Taking Stock - HP shares were up more than 8%

In today's taking stock we discuss, Shares of HP were up more than 8% in extended trading Tuesday after the computer hardware maker reported better-than-expected quarterly results and strong guidance for the current quarter.

Research Team

Media,
Sasfin Wealth
Share now
article image

MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange rose for a second consecutive day and both major indexes closed at their highest yet as recovery in mining and local financial companies held the momentum. The JSE bucked a global trend where most major indexes either fell or stayed muted as concerns over Powell's nomination stoked concerns of higher interest rate, which would make the cost of capital dearer. The blue-chip Top 40 index ended up 0.28% to 64,566 points while the benchmark All-Share index was at 71,015 points. The resources index, which represents a basket of gold and platinum companies, gained over 1.5%.

 

 

EUROPEAN MARKET COMMENTARY

European stocks pulled back on Tuesday as market players monitored a Covid-19 surge, the prospect of U.S. rate hikes and the latest purchasing manager’s index (PMI) data for the euro zone. The pan-European Stoxx 600 provisionally closed down by 1.1%, with tech stocks falling 3.1% to lead the losses as most sectors and major bourses dipped into negative territory. Euro zone business activity growth jumped unexpectedly in November, but a fresh wave of Covid-19 infections across the bloc and surging prices soured the outlook for December.

 

 

US MARKET COMMENTARY

The Nasdaq Composite fell for the second consecutive day as higher interest rates appeared to put pressure on high-flying tech stocks, but shares of banks and industrial names moved higher in a split market on Tuesday. The decline in tech and other growth stocks comes as Treasury yields have jumped following President Joe Biden’s decision to select Fed Chair Jerome Powell for a second term on Monday. Higher rates are often seen as a negative for high-growth companies because their future earnings look less attractive as short-term yields rise.

 

 

ASIAN MARKET COMMENTARY

Asian markets fell this morning as investors extended a run of weakness, with inflation worries and expectations of tighter central bank monetary policy the centre of attention. New Zealand's central bank lifted interest rates for the second time in as many months earlier today, driven by rising inflationary pressure and as an easing of coronavirus restrictions supported economic activity. Next on the agenda in Asia is the Bank of Korea, which has its policy meeting Thursday.

 

 

CURRENCY MARKET COMMENTARY

The rand slipped further on Tuesday, trading near a one-year low, as the dollar held firm on bets for U.S. interest rate increases after Federal Reserve Chair Jerome Powell was nominated for a second term. However, the rand was 0.23% firmer at the close of the session, as it traded around R15.83 to the dollar. U.S. President Joe Biden on Monday nominated Powell over another candidate whom markets considered more dovish, reinforcing market expectations of U.S. rate rises next year. Higher rates in developed countries tend to drain capital away from higher-yielding but riskier emerging markets such as South Africa.

 

 

COMMODITIES MARKET COMMENTARY

Oil prices fell earlier today as the U.S.-led coordinated release of stocks from strategic reserves eased concerns over tightness in global supply, while investors took profits from the previous day's rally ahead of the U.S. Thanksgiving holiday. The United States said on Tuesday it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain, to try to cool prices after OPEC+ producers repeatedly ignored calls for more crude. Gold prices edged up this morning, although strength in the U.S. dollar and bets that the Federal Reserve could raise interest rates sooner kept the metal below the key $1,800 mark.

LOCAL COMPANIES

PPC (PPC) -3.4%

JSE-listed cement and building materials company PPC has delivered another solid financial performance, enabling it to further degear its balance sheet, and has indicated that it is getting to a point where it can consider again paying shareholders a dividend. PPC last paid a dividend six years ago in November 2015. Group CEO Roland van Wijnen confirmed on Tuesday that once the group has degeared its balance sheet to an appropriate level, it will lead to a situation where it can consider resuming dividend payments. “I think it is important for our shareholders to get a return on their investment. They have been waiting for a long time,” he said. Van Wijnen said PPC produced a resilient financial performance in the six months to end-September 2021, with its gross South African debt reduced to R1.7 billion. However, Van Wijnen said this does not yet include the about R500 million proceeds from the divestment of PPC and Botswana Aggregates, which will be used to further reduce the group’s South African debt. Group revenue rose by 20% to R5.1 billion and benefitted from a 12% increase in cement sales volumes and the positive impact of hyperinflation accounting on PPC Zimbabwe’s financials. Van Wijnen said the average producer price index for PPC South Africa Cement is at 9.2% and its price increases are on average between 4% and 8%. “The only reason that we have been able to increase our margin from 14.4% to 18.7% is on the back of the hard work done by the people in team PPC,” he said. Van Wijnen said the largest cost increases were electricity and distribution, with electricity costs increasing by 16%, distribution costs overall by 12% and “fuel higher than that”. Cash generation was strong and PPC settled a further R309 million in debt in the period. Basic headline earnings per share rose by 83% to 55 cents.

 

Brait (BAT) -9.5%

JSE and Luxembourg Stock Exchange-listed investment holding group Brait saw its share price slide over 10% (to around R4.o5) in morning trade on Tuesday, following the firm announcing plans for a capital raise of up to R3 billion that would go towards refinancing its debt. However, the stock ended the day around 9.5% down at R4.10. The rights offer was revealed together with the group’s interim results for the half-year ended September 30, 2021, which showed a 3% increase in NAV (net asset value) per share to R8.14. Brait notes that as an investment holding company its key reporting metric is NAV per share. The group says that it has already “secured commitments of R2.7 billion for a capital raise of up to R3 billion”.

 

Coronation (CML) -1.3%

Coronation Fund Managers reported an increase of 22% in headline earnings per share in the 12 months to September 2021 and hiked dividends by close to 23% – the consequence of an increase of 11% in assets under management to R634 billion by year-end. Gross management fees amounted to R4.26 billion compared to R3.64 billion in the previous year.

INTERNATIONAL COMPANIES

HP (HPQ) +0.8%

Shares of HP were up more than 8% in extended trading Tuesday after the computer hardware maker reported better-than-expected quarterly results and strong guidance for the current quarter. HP’s personal systems net revenue came in at $11.8 billion, up 13% year-over-year. The focus on enterprise was clear in this segment, where it showed a 3% year-over-year revenue decline in its consumer PC business but a 25% revenue pop in its commercial PC business revenue. Total PC unit sales were down 9%, however. The company’s printing business posted $4.9 billion in revenue, up 1% year-over-year. Commercial printing revenue was up 19% year-over-year while consumer printing revenue fell 6%.

 

Gap (GPS) -1.8%

Gap Inc. shares tumbled Tuesday after the company slashed its full-year outlook, with fiscal third-quarter results falling short as Covid-related factory closures led to significant product delays in the quarter. Its stock was recently down about 16% in extended trading on the news, having risen about 16% year to date. Gap said it swung to a net loss of $152 million, or 40 cents per share, from net income of $95 million, or 25 cents a share, a year earlier. Excluding items, it earned 27 cents per share, short of the 50 cents that analysts had been looking for, according to Refinitiv. Revenue fell slightly to $3.94 billion from $3.99 billion a year earlier. That missed expectations for $4.44 billion.

Download full report here

About the Author

Research Team
Media, Sasfin Wealth