Week Ahead: All Eyes on US and European Releases

All eyes on US and European releases next week

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

• Famous Brands (Interim Results): Management expects headline earnings per share (HEPS) to increase to between 89 cents and 109 cents, compared to a loss of 240 cents in the prior period (1H21). The group has seen varying levels of recovery across trading markets against 1H21 which experienced the worst of the pandemic.
• Datatec (Interim Results): HEPS are expected to be between 6.1 US cents and 6.4 US cents compared to 1.6 US cents reported in 1H21.
• Anheuser Busch Inbev SA NV (Third-quarter Results): In line with all brewers, AB InBev will need to increase prices to offset rapidly rising input costs. Volume growth is likely to be more muted than in 2Q21 after lapping easier comparable results. Price mix should benefit from maintained on-premise sales.
• EOH Holdings (Full-Year Results): For FY21 the headline loss per share (HLPS) will range between 7 cents and 37 cents, an improvement of between 93% and 99% y/y. The group generated an operating profit of between R125 million and R175 million from total operations from a loss of R1.3 billion in FY20. Adjusted EBITDA is expected to range between R600 million and R734 million (FY20: R72 million) with the margin improving to between 7.6% and 9.3% (FY20: 0.6%).
• Sibanye-Stillwater will release a 3Q21 operational update. Management’s outlook for the remainder of 2021 remains positive. FY21 gold production is expected to be between 884 000 oz. and 948 000 oz. (unchanged) with AISC of $1 690/oz. to $1 742/oz. FY21 SA PGM production is anticipated to be between 1.75 Moz. and 1.85 Moz., with AISC guided to be between $1 230 and $1 295/oz. PGM production from the US is anticipated to be between 620 000 oz. and 650 000 oz. (previous guidance: 660 000 oz. to 680 000 oz.). AISC is forecast to increase to between $910 and $940/oz. (previous guidance: $840/oz. to $860/oz.).
• Glencore and Impala Platinum will also release operational updates.
• From a corporate actions perspective, Tuesday marks the last day to trade Barloworld Preference Share. Caxton and CTP Publishers Preference Share, Etion, Hammerson PLC, Newpark REIT, PSG Konsult, Prosus NV and RCL Foods to receive their most recently declared distributions.
• Tower Property Fund (JO:TWRJ), South32 (JO:S32J), SilverBridge Holdings Ltd (JO:SVBJ), Clientèle (JO:CLIJ), and Northam Platinum (JO:NHMJ) will host AGMs in the upcoming week.
• Stellar Capital Partners (JO:SCPJ) will host a GM in the upcoming week.

We look forward to another busy week ahead in the US with releases expected across various sectors. By Thursday evening, with 101 out of 500 S&P 500 companies (or 20.2%) having reported results, 68.3% of companies reported better-than-expected revenue and 81% reported better-than-expected earnings. The average revenue surprise was 2.1% and the average earnings surprise was 11.7%. Average revenue growth was 16.3% and average earnings growth was 45.3%.

• Facebook’s ad impressions may have continued to decelerate in 3Q21 with people spending less time on apps amid economies reopening. Gains in monthly active users could taper sharply in 2H21 as growing regulatory scrutiny may spur the company to limit data sharing and delay the roll-out of new products.
• Ecolab’s 3Q21 earnings are expected to be negatively affected by the impact of Hurricane Ida. Similar to other specialty peers, the company experienced higher delivered product costs, raw material availability issues, temporary customer closures and a disruption at one of Ecolab’s major production facilities in the region as a result of the hurricane.
• Visa’s 4Q21 revenue is guided to grow 27.5% y/y, as stronger credit card volumes in 3Q21 are recognised in Services (half of total net) with a one-quarter lag. Other segments may be affected by a sequential slowdown in US spending growth through the quarter, offset by stronger international revenue. Cross-border volumes accelerated to approach 2019 levels on robust e-commerce sales while travel still trailed, but reached its highest level since the pandemic.
• Microsoft’s 1Q22 should reflect a steady improvement in enterprise budgets, with an emphasis on cloud and productivitysoftware products. For Azure, higher usage is likely to be driven by new and old customers. Even the on-premise Server products could see greater adoption, fuelled by companies spending more money to upgrade their internal IT infrastructure.
• Coca-Cola’s comparable EPS could increase by ~5% in 3Q21, as an estimated net revenue rise of ~13% is mitigated by a narrowed operating margin stemming from a sharp rebound in beverage consumption in restaurants and other on-premise venues amid greater consumer traffic.
• Bloomberg anticipates that Merck may raise targets to reflect strength in Gardasil, Keytruda and Animal Health. Excluded from guidance, Merck will receive $1.2 billion for a US government pact plus additional contract income from elsewhere on the receipt of FDA emergency-use authorisation or approval for its Covid-19 drug.
• Yum! Brands’ 3Q21 same-store sales are expected to improve at KFC (+7.3%), Pizza Hut (+4.7%) and Taco Bell (+6.3%), as the reopening of temporarily closed restaurants, greater mobility and reduced dining restrictions boosted international sales. Adjusted operating margin may have contracted 140bps to 33.6% due to labour and food inflation, as well as more staffing at company-owned units.
• Comcast signalled a slowdown in its 3Q21 broadband momentum, signalling ~300 000 gains on pandemic-related back-toschool volatility (vs 3Q19’s +379 000). Wireless has been a standout with the new unlimited plan boosting subscribers and consensus projecting 282 000 gains. NBC should get an ad boost from the Tokyo Olympics and Peacock, but the opening of the Beijing park may pressure segment EBITDA, while the lack of international visitation continues to create profitability challenges. Sky may face customer declines in 3Q21 with the reset of football rights, though costs will also be lower.
• Mastercard may be challenged to meet 3Q21 revenue estimates of $4.95 billion (+29% y/y), given a deceleration in US consumer-card spending growth as the quarter progressed. Supporting expectations, however, are quickening cross-border spending growth due to e-commerce and, to a lesser extent, travel.
• Amazon.com’s 3Q21 earnings are projected to come under pressure, contracting 17% y/y as slowing online sales were only partially offset by growing momentum in Amazon Web Services (AWS). AWS’ revenue gains may hover near 35% in 2H21, fuelled by increased consumption and a sharp acceleration in enterprise IT spending
• Apple’s 4Q21 revenue is expected to grow ~31% y/y driven by strong growth in services. Margins could be pressured by supply-chain bottlenecks and higher costs in the 4Q21. Sales in services may grow in the double digits to $17.6 billion as 5G refreshes Apple’s installed base. Management comments on fee reductions and the potential near-term effect on sales will be closely followed.
• Alphabet’s top-line view remains supported by strong ad spending and accelerating growth in its Cloud segment. It may report sequential gains that are at least in the low- to mid-single digits across all its segments in 3Q21, except Network Members, which could record some ad-pricing pressure due to IDFA changes. Strength in video ads could drive another robust quarter for YouTube ad sales, which could easily surpass consensus for 47% growth in 3Q21 after jumping 84% in 2Q21. The cloud business may show steady operating margin improvement amid increasing order sizes, while sustaining top-line growth of at least 45% to 50%.
• Other stocks out next week include Kimberly-Clark, Eli Lily, General Electric Co, General Motors, Ford Motor Co, Twitter, McDonald’s Corp, Hilton Worldwide Holdings, Boeing Co, eBay, Motorola Solutions, Western Union, Kraft Heinz Co, Under Armour, Exxon Mobil Corp, and Colgate-Palmolive.

A busy week is expected for European banks with releases expected from Lloyds Banking Group, HSBC Holdings, Bank of Ireland Group, Banco de Sabadell SA and BNP Paribas SA. Novartis AG, Puma SE, BASF SE, GlaxoSmithKline PLC, Heineken NV, Royal Dutch Shell, Volkswagen AG and Daimler AG will also publish releases.

• The outlook for Lloyds Banking Group’s net interest margin and size will be a major focus for 3Q21. Mortgage volume may again beat expectations – though as UK mortgage pricing competition has heightened, management could point to slowing volume in 4Q21 and update on consumer-credit recovery.
• Look out for 3Q21 numbers from Novartis AG. Consensus calls for EPS and sales to grow 8% and 6% respectively. Cosentyx expects US growth to continue, with 3Q21 scrip trends similar to 2Q21. Entresto shows no signs of slowing down, which bodes well for 3Q21 results.
• Consensus expects BASF SE to deliver another strong quarter, reflecting strong upstream commodity chemical prices and a robust demand.
• Royal Dutch Shell’s recovery is accelerating, fuelled by increasingly supportive fuel prices driving sequentially strong crosssegment earnings and cash flow in 3Q21. Management says Hurricane Ida resulted in a 3Q21 hit of ~$400 million on adjusted earnings and cash flow, and marginally lower LNG liquefaction volume due to feed-gas constraints.
• Volkswagen AG’s 3Q21 deliveries were down 24.5% with deep declines in Skoda (-37.2%) and Audi (-23.8%), driven by semiconductor shortages.
• Food company Kerry Group will publish a 3Q21 sales update. Kerry Group may face at least low-single-digit input inflation in 2H21, which could challenge its pass-through cost model as customers may struggle to raise prices. Volume growth is likely to continue to benefit from food-service customers reopening and the consumer-foods division having been largely divested.
• Dutch Brewer Heineken NV will also publish a 3Q21 sales update. Volume is likely to still be driven by premium branded sales, though guided to be better than 2Q21. Higher input costs will have to be passed through to consumers as hedging rolls off.
• Reckitt Benckiser’s claims of an 18-month transition to strengthen its businesses and sharpen its portfolio will be more heavily tested in 2H21 against softer demand through 3Q21 on high comparisons (given that hygiene and health was heavily boosted during lockdowns), with rising commodity costs compounding pressures.

In the Asia-Pacific region a few significant releases are anticipated, including Hyundai Motor, Ping An Insurance Group, LG Electronics, Panasonic Corp and Komatsu.

• Samsung Electronics’ operating profit in 3Q21 may expand from a year earlier and sequentially, despite component shortages for smartphones and display products. DRAM prices may rise, likely boosting its profit in 3Q21.
• LG Electronics expects 3Q21 earnings and revenue to grow 1.9% and 7.3% respectively. From an industry perspective the global consumer electronics sector is maintaining a swift recovery in 2H21, with trends across subsegments staying strong. The global smartphone market’s comeback may continue apace, returning to growth in 2021 driven by 5G devices. LCD display makers’ sales and margins could benefit from further gains in panel prices in 2021.
• Ping An’s new-business value may have fallen between 10% to 20% in 3Q21 compared to 2Q21 (-42% y/y). The Property and Casualty unit’s profit may remain supported by fewer credit-insurance losses and a lower expense ratio.