The Week Ahead – Local releases in the spotlight as offshore releases quieten down

·       Barloworld (1H23 Earnings) – In a recent trading statement, management guided for headline earnings per share (HEPS) from continuing operations to increase between 28.5% and 31% y/y, to between 573.9 and 585.5 ZAR cents. For the five-month period ended 28 February 2023, we saw revenue increase 15% y/y, while operating profit from core operations grew 18% y/y, driven by strong improvements in all its businesses.

·       Astral Foods (1H23 Earnings) – Management has guided for HEPS to decrease between 87% and 92% y/y. The result was impacted by record-high feed input costs, load-shedding and the general decay of municipal infrastructure continuing to impact operational efficiency and costs negatively.

·       Famous Brands (FY23 Earnings) – For this filing management expect that HEPS will increase between 27% and 47% y/y driven by an increase in sales in Leading Brands and Logistics. The group continues to see a good recovery in quick service restaurant performance and casual dining post Covid-19 restrictions. However, load-shedding combined with difficult economic conditions remain headwinds.

·       Coronation Fund Managers (1H23 Earnings) – HEPS as expected to decrease by between 89% and 99% y/y per a recent trading statement. This is due to the company raising a provision to pay SARS an outstanding amount of R800 to R900 million following a recent loss in the Supreme Court of Appeal (SCA). As previously confirmed, the company will not be declaring an interim dividend. As of 31 March 2023, total assets under management (AUM) were R623 billion.

·       Reunert (1H23 Earnings) – Per management guidance, HEPS are expected to be between 257.3 and 276.8 ZAR cents, an increase of between 31.9% and 41.9% y/y. Growth was driven by improved demand for the company’s products and services as well as strong operational performances, particularly in the Electrical Engineering and Applied Electronics businesses. Management noted in the recent trading statement that a strong order book within Electrical Engineering and Applied Electronics, bodes well for growth throughout the remainder of the year.

·       Old Mutual (1Q23 Sales) – Management’s outlook for FY23 was cautious, highlighting continued pressure on customers amid a challenging macro environment. Nonetheless, the group remains confident it will maintain positive sales momentum.

·  Tsogo Sun Gaming (FY23 Earnings) – Guidance is for HEPS growth to range between 34% and 42% y/y to between 147 ZAR cents and 156 ZAR cents. This includes a previously announced hotel management contract cancellation expense of R289 million, which was partly offset by a hedge credit of R57 million (after tax). Improved cost bases at casino precincts and head office, lower debt levels and firmly controlled capital cash allocation, had positioned the group to deliver strong headline earnings growth.

·  Pepkor (1H23 Earnings) – In 1Q23, top-line growth was 5.3% with most brands showing resilience against a tough macroeconomic backdrop. For the full year, revenue is expected to grow 6.3% with earnings expected to contract slightly. The first half result will provide us with more clarity on whether this is a fair expectation.

 We also anticipate interim results from the hospital groups – Netcare, Mediclinic and Life Healthcare, while DataTec is also scheduled to report numbers this week.

Gold Fields and Liberty Two Degrees will hold their respective AGMs on Wednesday, 24 May 2023, with Grindrod and ArcelorMittal hosting shareholders meeting the day the after Glencore’s AGM is scheduled to take place on Friday, 26 May 2023. Famous Brands will hold a general meeting on the proposed adoption of a new long-term share incentive scheme on the 23^rd. Redefine Properties and Equites will trade ex-dividend on Wednesday, 24 May 2023.

US earnings season is all but complete. Over 467 companies in the S&P 500 have reported earnings. 360 of these have reported bottom-line results ahead of expectations and 317 have reported better-than-expected sales. The aggregate earnings and revenue surprise is currently +6.24% and +2.56%, respectively. Aggregate revenue for the index has increased 4.34%, however, the bottom line so far is down 3.2% overall.

In the US there are two key releases on our radar this coming week:

·  NVIDIA (1Q24 Results) – For this quarter, management has guided for revenue to increase ~2% q/q to $6.5 billion (in-line with consensus) while adjusted operating expenses will be ~$1.78 billion. The gross margin will expand around 50bps q/q to 66.5% – also in-line with expectations. Growth is expected to resume in its Datacentre business and to extend into 2H24. Gaming is also expected to do well following the launch of its new graphic processing unit.

·  Costco (3Q23 Results) – Same-store sales (excluding fuel) are expected to grow 4.3%, slowing from very high levels in the same quarter last year. Some trends from 2Q23 that are expected to persist includes higher staples purchases as opposed to discretionary and smaller basket sizes. Inflation is expected to continue driving costs higher, but the company has shown good ability to manage this in the past. Adjusted earnings per share are expected to increase 9% y/y.

In Europe, results are expected from Kingfisher and Marks & Spencer, while over in the Asia-Pacific notable releases will be from Lenovo and Xiaomi.