Corporate Earnings As Big Picture For Short, Long-Term Price Movement

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 using numbers.
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 to advice at this point that you allow company numbers and technical analysis guide your 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.
The above table with the expected released date, last year’s dividend, Earnings Per Share and the current EPS is to guide you.

Save The Date: Investdata Stock Market Training Workshop

On Saturday, July 28, 2018, Venue Ostra Hall & Hotel Alausa Ikeja Opposite NNPC Gas Plant

Theme: Comprehensive Stock Trading & Investing Toolkit for Rest of 2018

Sub Topics

Review of 2018H1 Market & Economic Performance: How Fiscal Reforms and Stimulus Will Support the Market/Economy in 2018H2
In this presentation, the speaker will discuss how historically the Fiscal and Monetary policies have influenced Nigeria’s stock market, the implications for the second half and it would drive equity prices higher as recovery continues, impact of the new NSE market Structure.

2018H2 Trading Checklist: How to Find Winning Stocks in Nigeria’s Volatile Equity Market
After the prolonged correction, volatility is here to stay for the rest of 2018. Is it time to start worrying about losses suffered so far, a flattening yield curve or time to relax due to the outstanding earnings season? Better yet, is there a way to harness increased volatility to your advantage? Our facilitator, a stock market expert will show you how to handle increased volatility in 2018. He’ll offer insights into forces impacting today’s market. He will share, using real-time examples, his ultimate checklist to finding winning stocks propelled by volatility. This simple strategy allows you to quickly evaluate stocks and to better time entry and exit points, while understanding market forces moving your portfolio

How To Generate Consistent Superior Equity Returns and Income With Dividend Stocks
Here, the expert will discuss his approach to generating equity income by investing in undervalued dividend stocks, what he looks out for when trading dividend stocks at a discount to historical valuations on multiples of price to sales, earnings, cash flow, book value, and enterprise value to EBITDA. In addition, he requires companies to have positive operating cash flow over the past 12 months, with dividends covered comfortably by cash flow.

Powerful Patterns and Effective Strategies for Trading Shifts in Market Volatility
Recent and ongoing changes in market volatility present both risks and opportunities for discerning traders. Learn some of the most effective strategies for taking advantage of the high-probability trading opportunities available in equities, while minimizing risks associated with stock market trading. The six most powerful patterns in the market to trade, how to know which patterns and strategies to specialize in for consistent results and the critical difference between oscillating and momentum patterns.

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Ambrose Omordion
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https://investdata.com.ng/2018/07/corporate-earnings-as-big-picture-for-short-long-term-price-movement/