Weekly Earnings Outlook

Investors can keep an eye out for a number of key companies such as PPC, Nike, and Naspers, scheduled to release their earnings this week.

Update: 3 July

Resolute Central Bank Leaders Signal Rate Hikes as Dollar Index Climbs

Central bank leaders have adopted a firm and unwavering position, sending signals of potential rate hikes and triggering a surge in the dollar index. While NIKE Inc. reports robust growth driven by digital innovation and a strong brand portfolio, underscoring their continued success in the market.

Jerome Powell, the US Federal Reserve Chair, highlighted the imperative for additional measures to rein in inflation, indicating the potential for two more rate hikes this year. Powell expressed confidence in the US economy’s resilience, suggesting a recession is not the most likely scenario. While the fund’s rate target remained unchanged at 5% to 5.25% in June, it may reach 5.6% by year-end if economic conditions and inflation pressures persist.

Christine Lagarde, the ECB President, noted persistent high inflation in the Euro Area. The ECB aims to raise interest rates to sufficiently restrictive levels to solidify policy tightening, despite signs of a slowdown. In June, the ECB increased rates by 25 basis points, reaching 4% for primary refinancing operations. The rate on the deposit facility also reached a 22-year high of 3.5%. Lagarde emphasized the ECB’s remaining agenda and suggested further rate hikes are likely in July.

Prosus NV (JSE: PRX) and Naspers (JSE: NPN)

Prosus, a global consumer internet group, recently released its financial results for the latest period, revealing some exciting developments and challenges.

Core headline earnings per share (HEPS) for Prosus dropped by 24.1% to 176 US cents. This decline was primarily attributed to lower contributions from associates, particularly Tencent, one of Prosus’ most prominent equity-accounted associates. Naspers, the parent company of Prosus, also experienced a decline in core HEPS, with a 31.4% decrease to 427 US cents, in line with expectations.

The decrease in profit contribution from equity-accounted associates, particularly Tencent, can be attributed to the adverse impact of Covid-19 lockdowns and regulations in China.

However, it’s not all gloom and doom for Prosus. Despite the challenges, the company witnessed robust revenue growth, with notable contributions from its Food Delivery, Payments, and Fintech sectors. These segments have shown strong resilience, highlighting the diversified nature of Prosus’ business.

Furthermore, the e-commerce businesses within Prosus demonstrated remarkable momentum, experiencing significant improvements in profitability during the second half of the year. This positive trajectory could set the stage for substantial profitability enhancements in the coming fiscal year, FY24, and beyond.

Nike Inc (NYSE: NKE)

NIKE has announced its financial results for the fiscal 2023 fourth quarter and full year, demonstrating strong performance and continued growth. The company reported full-year revenues of $51.2 billion, and a remarkable 16 percent increase on a currency-neutral basis. In the fourth quarter, NIKE reported revenues of $12.8 billion, up 5 percent from the prior year and 8 percent on a currency-neutral basis.

The growth was driven by strong performance in NIKE Direct, the company’s digital platform, which reported $5.5 billion in revenue in quarter 4. However, wholesale reported revenues for the fourth quarter were $6.7 billion, down 2 percent compared to the prior year.

Despite the overall positive results, the gross margin for the fourth quarter decreased by 140 basis points to 43.6 percent. This decline was primarily attributed to higher product input costs, elevated freight and logistics expenses, higher markdowns, and unfavorable net foreign currency exchange rate changes.

John Donahoe, President & CEO of NIKE, Inc., expressed satisfaction with the company’s strong results, highlighting the effectiveness of their strategy. He emphasized the role of innovation and digital leadership in driving broad-based growth across NIKE’s brand portfolio, enabling them to serve the future of sport.

Sources: Bloomberg, Nike Inc., BusinessLIVE, Reuters

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