Cisco Raises 2025 Outlook, Expands Buyback, Shares Jump 7% After Hours

Local Market Commentary

The JSE Top 40 index gained 0.47% to 80,141.7 points, with the All Share index up 0.43% to 87,942.2 points. South African business sentiment stabilised in January, remaining positive after a decade-high in December, with a slight decline in the Chamber of Commerce index to 120. The JSE’s ‘Claim It’ campaign is encouraging South Africans to claim their share of R4.5 billion in unclaimed dividends. Additionally, a delay is expected in reducing South Africa's inflation target, as focus shifts to economic growth and fiscal consolidation, with a related conference scheduled for next month.

European Market Commentary

European shares reached an all-time high on Wednesday, with the STOXX 600 index rising 0.1% and Germany’s benchmark also hitting a record peak, driven by strong earnings from Heineken and ABN AMRO. However, caution remained as investors awaited U.S. inflation data and updates on trade policies. Dutch Prime Minister Dick Schoof announced efforts to boost the country’s tech startups and attract venture capital, following a report highlighting a slowdown in the sector. Meanwhile, the UK's housing market showed signs of cooling in January, with house price growth and demand easing, although future activity is expected to pick up. Bank of England policymaker Megan Greene emphasised a cautious stance on rate cuts, suggesting policy will continue to combat inflationary pressures.

U.S. Market Commentary

The S&P 500 closed lower on Wednesday following a stronger-than-expected U.S. inflation report, which intensified concerns that the Federal Reserve may hold off on rate cuts. U.S. consumer prices rose in January by the largest margin in 18 months, reinforcing the Fed's stance on maintaining rates. The inflation spike also raised alarms over President Trump’s tariff policies, which have been criticised for fuelling inflation. CVS Health and Gilead Sciences saw positive movements after strong earnings. Interest rate futures now indicate a 70% likelihood the Fed will reduce rates by 25 basis points by the end of 2025, down from 80% on Tuesday. Fed Chair Jerome Powell, continuing his testimony before Congress, reaffirmed the central bank’s cautious approach. January’s inflation report is the final reading before the direct effects of Trump's tariff measures, which came into effect this month.

Asia Market Commentary

Asia-Pacific markets traded higher this morning, diverging from Wall Street's decline, as stronger-than-expected U.S. inflation data dampened expectations of Federal Reserve policy easing. Japan's wholesale inflation reached a seven-month high of 4.2% in January, marking the fifth consecutive month of acceleration, further fuelling speculation of an interest rate hike later this year. This follows a warning from Bank of Japan Governor Kazuo Ueda about rising food costs affecting public inflation expectations. Hong Kong-listed shares of Alibaba surged to their highest levels since 2022, boosted by news of a collaboration with Apple to introduce AI features for iPhone users in China. In contrast, SoftBank Group's shares dropped following a surprise quarterly loss and underperforming investments in its Vision Funds.

Currency Market Commentary

South Africa's rand slipped on Wednesday following data showing that U.S. consumer prices rose more than expected last month, increasing the likelihood of the Federal Reserve keeping interest rates higher for longer. Meanwhile, the U.S. dollar surged to a one-week high against the Japanese yen as the inflation data for January raised expectations that the Fed would maintain its aggressive stance to combat inflation, with Americans facing higher costs across a range of goods and services.

Commodity Market Commentary

Gold prices edged higher this morning as markets focused on U.S. President Donald Trump's tariff plans, which could trigger a global trade war, while investors awaited key U.S. data later in the day. Oil prices dropped on Thursday, driven by expectations that a potential peace deal between Ukraine and Russia could lift sanctions, easing supply disruptions, and concerns over Trump's reciprocal tariffs stoking inflation. Russia, the world's third-largest oil producer, has seen its oil exports constrained by sanctions, which have helped sustain higher prices. U.S. crude stocks rose more than expected last week, with crude inventories increasing by 4.1 million barrels to 427.9 million barrels, surpassing analysts' expectations of a 3 million-barrel rise.

Northam Platinum Holdings Limited (NPH) +1.72%

Northam reported solid production performance for the six months ending 31 December 2024, with a 3.7% increase in refined metal production from own operations, totalling 451,213 oz 4E. Eland's output also contributed to a 15.1% rise in 4E metal in concentrate. However, refined metal production fell by 2.5% to 425,151 oz 4E, primarily due to the planned furnace 2 rebuild. Group unit cash costs increased by 7.7% to R25,381/oz 4E, driven by mining inflation and lower refined volumes. Revenue declined by 3.1% to R14.5 billion, impacted by a weaker 4E ZAR basket price, although chrome concentrate sales rose by 7.5%. Operating profit dropped 55.2% to R1.1 billion, and basic and headline earnings per share are expected to decline by 49.9%-59.9% and 44.7%-54.7%, respectively. The company ended the period with net debt of R6.1 billion, and a net debt to EBITDA ratio of 1.26, with R12.3 billion in undrawn banking facilities.

South32 Limited (S32) +0.99%
South32 has secured Federal environmental approval for its Worsley Mine Development Project under the Environmental Protection and Biodiversity Conservation Act (1999). This, alongside the State environmental clearance received in December 2024, enables continued bauxite mining at Worsley Alumina. Mining in new areas is set to begin in Q4 FY25, extending operations through to at least FY36. CEO Graham Kerr emphasised the project’s significance for regional employment, economic growth, and alumina production in support of the global energy transition. The company will proceed with development in compliance with regulatory conditions.

Universal Partners Limited (UPL) 0.00%

Universal Partners reported a decline in net asset value (NAV) per share to GBP 1.196 (ZAR 28.16) for the quarter and six months ending 31 December 2024, from GBP 1.297 (ZAR 30.19) in the prior period. The company posted a quarterly loss of GBP 6.27 million, bringing the six-month loss to GBP 6.98 million, compared to a marginal profit in the same period of 2023. This resulted in a loss per share of 8.61 pence for the quarter and 9.58 pence for the half-year. Universal Partners remains listed on the Stock Exchange of Mauritius and the JSE’s Alternative Exchange.

Pan African Resources (PAN) -7.62%

Pan African Resources reported gold production of 84,705 oz for the six months ended 31 December 2024, reflecting a slight 3.3% decline from the prior period, mainly due to commissioning delays at Evander Mines. However, the early output from the Mogale Tailings Retreatment (MTR) project helped offset the decline. Production is expected to improve in H2 FY2025, with full-year guidance of 215,000 oz, marking a 16% increase from FY2024. Despite a fatality at Evander Mines, safety metrics improved. All-in sustaining costs (AISC) rose to US$1,675/oz due to lower output from Evander, Eskom-related disruptions, and a stronger rand. However, costs are expected to decline in H2 FY2025. Revenue remained steady at US$189.3 million, and profit rose by 10% to US$44.6 million, bolstered by a US$25.2 million gain from the TCMG acquisition. Net debt increased to US$228.5 million, largely due to MTR construction and TCMG consolidation. Expansion projects are progressing, with significant production growth anticipated in FY2026. Strong cash flow is expected post-February 2025 as the synthetic gold forward sale transaction concludes.

Trellidor (TRL) +42.29%

Trellidor is finalising its unaudited financial results for the six months ending 31 December 2024, with results expected to be announced on SENS around 5 March 2025. The company anticipates a substantial increase in earnings per share (EPS) and headline earnings per share (HEPS), with estimates ranging from 28.53 cents to 30.67 cents, reflecting a 33% to 43% increase compared to the 21.40 cents reported for the same period in 2023. This growth is attributed to continued strong performance from the Trellidor UK division and improved results from the Taylor and NMC divisions.

Restaurant Brands International Inc. (QSR) -1.70%

Restaurant Brands International exceeded Q4 profit and sales expectations, driven by strong promotions at Burger King and consistent demand for Tim Hortons' coffee offerings, including its Double Double and Iced Capp. U.S. comparable sales at Burger King rose by 1.5%, a significant improvement from the previous quarter's 0.4% decline, while McDonald's U.S. same-store sales fell by 1.4%. Tim Hortons, which contributes nearly half of the company’s total revenue, saw a 1% increase in quarterly revenue, supported by sustained demand for its coffee. Despite rising coffee prices and higher egg costs due to bird flu, CEO Joshua Kobza downplayed the risk of severe inflationary pressures, stating the company was not significantly impacted. Restaurant Brands' Q4 revenue of $2.30 billion surpassed the analyst consensus of $2.28 billion, and its adjusted earnings per share of 81 cents also exceeded expectations.

Reddit Inc. (RDDT) +1.27%

Reddit's Q4 results missed market expectations for daily active unique visitors, primarily due to a change in Google's search algorithm that reduced the platform’s visibility in search results, resulting in a 15% drop in its shares during extended trading. The company reported 101.7 million daily active unique visitors, a 39% year-on-year increase, but falling short of the analyst estimate of 103.3 million. However, traffic from Google search showed signs of recovery in Q1. Reddit's Q4 revenue rose by 71% to $427.7 million, driven by the holiday shopping season, surpassing the consensus estimate of $405.3 million. The company also posted a profit per share of 36 cents, exceeding the 25-cent estimate, while its global average revenue per user grew 23% to $4.21. Reddit's Q1 revenue guidance of $360 million to $370 million was above analyst expectations. CEO Steve Huffman also mentioned ongoing discussions for potential data licensing deals with major players.

Cisco Systems Inc. (CSCO) +0.16%

Cisco Systems raised its fiscal 2025 revenue forecast to between $56 billion and $56.5 billion, up from its previous range of $55.3 billion to $56.3 billion, driven by increasing demand for its cloud networking products amid the AI boom. The new outlook surpassed analysts' estimate of $55.99 billion. The company also approved an additional $15 billion for its share buyback program, bringing the total remaining for repurchases to $17 billion. Cisco's second-quarter revenue reached $14 billion, exceeding the $13.87 billion estimate, and it forecast third-quarter revenue between $13.9 billion and $14.1 billion, slightly above the $13.87 billion consensus. The positive outlook sent Cisco’s shares up nearly 7% in after-hours trading.

CVS Health Corporation (CVS) +14.95%

CVS Health exceeded Wall Street's fourth-quarter profit estimates and provided an annual forecast largely in line with expectations, signalling potential improvement under new CEO David Joyner. The company expects annual profit between $5.75 and $6.00 per share, slightly below the consensus estimate of $5.96. Despite posting a quarterly loss of $439 million in its healthcare benefits unit, compared to a profit of $676 million a year ago, CVS saw a 7.5% increase in revenue from its pharmacy and consumer wellness segment, reaching $33.51 billion, driven by higher prescription drug volumes. On an adjusted basis, CVS reported a fourth-quarter profit of $1.19 per share, down from $2.12 a year ago but surpassing expectations of 93 cents.

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