoff, Telkom and Vodacom to receive their most recently declared distributions. These counters will trade ex-dividend on Wednesday. Clover, Discovery , FirstRand, KAP Industrial Holdings, Woolworths , Hyprop, Remgro, Trellidoor, African Rainbow Minerals and Choppies will host AGMs this week.

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