Thursday, November 15, 2018 / 02:05 PM / InvestData
The recently concluded quarterly earnings reports season of listed companies on the Nigerian Stock Exchange, as would be expected, showed actual financial health and where they really stand, going into end of their financial year.
Generally, the numbers for the period under consideration came below expectation and market forecast, especially the top line, where over 40% of them released flat profitability levels, despite the mild growth in bottom line.
It must be noted that the Q3 corporate earnings sales growth rate were very slow and weak, following through from the previous quarters’, reflecting the nation’s economic fundamentals and cycle after a recession in 2016/2017.
A look at the Q3 numbers as a whole, by matching the actual numbers with expectations, and benchmarking them against those of the corresponding period of last year, we would see an obvious underperformance by way of weakened sales revenue as mentioned earlier. Profit levels were slightly above average in the period under review, due mainly to cost cutting measures as well as extraordinary incomes, which are mostly one-off.
Amongst the banks, for example, the rising oil price before the recent pullback impacted positively on the loan book, given that a sizeable chunk of their exposure was to oil companies, as well as the power sector. This enabled players in the oil and gas to sector repay their loans, including some that had been written off and duly provisioned for, which is why some of the banks reported write-back of such previously provisioned “bad and doubtful” loans, resulting in bigger profit margins.
Positive surprises were very few in the recent Q3 earnings season, a repeat of what happened in the half-year outing, when there were a few companies with positive revenue and earnings surprises.
One thing that is not in doubt is the weak economic activities and declining economic growth rate reflected in the recent corporate earnings picture, as numbers from many notable companies in the Industrial Goods, Consumer Goods and Healthcare, among other sectors came weak. This is due to an unholy alliance of factors like high production and, or operating cost, weak purchasing power of Nigerians and unstable government policies, all conspiring to make companies listed on the Nigerian Stock Exchange and many others operating in the country under-perform.
These takeaways have given insights into what should be expected by the first quarter of 2019, when the 2018 full-year audited numbers will pour in and whether the directors of these companies will recommend distribution of juicier dividends. It will also be a period when some will make a leaner offering, or regrettably, none at all. Historically too, the full-year earnings season is a time that witnesses the that attracts more participant to the equity market due to expectations of dividend rewards. The possibility of dividend cut is high going by the numbers released so far by these companies.
This is why how investors can play the dividend season intelligently with the help of deep research is part of topics slated for discussion at INVEST 2019 TRADERS & INVESTORS SUCCESS SUMMIT put together by Investdata Consulting Ltd.
Take advantage of low prices in the market today to position in the right stocks that would ensure you recover you lost grounds and grow your income.
To track the prices and earnings trend of selected stocks on the Nigerian Stock Exchange, see Investdata Price & Earnings Tracking for the year. It will guide you on companies with numbers trending up or down fundamentally.
You will also see those companies that are positing negative numbers.