Sasfin : Visa revenue growth slows more as tough economy sobers spending

MARKET COMMENTARY

LOCAL MARKET COMMENTARY

Local stocks traded higher yesterday, as the JSE All-Share index added 0.98% and the Top 40 index closed 1.04% higher to close at 80,508 and 74,479 points, respectively. All eyes were on the South African Reserve Bank yesterday as investors awaited its first monetary decision for the year. The local central bank announced a 25-basis point hike yesterday to bring its main lending rate to 7.25%. According to the central bank, the local economy is expected to grow 0.3% this year and 0.7% in 2024. It also sees consumer inflation of 5.4% this year and 4.8% in 2024.

EUROPEAN MARKET COMMENTARY

In Europe, markets traded higher yesterday as economic data continues to suggest that the region could avoid a recession. The pan-European Stoxx 600 added 0.4%, led by retail stocks which added 2.2% as most sectors and markets closed in the black. Data this week showed that business sentiment in Germany has improved, while services and manufacturing in the euro zone increased.

US MARKET COMMENTARY

US stocks also traded higher yesterday as growth domestic product came in above expectations and investors digested the latest corporate earnings. GDP data released yesterday showed that the US economy grew by 2.9% during the final quarter of 2022, which was above the expected 2.8% reading. A mixed earnings season continued, with Tesla giving the Nasdaq a boost after posting strong results. All eyes will now turn to the US Federal Reserve's policy meeting next week where the central bank is expected to announce a 25-basis point hike.

ASIA MARKET COMMENTARY

Stocks in Asia were higher this morning as Tokyo's core consumer prices roses 4.3%, faster than estimates. Meanwhile, the producer price index in Australia rose 5.8% for the last quarter of 2022. The reading was slightly lower than the previous quarter's print of 6.4%, which could signal that inflation is easing.

COMMODITY MARKET COMMENTARY

Gold prices were mostly unchanged this morning as investors await US inflation data, which is due later today. Meanwhile, oil prices were higher in early trade today as positive data out of the US offered support. Hopes of a rapid recovery in Chinese demand after Covid-19 cases and deaths plunged, also helped lift crude prices. OPEC+ delegates will meet next week to review crude production levels.

CURRENCY MARKET COMMENTARY

The rand weakened yesterday after the South African Reserve Bank raised its main lending rate. At the close of play, the rand was trading around R17.19 to the dollar, 0.47% softer. In other news, the dollar fell against the yen this morning, while also touching nine-month lows versus the euro. This is due to the expectations that the European Central Bank will implement a large rate hike next week.

LOCAL COMPANIES

OUTSURANCE GROUP LIMITED (OUT) +0.7%

Earnings per share (EPS) from continuing and discontinued operations for the six months ended 31 December 2022 is expected to be more than 70% (more than 287.6 cents per share) lower than the EPS from continuing and discontinued operations of 410.9 cents per share reported in the comparative period. Normalised earnings per share (NEPS) from continuing and discontinued operations is expected to be more than 20% (more than 25.1 cents per share) lower than the NEPS from continuing and discontinued operations of 125.5 cents per share reported in the comparative period, which excludes, inter alia, the profit on the sale of Hastings.

AVI LIMITED (AVI) -2.7%

Group revenue increased by 7.2% over the same period last year and the group's consolidated gross profit margin improved marginally. Consolidated operating profit was 1.7% higher than last year with only I&J's earnings declining. The Group's branded consumer business, excluding I&J, improved operating profit by 8.4%. Consolidated headline earnings per share for the six months ended 31 December 2022 are expected to increase by between 0.0% and 1.0% over the prior year, translating into an increase from last year's 316,9 cents to a range of between 316,9 and 320,1 cents per share and consolidated earnings per share for the six months ended 31 December2022, including capital gains and losses, are expected to increase by between 0.0% and 1.0% over the prior year, translating into an increase from last year's 316,5 cents to a range of between 316,5 and 319,7 cents per share.

TRUWORTHS INTERNATIONAL LIMITED (TRU) +4.2%

Earnings per share (EPS) are expected to be up between 11% and 14% from 452.7 cents per share to between 503 and 516 cents per share. Headline earnings per share (HEPS) are expected to be between 485 and 498 cents per share, up between 8% and 11% from 448.6 cents per share a year earlier. The higher estimated increase in EPS relative to the increase in HEPS is a result of the reversal of some previously recognised impairment losses in respect of the Office business segment's store lease right-of-use assets due to improved performance in these stores. During the first 26 weeks of the Group's 2023 financial period retail sales increased by 13.7% to R11.3 billion compared to the first 26 weeks of the 2022 financial period. This was despite a record level of electricity load shedding in South Africa and increasing pressure on consumers' disposable income in both South Africa and the United Kingdom due to rising interest rates and high levels of inflation.

INTERNATIONAL COMPANIES

Intel (INTC) +1.3%

Shares of the chipmaker dropped 9% in extended trading yesterday, after posting results which missed expectations. Earnings came in at 10 cents per share, versus the 20 cents per share expected. Additionally, revenue was reported at $14.04 billion, versus $14.45 billion expected. The company recorded a $664 million net loss, compared to a profit of $4.62 billion in the quarter before. The company decided not to provide a full-year forecast because of "the uncertainty in the current environment".

Hasbro (HAS) -0.5%

The toy-maker announced it would eliminate around 1,000 employee positions and warned of weak quarterly results. The company seeks to save between $250 million and $300 million every year by the end of 2025. The company also expects fourth quarter revenue to come in 17% lower than the previous year. For the full year, the company expect revenue to be 9% lower than 2021, hitting $5.86 billion. Hasbro is set to report its fourth-quarter earnings on February 16^th.

Visa (V) -0.1%

Shares of the payment company were up after reporting quarterly results. Revenue rose to $7.94 billion against the Wall Street expectations of $7.69 billion. Adjusted earnings per share came in at $2.18 versus estimates of $2.00. With travel nearly recovering to pre covid levels, the company are seeing improvements but say consumer spending has slowed in a tough economy. Payment volumes for the three months ended December 31, 2022, increased 7% over the prior year on a constant-dollar basis. Total processed transactions, which represent transactions processed by Visa, for the three months ended December 31, 2022, were 52.5 billion, a 10% increase over the prior year.

Do you prefer a full in-depth report you can read offline? Click here to download the full report