Weekly Earnings Outlook

Update 6 May

Glencore’s Q1 Production: Nickel and Lead Shine, Cobalt Sputters

Glencore, the Swiss multinational mining and commodity giant, delivered a mixed bag in its first-quarter production update for 2024. While some metals like nickel and lead saw healthy increases of 14% and 11% respectively, compared to the same period last year, others fell short. Copper production, a key metal for Glencore, dipped by 2%.

Cobalt production witnessed a significant drop of 37%. This can be attributed to Glencore strategically reducing operations at its Mutanda mine in the Democratic Republic of Congo, a response to the current slump in cobalt prices. Interestingly, gold defied the trend and saw a modest but steady increase of 7%.

Despite the mixed Q1 performance, Glencore expressed confidence in its ability to meet its annual production targets for 2024. They maintained their full-year production guidance for most commodities, including copper, coal, and zinc. This suggests Glencore might be expecting a rebound in production for some metals like copper in the coming quarters.

The company also provided its adjusted earnings before interest and tax (EBIT) expectations for its marketing division. They anticipate a range of USD 3 to 3.5 billion for 2024, which is slightly lower than the USD 3.5 billion reported in 2023. This could be a reflection of the overall market fluctuations and their impact on Glencore’s trading activities.

McDonald’s Corp (NYSE: MCD)

McDonald’s is facing a reality check. Their first-quarter results missed expectations, with comparable sales growth (established restaurants) at a sluggish 1.9%, falling short of analyst predictions. This slowdown plagues all regions, especially the crucial US market, where budget-conscious consumers are tightening their belts. The situation is further complicated by a 3% decline in the Middle East business unit due to boycotts.

To combat this, affordability is becoming McDonald’s battle cry. They’re eyeing a nationwide value menu in the US, mirroring successful deals like the McSmart bundle seen in other countries. This strategy targets budget-conscious customers who might be dining out less frequently.

However, challenges persist. After years of outperforming competitors, customer traffic is showing signs of slowing down. To entice diners, McDonald’s is introducing limited-time menu items like the Bacon Cajun Ranch McCrispy and loyalty programs. Value bundles under $4 are another weapon, but analysts warn these discounts could erode profitability in the long run. Earnings per share also fell short of expectations at $2.70, compared to the anticipated $2.72.

Despite the slowdown, McDonald’s global expansion presses on with new restaurant openings, aiming for a 3% systemwide sales increase. They hope these new locations, coupled with their customer attraction strategies, will reignite sales growth. However, investor confidence is shaky, with the stock price dipping to its lowest point since November 2023 – a 7.7% decline year-to-date compared to the S&P 500’s 7.3% gain. McDonald’s is at a crossroads, needing to navigate a competitive landscape and economic pressures while maintaining their profitability and brand appeal.

Apple Inc (NASDAQ: APPL)

Apple’s Q2 report paints a picture of a company strategically navigating a changing market. Overall revenue dipped 4% to $90.8 billion, but earnings per share hit a record $1.53, exceeding expectations. This success is fueled by a booming Services segment, which surged to a record $23.87 billion, a significant jump from $20.9 billion the prior year. This growth underscores Apple’s successful diversification beyond hardware sales, which dipped to $66.89 billion from $73.93 billion.

Apple prioritizes shareholder returns, authorizing a hefty $110 billion stock repurchase and raising the quarterly dividend by 4% to $0.25 per share. These moves reflect confidence in their strong financial health, bolstered by a robust balance sheet with $337.41 billion in assets and $32.69 billion in cash. However, operating expenses also rose slightly to $14.37 billion, indicating investments in research and development.

While economic uncertainties and competition pose challenges, Apple’s strategic focus on expanding services and pioneering high-growth areas like spatial computing with the launch of Apple Vision Pro positions them well for future success. Their ability to maintain high profitability despite revenue fluctuations demonstrates operational and financial resilience.

Sources: MoneyWeb; Glencore; Bloomberg

Piece written by Trive Sales Trader, Kealeboga Molefe

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