Week Ahead: All Eyes on US Airlines Next Week

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Locally, several results and updates are expected across the bourse:

  • The Anglo American (JO: AMSJ ) stable will be in focus next week, with operational reviews expected for 3Q21. In its 2Q21 production update, group management left FY21 production guidance for metallurgical coal and nickel production unchanged. Diamond, iron ore and platinum production guidance tightened while copper production guidance was upgraded.
  • Calgro M3 Holdings (Interim Results): Management expects headline earnings per share (HEPS) to be between 41.48 cents and 44.10 cents, compared to a headline loss per share of 26.29 cents in 1H21. The group delivered solid results on the back of a successful turnaround and restructuring process and revenue increased over 40% in each of the businesses. The operating margin increased, driven by efficiencies and a better design focus in the development business, while overhead costs decreased.
  • Combined Motor Holdings (Interim Results): HEPS are expected to range between 190 cents and 210 cents, a solid improvement compared to a loss of 14.1 cents in the prior year.
  • Pick n Pay (JO: PIKJ ) (Interim Results): According to management, HEPS are expected to increase between 35% and 45% y/y. Excluding hyperinflation and the impact of trade disruptions in July, comparable HEPS would have increased by between 85% and 95%. Good trading momentum in 1Q22 was maintained, in line with group expectations. However, the severe trading disruptions in July resulted in ~R1.7 billion in lost sales in 2Q22. Group turnover increased 4.1% y/y. Excluding the impact of disruptions, sales growth was up 8.0% y/y.
  • Balwin Properties (JO: BWNJ ) (Interim Results): HEPS are expected to increase between 40% and 45%, reflective of the ongoing recovery from the hard lockdown in 1H21 which led to construction delays.
  • Clicks(JO: CLSJ ) (JO: CLSJ ) (Full-Year Results): Management guided diluted HEPS to increase by 0% to 3%, due to the impact of the civil unrest and the fact that only 30% of the related Sasria insurance claim has been accounted for to date. Excluding the impact of the civil unrest, diluted HEPS would have been in line with prior guidance for growth within the 8% to 13% range. Group turnover from continuing operations increased 10.2% (FY20: 10.5%) with growth recorded in both Retail Health & Beauty (+8.3%) and Distribution (+12.3%).
  • Allied Electronics (Interim Results): Management guided for normalised HEPS from total operations to increase between 100% and 148%. normalised HEPS from continuing operations are estimated to be between 213% and 263% higher y/y.
  • Sasol (JO: SOLJ ) will publish production and sales metrics for the 1Q21. For FY22, Sasol expects lower volumes from the core SA business as lower gas supply and coal quality impacts Secunda and a lower utilisation rate at ORYX GTL in Qatar due to a planned shutdown. Chemicals Africa sales volumes are anticipated to be 2% to 4% lower because of feedstock challenges and planned shutdowns. Chemicals America sales volumes are expected to be in line with FY21 and Chemicals Eurasia sales volumes to be 4% to 6% higher. Normalised cash fixed costs will remain within inflation assumptions, and capital expenditure of between R20 billion and R25 billion is planned for 2022. Net debt to EBITDA is expected to come in at between 1.0 times and 1.8 times.
  • Updates from BHP Group (JO: BHPJ ), Standard Bank (JO: SBKJ ) and Distell Group (JO: DGHJ ) Holdings are also scheduled for next week.
  • From a corporate actions perspective, Tuesday marks the last day to trade AH-Vest  (JO: AHLJ ), AVI (JO: AVIJ ), Bid Corp (JO: BIDJ ), Bowler Metcalf (JO: BCFJ ), Capitec Bank (JO: CPIJ ), Equites Property Fund (JO: EQUJ ), Growthpoint Properties (JO: GRTJ ), Heriot REIT (JO: HETJ ), Hyprop Investments, Rand Merchant Investment Holdings, SA Corporate Real Estate  (JO: SACJ ), Schroder European Real Estate Investment Trust PLC  (JO: SCDJ ), Spur (JO: SURJ ) Corp and Super Group to receive their most recently declared distributions.
  • Tsogo Sun (JO: TSGJ ) Hotels, Sebata Holdings and Lewis Group will host AGMs in the upcoming week.

All eyes will be on US airlines next week with results anticipated from United Airlines, American Airlines (NASDAQ: AAL ) Group, Alaska Air Group, and Southwest Airlines (NYSE: LUV ). From an industry perspective, the air travel recovery has begun with a robust demand bounce for 2Q21 and 3Q21, though it’s largely leisure domestic traffic facing strong competition. US airlines’ cash generation may improve, with a number turning positive in 3Q21 and the potential to remain so in 4Q21 if demand is stable. By Friday morning, with 57 out of 500 S&P 500 companies having reported results (or 11.4%), 70.2% of companies reported better-than-expected revenue and 82% reported better-than-expected earnings. The average revenue surprise was 0.8% and the average earnings surprise was 2.4%. Average revenue growth was 7.6% and average earnings growth was 23.2%.

  • Johnson & Johnson (NYSE: JNJ ) is expected to record a 7.8% increase in EPS and 12.9% growth in revenue for 3Q21, recovering off a weak base, especially in Medical Devices. Analysts suspect that FY21 guidance may be raised again, driven by Medical Devices, as well as strength in the Pharma segment.
  • Philip Morris ’ 3Q21 EPS is forecast to increase 1% y/y as high single-digit revenue growth is mitigated by an operating margin pressure and a higher effective tax rate. The strong sales performance will likely be driven by increased prices on essentially flat volumes.
  • AT&T’s 3Q21 revenue is guided to contract 2.5% y/y following its DirectTV divestiture. Recent strength in broadband revenue may have continued in 3Q21 as growth in fibre connections remain strong. Warner Media is expected to have performed well following the launch of HBO Max internationally at the end of 2Q21, along with an ad-supported version of the service.
  • Look out for 1Q21 results from Procter & Gamble (NYSE: PG ). The company beat each of its FY21 targets, with raised agility to innovate and market its portfolio, while managing cost and margin pressure. Healthy demand in Asia mirrors the US, with Europe rebuilding slowly.
  • Netflix (NASDAQ: NFLX ) could see additional 3.5 million users thanks to a strengthening content slate culminating with the breakout hit Squid Game in 3Q21. Profitability has been improving although the content ramp-up will be a drag in 3Q21. However, this may reverse into 4Q21 and 2022 with a solid slate of shows and films due for release.
  • Tesla (NASDAQ: TSLA ) continues to weather the semi-conductor shortage better than the rest of the automotive industry, and reported robust 3Q21 vehicle deliveries of 241 000 units, well ahead of consensus estimates, likely driven by upside in US Model 3 volumes. Model 3+Y deliveries came in at 232 000, while Model S+X deliveries were about 9 000.
  • Bloomberg consensus projects 3Q21 earnings from American Express (NYSE: AXP ) to improve by 33.6% y/y. During September, American Express reported managed y/y loan growth of 5.0% in its consumer credit card business compared to July (+4.8% y/y). Managed delinquencies were flat m/m and down 60bps y/y in September, while net charge-offs were down 10bps m/m and down 190bps y/y.

In Europe, results are expected from Rexel SA, Kuehne + Nagel International, Volvo AB, UBS Group AG (SIX: UBSG ), Julius Baer, Barclays (LON: BARC ) PLC, SAP SE (DE: SAPG ), and Schindler Holding AG.

  • Banking giant Barclays is scheduled to release 3Q21 numbers with earnings expected to jump 71.5% y/y. Revenue generated from Markets is estimated to be $2 billion while revenue from Equities is guided to fall 6% y/y. Net interest income may marginally top £2 billion, while expenses in CIB are expected at between £1.72 million and £1.74 billion.
  • The pressure on SAP’s license growth could continue in the 3Q21, amid a shift to a subscription-based model, despite an improvement in enterprise-software spending. Adjusted EPS may fall to €1.33 on mix-shift toward cloud, higher sales & marketing as well as research & development costs. Sales could gain 3% y/y on stronger cloud-ERP demand aiding subscription growth.

In the Asia-Pacific region a few significant releases are anticipated, including China Mobile , which is guided to see 3Q21 earnings to increase slightly by 1% y/y. Kia Corp’s 3Q21 revenue is projected to grow 6.5% y/y. Kia Motors could boost both its shipments and profitability in the US as it pushes to increase sales of higher-margin SUVs and MPVs. However, it needs to contend with the global chip shortage.

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