Corporate Earnings as Big Picture for Short and Long-Term Price Movement


Tuesday, July 17, 2018 12:00PM / Invest Data


No doubt, statistics from the Nigerian Stock Exchange (NSE) have established great facts about the great improvements recorded in corporate earnings over the past five quarters, reflecting the positive impact of monetary policy stimulus of the CBN on the economy, especially on the manufacturing sector. Recall that the CBN’s introduction of flexible exchange rate led to its creation of the import and export foreign exchange window, following which there has been sustained intervention which has stabilized the exchange rate of the Naira against international currencies, thereby boosting economic activities. 

Sometimes, earnings reports released by companies through the NSE portal look complex to digest due to a barrage of numbers and statistics that confuse the average investor, particularly when it comes to calculating revenue and the earnings or describe reasonable growth or impressive performance.  

In this write up therefore, we are looking at the Q1 numbers and expected second quarter earnings season. 

An earnings season does not only provide good or bad news about listed companies. It reveals the financial health or otherwise of any company which is what equity prices feed on to move in the short, medium, or long-term depending on the strength of the company numbers, its direction and the perception of investors, judging from the macro-economic conditions and overall perception about the company. 

Also, a company’s earnings report is the scorecard of its board and management, performance of its product lines, technology and innovation.  

The rate at which companies on the floor of the Nigerian Stock Exchange have surpassed market and analysts forecast before now is a pointer to the fact that healthy companies are emerging to drive stock prices in this volatile market, particularly post the 2019 general elections. This is based on the prevailing low stock valuation that has followed the sustained price corrections as investors adopt a wait-and-see attitude at time of insecurity in the land and a glaring failure by those who should, to reassure investors. 

Such robust earnings have been seen across every sector on the NSE, except for some consumers goods and banking stocks, whose profitability levels were constrained due to the adoption of IFRS 9 in their reporting for broader disclosures and provisioning that had eaten into the bottom-lines of the banks.  

Notwithstanding the current divergence between the stronger earnings and weaker prices of equities, there are other factors such as the weakening of forces behind the market like liquidity and cautious trading by investors and traders. Besides the political risk, factors driving these earnings have become weak due to the economic slowdown, a situation that has been made worse by the late approval of the 2018 budget. 

Also important is the effect of the hike in interest rate by the U.S which made that country’s treasury investment window attractive, piling pressure on emerging markets like ours. 

Thankfully also, is the fact that the nation’s robust external reserve has supported its FX market, ensuring a relatively stable exchange rate and helping to attract foreign funds in the forms of portfolio and direct investments. This is not forgetting the impact of stable crude oil price, which has also impacted government revenue and economic data. 

However, and sadly too, the Nigerian stock market has so far not rewarded these great and impressive data as volatility and pullbacks continue seemingly unabated, as it traded sideways even after the 2017 full-year and Q1 earnings seasons.    

Going forward, and with many companies notifying the exchange of their closed period preparatory to the release of their half-year numbers (when their directors, management staff and key stakeholders and their families, are forbidden from trading in their shares), we are going to see results hitting the market this week. Already, Trans-Nationwide Express, on Friday became the first to file its un-audited half-year score-card showing a 20.3% rise in net profit at N4.444bn, faster than the flat 1.69% limp in revenue for the period.  The inflow of more results is expected to further give an aggregate picture of the state of the economy and particular companies. 

Meanwhile, we expect election campaign spending and implementation of the 2018 budget to boost consumption and better Q3 numbers in the coming months, which will drive prices post-election, while investors await the outcome of 2018 full-year next year.

The market is expected at some point to find direction and recognize the score-cards, which would form the very strong foundations. When that come, stock prices will begin to rise again as long as the external factors do not deflate the buying interest of investors further. 

Statistics can cloud a very clear picture, but numbers do not lie, because when manipulated it will expose you someday. It is therefore necessary for investors to seek advice and make use of necessary analytical tools before making any investment decision. 

It is less than two months to the expiration of the 30-day deadline for companies quoted on the Nigerian Stock Exchange (NSE) with June 30 as year-end to lapse, as contained in their post-listing requirements, their expected earnings release date has been estimated by Investdata. This is based on their historical reporting timelines. 

It is expected that more earnings reports will hit the market in the month of July and August, coupled with more companies joining the bandwagon of paying interim dividends, particularly the back and consumer goods makers. Such earnings are expected to add momentum to the market for the Q2 earnings season as investors look forward to cash or scrip dividends from full-year and half-year accounts of companies, depending on the strength of such reported earnings. 

Research reveals that increasing number of companies on the exchange are complying with their post-listing requirements, while the NSE’s compliance code will guide investors to know those that regularly provide information to the investing public.


Table 1: Interim Dividend and EPS Analysis

Company Name

Released Date

Q2 Interim Dividend

Q2 EPS 2017

Q1 2018 EPS

Est. Dividend

Africa Prudential

18th July 2017





Dangote  Sugar

01st July 2017





Access Bank

23rd Aug 2017





Axa Mansard

28th July 2017





Custodian & Allied

1st Aug., 2017






15th Aug. 2017





Zenith Bank

10th Aug. 2017





Stanbic IBTC

29thAug.  2017






24th Aug, 2017






28th July 2017







Q3 2017

Q1 2018



28th July 2017






26th Oct 2017






29th Oct 2017























Source: Company Financials, Invest Data

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