Q2 corporate earnings seen on track with expectations
Citi study sees Cebu Pacific beating targetBy Doris C. Dumlao
Philippine Daily Inquirer
MANILA, Philippines–With the dawning of the second-quarter corporate reporting season, Citigroup expects Philippine banks, property, utilities and telecommunication companies to report earnings on track with market consensus while air transportation—particularly Gokongwei-led airline operator Cebu Air—is seen beating expectations.
Citi is also bracing for a potential missing of consensus estimates by consumer stocks and some conglomerates, based on a July 16 report that offered a preview of second-quarter corporate earnings across Southeast Asia.
Likely to beat expectations, the research said, was Cebu Air. “Lower jet fuel costs quarter-on-quarter and year-on-year, strong peak season in second quarter, and more rational competition domestically is seen to lift profits,” the report said.
Coming from a 19-percent year-on-year growth in the first quarter driven by banks and property counters, Citi said earnings growth for stocks under its coverage was likely to decelerate in the second quarter. But the softer second-quarter earnings growth, the research said, was in line with expectations.
The Citi research noted that for the full year, consensus estimates pointed to earnings rising 11 percent for the full year 2012.
In line with market expectations, the research said banks’ second-quarter earnings were likely to decelerate. The key trends cited were that loan growth might slow down to mid-teens level; net interest margins were likely to be flat to lower year-on-year with zero yield on bank reserves offset by the twin effects of higher benchmark lending rates and the move of some banks to cut savings deposit rates, and rising yields on government securities should trim trading income in the second quarter after strong gains in the first three months.
The property counter is also seen likely being in line with expectations. The Citi research said the “possibly higher-than-expected residential sales and progress completion from ramped-up project launches in the second half of 2012 will be tempered by higher interest charges from recent debt issuances.”
For telcos, Citi said an earnings decline in the second quarter was expected to be in line with consensus estimates. “Bulk of price repair benefits only expected to materialize in the second half,” the report said.
For utilities, the research said a strong top-line growth would likely be in line with market expectations. “High spot market prices could drive top-line of generation companies that sell to the spot market or have prices linked to spot market. Robust electricity demand could drive volumes of distribution companies,” the report said.
Results among conglomerates were seen mixed, with Metro Pacific Investment, Ayala Corp. and SM Investments likely being in line with consensus, the Citi research said. However, it said DMCI Holdings might miss market estimates due to lower coal prices.
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