Weekly Earnings Outlook

South African financial services giant Old Mutual and retail bank Capitec Bank have both reported strong earnings for the first half of 2023, while sportswear behemoth Nike has delivered decent results for the first quarter of fiscal 2024. These results offer a glimpse into the performance of key sectors of the global economy, and highlight the resilience of certain companies in the face of prevailing challenges.

Old Mutual (JSE: OMU)

Old Mutual, a South African financial services company, reported strong earnings for the first half of 2023. Adjusted headline earnings per share (AHEPS) increased 21% to 68.8 cents, while value of new business (VNB) climbed 32% to R937 million.

The company’s earnings vigor was particularly pronounced within its investment division, benefiting significantly from the upswing in interest rates and the recovery of equity markets. The company’s earnings vigor was particularly pronounced within its investment division, benefiting significantly from the upswing in interest rates and the recovery of equity markets. According to Bloomberg data, the JSE All Share Index registered a noteworthy 10.5% return during the first half of 2023. Old Mutual also capitalized on the surge in bond yields, amplifying the value of its fixed-income portfolio.

Life Annual Premium Equivalent (APE) sales were up marginally by 1% to R6.2 billion. This was due to a number of factors, including rising inflation, which put pressure on household incomes. However, the company saw strong growth in its asset management business, with assets under management increasing 10% to R1.3 trillion. This growth was driven by demand from both individual and institutional investors.

Iain Williamson, the CEO of Old Mutual, expressed his satisfaction with the company’s results, describing them as “very pleasing.” He further emphasized that Old Mutual is well-prepared and strategically positioned for continued growth in the second half of the year.

Capitec Bank (JSE: CPI)

The South African retail bank reported strong earnings for the six months ended 31 August 2023. Headline earnings per share (HEPS) grew 9% year-over-year to 4 072 cents, while income from operations grew 21% to R17.2 billion.

This impressive performance was chiefly propelled by the bank’s strong net transaction fee income, which can be attributed to the growth in transaction volumes and the introduction of new products and incentives, aimed at encouraging consumers to transition from cash-based transactions to card and digital payments—an alignment with the evolving trends in modern banking.

Furthermore, the bank’s success extended to its funeral insurance segment, where it experienced double-digit client growth, making a significant positive contribution to the overall financial results.

The top-line performance of the bank remained robust, primarily fueled by increased loans and advances, as well as higher transaction volumes, both of which played a pivotal role in supporting the bank’s growth and profitability. Additionally, the business banking division also contributed positively to the overall results, further enhancing the bank’s financial standing.

Nike (NYSE: NKE)

Nike reported decent results for the first quarter of fiscal 2024, with revenue and earnings broadly in-line with expectations. Revenue for the quarter came in at $12.94 billion, versus the consensus estimate of $13.02 billion. Diluted earnings per share was $0.94, up 1% year-over-year.

A few notable takeaways emerge from these results. Firstly, the primary driver of revenue growth was the robust demand emanating from China, effectively mitigating the softer demand witnessed in the apparel segment and the slower growth experienced in North America. Furthermore, Nike’s Digital sales under the NIKE Brand displayed a commendable 2% increase, both in reported and currency-neutral terms, underscoring the company’s continuous expansion in the realm of e-commerce. The 1% year-over-year growth in diluted earnings per share was facilitated by judicious cost management, specifically in the form of reduced selling and administrative expenses, coupled with a more favorable tax rate.

Taking into account the prevailing economic landscape, Nike’s first-quarter performance can be considered solid. It is important to acknowledge that the company confronts certain challenges, including softer demand for apparel and a slower growth trajectory in North America. Nevertheless, Nike remains resilient in adapting to these challenges, as it continues to leverage its strengths and seize growth opportunities in key markets, particularly China, and within the digital retail landscape.

Sources: Old Mutual Earnings Report; Bloomberg News; Nike Q1 FY24 Earnings Release; Reuters

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