Medtronic Misses Revenue Estimates but Beats EPS Forecast Shares Drop 7%

Local Market Commentary

South Africa’s financial markets saw gains yesterday, with the Top 40 and All Share indices rising 0.89% and 0.75%, respectively, ending at 81,413.5 and 89,061.7 points. Meanwhile, the country’s unemployment rate eased to 31.9% in Q4, its lowest since Q3 2023, driven by job growth in finance and manufacturing. Employment rose by 132,000, while unemployment declined by 20,000. Investor focus now shifts to Finance Minister Enoch Godongwana’s budget speech, where key themes are expected to include fiscal reforms, expenditure controls, and greater private-sector participation.

European Market Commentary

European equities hit record highs on Tuesday, with banking and defence stocks leading gains amid expectations of increased military spending alongside Russia-Ukraine peace talks. The STOXX 600 rose 0.3%, while Germany’s DAX climbed 0.2% to a new peak, supported by a sharp improvement in investor sentiment, as the ZEW index surged to 26.0 in February. In the UK, productivity showed a partial Q4 recovery, rising 0.7% after a prior 1.1% decline, though it remained 0.8% lower year-on-year.

U.S. Market Commentary

The S&P 500 edged to a new record close on Tuesday, navigating a volatile session as markets weighed earnings reports, upcoming Federal Reserve minutes, and geopolitical risks. All three major U.S. indices fluctuated but turned positive by the close. Investors await the Fed’s January meeting minutes for insights into policy direction amid inflation concerns and trade uncertainties. With most S&P 500 firms having reported Q4 results, 74% have exceeded expectations, according to LSEG data.

Asia Market Commentary

Asia-Pacific equities mostly declined this morning, diverging from Wall Street, where the S&P 500 reached a record high. Japanese manufacturing sentiment improved for a second month, with the Reuters Tankan index rising to +3 in February. The Reserve Bank of New Zealand cut rates by 50 basis points to 3.75% amid slowing economic growth, marking its fourth consecutive reduction. Meanwhile, China’s property market struggles continued, as new home prices fell 5% year-on-year in January, though they remained stable month-on-month.

Currency Market Commentary

The South African rand weakened on Tuesday as markets awaited the national budget speech, while sterling dipped but remained near two-month highs amid strong UK wage growth, supporting expectations of a gradual Bank of England rate-cut path. The U.S. dollar held firm, driven by tariff concerns and geopolitical tensions, while the New Zealand dollar fell following the central bank’s larger-than-expected rate cut.

Commodity Market Commentary

Gold prices climbed over 1% on Tuesday as uncertainty around U.S. tariff policies drove safe-haven demand. Oil prices edged higher on Wednesday amid supply disruptions in the U.S. and Russia, alongside anticipation of updates on Ukraine peace talks. Russia reported a 30%-40% reduction in crude exports via the Caspian Pipeline Consortium due to a Ukrainian drone attack, potentially removing up to 380,000 barrels per day from the market. Meanwhile, extreme cold in North Dakota threatened U.S. output, with production expected to decline by as much as 150,000 bpd.

Anglo American Plc (AGL) -2.41%

Anglo American Plc has agreed to sell its nickel business to MMG Singapore Resources Pte. Ltd., a subsidiary of MMG Limited, for up to $500 million. The deal includes two ferronickel operations in Brazil—Barro Alto and Codemin—along with the Jacaré and Morro Sem Boné greenfield projects. The agreement involves an upfront payment of $350 million, a potential $100 million earnout linked to performance, and a contingent $50 million based on future investment decisions. This sale is part of Anglo American's strategy to streamline its portfolio, focusing on copper, premium iron ore, and crop nutrients. It follows the divestment of its steelmaking coal business, which is expected to generate up to $5.3 billion in gross proceeds. MMG views the acquisition as a strategic move to diversify into nickel and strengthen its presence in Latin America. The transaction is subject to regulatory approvals and is expected to close by Q3 2025.

BHP Group Limited (BHG) -1.43%

BHP Group Limited reported headline earnings of $4.38 billion for the half-year ended 31 December 2024, marking a 29% increase from the previous year, despite an 8% drop in revenue to $25.18 billion. Basic earnings per share surged 376% to 87.1 cents, driven by lower impairment charges compared to the prior period. However, the interim dividend was reduced to 50 US cents per share, down from 72 cents. The company’s Dividend Reinvestment Plan remains in effect, with key dividend dates set for March and April 2025. These results reflect BHP’s operational resilience in the face of market challenges.

Kumba Iron Ore Limited(KIO) +7.06%

Kumba Iron Ore reported strong operational performance in 2024, with record safety improvements and a total recordable injury frequency rate of 0.76, maintaining over nine years without major environmental incidents. Despite a 21% revenue decline to R68.5 billion, cost savings of R4.4 billion helped sustain an adjusted EBITDA margin of 41%. Headline earnings per share fell 45% to R38.94, but the company maintained a 100% payout ratio, declaring a final cash dividend of R19.90 per share. Kumba continues to focus on unlocking value through its UHDMS technology and working with stakeholders to improve logistics efficiency.

DRDGOLD Limited (DRD) +1.12%

DRDGOLD reported strong financial results for the six months ended 31 December 2024, with revenue rising 28% to R3.8 billion and operating profit increasing 74% to R1.58 billion, driven by improved operational efficiencies and higher gold prices. Earnings per share and headline earnings per share both rose 65% to 112.6 SA cents, reflecting strong profitability. The Board declared an interim cash dividend of 30 SA cents per share, a 50% increase from the previous period. The dividend is subject to a 20% withholding tax, resulting in a net dividend of 24 SA cents per share for taxable shareholders.

Medtronic PLC (MDT) -7.26%

Medtronic missed Wall Street’s Q3 revenue estimates as distributors cut back on surgical device purchases, with ongoing competitive pressures in the stapler market contributing to a 1.9% sales decline in the segment. The company expects these challenges to persist into Q4 but anticipates recovery in fiscal 2026 as inventory levels stabilise. Despite the revenue shortfall, Medtronic’s adjusted EPS of $1.39 exceeded estimates by $0.03, and it reaffirmed its full-year profit forecast of $5.44–$5.50 per share, aligning with analysts’ $5.45 projection. Shares fell over 7% on the news.

InterContinental Hotels Group PLC (IHG) -4.72%

IHG announced a $900 million share buyback plan on Tuesday, falling short of some investor expectations and sending shares down 5%, despite solid annual room revenue growth. The hotel group, which owns Holiday Inn and Crowne Plaza, plans to return over $1.1 billion to shareholders in 2025, including a 10% dividend increase. RevPAR rose 3% annually, outperforming forecasts of 2.6%, driven by U.S. demand, though China saw a 4.8% decline. IHG also acquired European hotel brand Ruby for $116 million, while its annual operating profit met market expectations.

HSBC Holdings PLC (HSBA) +1.91%

HSBC reported annual pre-tax profit of $32.31 billion, slightly below estimates, with revenue falling to $65.85 billion from $66.1 billion in 2023. Q4 profit before tax nearly doubled to $2.3 billion. These are the bank’s first full-year results under CEO Georges Elhedery, who took over in July. HSBC recently cut around 40 investment banking roles in Hong Kong, mainly in M&A, consumer, real estate, and energy sectors. The lender is undergoing a major restructuring, splitting operations into Eastern and Western markets. HSBC’s Hong Kong shares rose over 23% in 2023.

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