Locally, we expect releases from:
• Dis-Chem Pharmacies (Interim Results) – Headline earnings per share (HEPS) are expected to improve between 43.1% to 45.4% y/y. Excluding once-off acquisition impacts, HEPS are guided to increase between 30.4% to 32.6% y/y, well ahead of full-year expectations (Bloomberg: +27.9%). The performance was underpinned by strong market share gains and further margin expansion. The working capital position improved, which had a positive impact on cash generation.
• Gold Fields (3Q22 Update) – Per recent guidance for FY22, group attributable production is expected to be 2.25Moz to 2.29Moz, with all-in sustaining costs (AISC) expected to be between $1 140/oz and $1 180/oz. Total capex for the year is expected to be between $1.05 billion and $1.15 billion, with sustaining capital of $625 million to $675 million. The Salares Norte project (~$330 million) will account for the largest component of the capex budget for the year. This update will aide us in assessing if the company is still on track to deliver this.
• AngloGold Ashanti (3Q22 Update) – Production for FY22 is forecast to come in at between 2.55Moz. and 2.80Moz. At the half-year point, group production was at ~48% of the midpoint of this range but is expected to make a full recovery during the remainder of the year. AISC was guided to come in at $1 295/oz to $1 425/oz, while capex will range between $1.05 billion and $1.2 billion.
• DataTec (Interim Results) – HEPS are expected to decrease 20.6% to 36.5% y/y, to between 4 and 5 US cents. Management previously noted that headwinds resulting from semiconductor shortages, compounded by various factors including the war in Ukraine, Covid-19 lockdowns in China and global inflationary pressures, would continue to disrupt global supply chains. In addition, the material strengthening of the US dollar affected all divisions.
• Sibanye Stillwater (3Q22 Update) – At the end of the first half, the outlook for 2H22 was encouraging, with production disruptions set to dissipate as both the SA gold and US PGM operations resumed production. Pressure on gold prices was noted as a concern.
o Mined 2E PGM production from the US PGM operations was forecast to be between 445 000 2Eoz and 460 000 2Eoz, with AISC of between $1 380/2Eoz to $1 425/2Eoz.
o 3E PGM production for the US PGM recycling operations was forecast to be between 700 000 and 730 000 3Eoz.
o 4E PGM production from the SA PGM operations was expected to be between 1 750 000 4Eoz and 1 850 000 4Eoz, with AISC between R18 500/4Eoz and R19 200/4Eoz ($1 233/4Eoz and $1 280/4Eoz).
o Guidance for gold production from the managed SA gold operations (excluding DRDGOLD) was between 14 000kg (450 000oz) and 14 500kg (466 000oz), with AISC between R1 390 000/kg and R1 470 000/kg ($2 880/oz and US$3 060/oz).
• MTN (3Q22 Update) – The company reported solid results over the first half of the year (HEPS: +46.5%; Revenue: +14.8%) driven by robust growth in all divisions. According to Bloomberg, however, growth is expected to slow down over the latter part of the year (HEPS: +30.8%; Revenue: +10.0%) due to sustained market volatility amid prevailing inflationary headwinds.
On the corporate actions front, Tuesday (1 November 2022) marks the last day to trade Hyprop, PSG Konsult and Barloworld shares to receive their latest dividend payments. Motus Holdings, Murray & Roberts, and Truworths are set to host their respective shareholder meetings during the week.
The 3Q22 earnings season in the US gains further momentum with several of our houseview stocks expected to release results:
• Adjusted EPS for NXP Semiconductors is set to climb 28.7% y/y to $3.66, while revenue will increase 19.8% y/y to $3.43 billion. In contrast to several other memory-chip makers (including Micron and Samsung), growth within the logic-chip maker was supported by strong demand from vehicle manufacturers, hyperscale data centres and other industrial companies.
• Despite a 10.3% y/y increase in revenue, Ecolab’s adjusted EPS are anticipated to fall 5.5% y/y, as supply chain issues and higher input cost prices (due to rampant inflation) continued to weigh on the operational performance of the company.
• Power management company Eaton is expected to report adjusted EPS growth of 14.6% y/y and revenue growth of 7.9% y/y for the third quarter, as it continues to benefit from digitalisation and electrification trends within the construction, manufacturing, utilities, and aerospace industries.
• Coming off yet another tough base, pharmaceutical giant Eli Lilly is set to report an underwhelming 3Q22, with a 0.7% decline in adjusted EPS and a 2.3% increase in revenue.
Also in the healthcare sector, CVS and Pfizer are expected to report mixed results over the period. Adjusted EPS and revenue growth for the former is forecast to come in at 0.5% and 4.1%, respectively. The latter is expected to report adjusted EPS growth of 4.8%, despite a 12.4% decline in revenue.
Also keep an eye out for food and beverage specialists Mondelez, Kellogg’s and Starbucks.
In Europe, we expect results from:
• BP – The energy company is set to report solid double-digit growth in both adjusted EPS (+96.3% y/y) and revenue (+61.8% y/y), as oil, gas and other commodity prices remain elevated due to persistent supply constraints, particularly in Europe.
• Dufry – a Swiss-based travel retailer that operates duty-free and duty-paid stores in various airports, cruise lines and railway stations around the world. The company is expected to report sizable growth in revenue (+58.4% y/y) over the third quarter, benefitting from a sustained uptick in business and leisure travel.
• Smith & Nephew – According to Bloomberg, 3Q22 revenue for the medical equipment manufacturer will decrease 0.4% y/y, despite an anticipated uptick in elective surgeries including joint replacements (S&N’s area of specialty).
• Hannover – Despite losses arising from the war in Ukraine, and adverse weather conditions, the German reinsurance company is set to report adjusted EPS and revenue growth of 28.3% y/y and 12.0% y/y, respectively.
Earnings releases in the Asia-Pacific region will be headlined by DBS Group Holdings.
Economics Weekly: Policy mix – A balancing act
In its latest report, the International Monetary Fund (IMF) speaks to the need for monetary and fiscal policy to be coordinated, avoiding the temptation to support households during the prevailing cost of living crisis at the risk of policy contradictions. The latest Medium Term Budget Policy Statement (MTBPS) showed that while the risk of such policy mistakes is elevated globally, the National Treasury remains focussed on taking coordinated policy steps to limit spending growth and strengthen fiscal policy metrices. In line with a stronger fiscal position and a systematic move towards positive real interest rates, both fiscal and monetary are making a concerted effort to build the policy space that will become essential during future crisis events.
