Target Shares Surge on Profit Growth Amid Modest Sales Forecast

LOCAL MARKET COMMENTARY

The Top 40 index and the All Share index both closed approximately 0.3% higher on the stock market, ending at 76,894 and 84,026 points, respectively. Consumer inflation in South Africa fell more than expected to 4.6% in July, down from 4.8% a year ago and 5.1% in June, according to the statistics agency. This figure is close to the central bank's target of 4.5%, leading economists to anticipate a 25-basis point rate cut on September 19. JSE-listed RCL Foods, controlled by Johann Rupert's Remgro, announced a significant increase in earnings for the year ending June 30, 2024. Meanwhile, Spur Corporation, another JSE-listed company, reported an 11.4% growth in headline earnings per share, reaching 291.02 cents for the same period.

EUROPEAN MARKET COMMENTARY

European stock markets closed higher on Wednesday, recovering after a recent dip. The U.K.'s public sector net borrowing increased to £3.1 billion in July, up by £1.8 billion from the previous year, exceeding the forecasted £2.5 billion. Borrowing for the first four months of the year was £4.7 billion above the Office for Budget Responsibility's March forecast. The rest of the week is expected to be quiet for European data, with the main focus on the flash purchasing managers' index figures for the euro area due on Thursday.

US MARKET COMMENTARY

U.S. stocks edged higher on Wednesday amid cautious trading, as investors digested a significant downward revision in payrolls data and the release of minutes from the Federal Reserve's July meeting. The minutes reinforced expectations for a potential rate cut in September, even before recent reports showed cooling inflation and a softening economy. All three major U.S. stock indexes closed modestly up. The Labor Department's revision reduced the previously reported 2.9 million payroll gains by 818,000, marking the steepest downward adjustment since the global financial crisis.

ASIA MARKET COMMENTARY

Asia-Pacific markets opened mostly higher this morning as investors focused on business activity data from Australia, Japan, and India. The Bank of Korea maintained its benchmark interest rate at 3.5%, as expected, but traders are closely watching its press release for hints of potential policy easing. In Japan, business activity accelerated in August, with the composite purchasing managers index rising to 53.0 from 52.5 in July. Japan's manufacturing sector returned to growth, while the services sector experienced faster expansion.

CURRENCY MARKET COMMENTARY

On Wednesday, the South African rand weakened as July's inflation dropped to a three-year low, reinforcing analysts' expectations that the South African Reserve Bank may cut interest rates next month. The dollar hovered near its lowest level in over a year against the euro and sterling this morning, as a dovish stance from the Federal Reserve and new signs of weakness in the U.S. job market bolstered expectations for interest rate cuts.

COMMODITY MARKET COMMENTARY

Gold prices dropped this morning, pulling back from the record highs reached earlier this week as the U.S. dollar strengthened ahead of key U.S. jobs data and a speech by the Federal Reserve Chair, which could provide more clarity on the future of interest rates. Meanwhile, the recent sharp decline in crude oil prices paused as anticipation of a Federal Reserve rate cut helped offset concerns arising from weak economic data from both the United States and China.

Sabvest Capital Limited (SBP) -2.98%

The company's financial results for the first half of 2024 show a slight increase in net asset value per share (7.8% from December 2023 and 2.8% from June 2023) and shareholders' funds (5.7% from December 2023 and 0.4% from June 2023). Dividends per share rose by 16.7% to 35 cents compared to the same period last year. Total comprehensive income increased significantly by 60.3% to R319.8 million, and earnings per share saw a notable rise of 63.2% to 826.1 cents. The number of shares in issue decreased slightly over the period.

Spur Corporation Limited (SUR) -1.15%

Key highlights for the period include a 11.5% increase in franchised restaurant turnovers to R10.62 billion and a 14.1% rise in revenue to R3.47 billion. Earnings per share grew by 10.7% to 287.92 cents, while diluted earnings per share increased by 8.7% to 281.31 cents. The dividend per share also saw a 10.9% increase to 213 cents. Profit before tax rose by 7.3% to R341.7 million, and headline earnings per share improved by 11.4% to 291.02 cents. The company reported unrestricted cash of R365.7 million as of June 2024, with a return on equity of 29.6%.

DRDGOLD Limited (DRD) -6.42%

For the year ending June 2024, the company reported a 14% increase in revenue to R6.24 billion and a 14% rise in operating profit to R2.08 billion. Earnings per share grew by 3% to 154.3 cents, while headline earnings per share increased by 4% to 154.1 cents. However, the final dividend per share dropped significantly by 69% to 20 cents.

Curro Holdings Limited (COH) +2.73%

In the first half of 2024, Curro saw a 0.5% increase in average learner numbers to 72,758, with revenue rising by 8.3% to R2.59 billion. EBITDA grew by 10.4% to R625 million, while recurring headline earnings increased by 12.3% to R228 million. Both recurring headline earnings per share (RHEPS) and headline earnings per share (HEPS) rose by 16.2% to 40.2 cents. Earnings per share (EPS) also saw a 20.4% increase to 40.2 cents. The Board decided not to declare a dividend for the period, maintaining their policy to distribute 20% of recurring headline earnings annually.

Target Corporation (TGT) +10.34%

Target reported a 3% increase in sales for its fiscal second quarter, marking a return to growth after a period of slow sales and reduced profits. The company now expects full-year comparable sales to be flat to up 2%, likely at the lower end of that range. However, Target raised its profit guidance, forecasting adjusted earnings per share between $9 and $9.70, up from the previous $8.60 to $9.60 range. For the quarter ending August 3, Target reported earnings per share of $2.57, beating the $2.18 expected by analysts, and revenue of $25.45 billion, exceeding the expected $25.21 billion. Net income surged over 40% year-over-year to $1.19 billion, or $2.57 per share. Following this positive report, Target's shares closed 11% higher on Wednesday.

Zoom Video Communications Inc. Class A (ZM) +1.86%

Zoom Video Communications raised its annual revenue forecast on Wednesday, citing strong demand for its AI-powered collaboration tools, which are increasingly used in hybrid work environments. The company also announced that CFO Kelly Steckelberg will be stepping down. Following the news, Zoom's shares rose 3% in after-hours trading. The company now expects fiscal 2025 revenue to range between $4.63 billion and $4.64 billion, slightly above its previous forecast. Zoom's second-quarter revenue reached $1.16 billion, surpassing analysts' estimates of $1.15 billion, while adjusted earnings per share were $1.39, beating the expected $1.21.

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