Week Ahead Outlook

Investors get ready for another week of Earnings Releases as a large number of high-profile companies share their earnings such as Walmart and Home Depot.

Earnings Update 27 February

As February draws to a close, we review the past week of earnings releases, looking at two U.S. companies, namely Walmart (NYSE: WMT) and home improvement retail corporation, The Home Depot (NYSE: HD). We also review some of the most prominent data from the latest FOMC Minutes and wrap up with expected earnings release dates for Woolies (JSE: WHL) and FirstRand (JSE: FSR). 

Walmart (NYSE: WMT), the world’s second-largest retailer, recently reported promising results for the fiscal fourth quarter that ended 31 January 2023. The retail giant has been “living better,” noting a quarterly earnings per share (EPS) figure of $1.71, surpassing expectations of $1.51 per share by a significant 13%. Walmart also surpassed revenue expectations, reporting a quarterly figure of $164.05 billion against expectations of $159.72 billion. Despite exceeding holiday quarter earnings expectations, the giant retailer forecasts a “weaker-than-expected outlook for the year ahead.” CFO John David Rainey expressed his belief that “the consumer is still very pressured” with “balance sheets running thinner and savings rates declining,” hence why the retail giant has adopted a “cautious outlook on the rest of the year.”

The Home Depot (NYSE: HD) reported a quarterly earnings per share (EPS) figure of $3.30, slightly above expectations of $3.28. However, the company fell short of revenue expectations for the first time since 2019, reflecting a “slowdown in the home improvement category” and further forecasting a relatively subdued outlook for the year ahead mainly due to “a tough consumer backdrop.” A rare miss on revenue expectations combined with a weak outlook for the year saw the company’s share price close more than 7% down on Tuesday, 21 February.

The latest FOMC Minutes implied that although recent data has seen a “welcome reduction in inflation,” “substantially more evidence” is necessary before the Federal Reserve assumes that inflation is “on a sustained downward path.” Market participants have begun pricing in expectations that “ongoing rate hikes” may be warranted to bring inflation down to its much-desired 2% target rate. Following the release, the U.S. Dollar strengthened somewhat while bond yields increased marginally. Moreover, equities ticked down, with the S&P 500 index (SPX) closing 0.16% lower on Wednesday. With James Bullard, president of the Federal Reserve Bank, emphasizing that “going higher sooner would be more effective,” market participants turn their attention to the following rate announcement, potentially expecting another rate hike.

With March approaching, we also focus on one of South Africa’s favorite retail companies, Woolworths Holdings Limited (JSE: WHL). The famed food retailer will release their half-year results on 1 March 2023. Moreover, market participants will also wait to see how the FirstRand Group has performed recently, with the financial services giant releasing their half-year results on 2 March.

Sources: Bloomberg, CNBC, Reuters, Refinitiv, Trading View

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