Why market blows cold despite good fundamentals/earnings reports

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The Nigeria’s corporate environment has well encountered successive remarkable profit seasons, judging by quarterly earnings we’ve seen in recent times and investors seems really don’t care.

Most significantly, the market reactions to the First-quarter 2018’s reports so far are turning one of the market’s most time-honored truths on its head, “that profits drive prices”. Despite fantastic earnings growth reported by many companies the general market performance seems to be in topsy-turvy, and the market has little or no regards for good earnings or positive economic indicators as the season accelerates.

That was true again last week, when a slew of high-profile beats couldn’t push the overall market much higher as traders hammered even some companies that beat expectations. In fact, out of 5 trading sessions of the week, 4 turned decidedly negative, with just 1 surviving the slay.

It is pretty amazing when you look at it, a market that’s having an equal and opposite reaction to a prevailing economic fundamental realities. It’s a very difficult market to please right now.”

Companies like Guaranty Trust Bank and some others that have topped earnings estimates have seen a sluggish trail in their share price with some of them frequently enlisted on the NSE daily losers chart in recent trading sessions.

Indeed, investors have been indecisive, perhaps because they have more on their minds than just bottom-line profits.

Among the popular concerns are the fear of an alleged looming crisis in the buildup to the forthcoming general elections couple with the security challenges ravaging the most populous black Nation.

However, market reactions are in cycles, investors probably are looking ahead at future earnings and if that is as well spectacular, as those seen so far in recent times, we might likely see a positive turn in investors’ sentiments.

Mutual Benefits Assurance Plc, which is one of the major insurance firms listed on the Nigerian Stock Exchange (NSE) fell into the category of companies that ended full-year 2017 with a fall in profit.

The company in its results made available last week had reported a loss after tax of over N1billion in its 2016 full-year reports but has recorded about 175% recovery in its 2017 full-year reports, declaring an excess of over N1billion as profit after tax.

The company’s gross premium written for full-year 2017 stood at about N14billion, up 16% from about N12billion declared the previous same period.

Shareholders’ earnings per share also grew 176% from a negative 17kobo to 13kobo per share.

The underwriter also grew its first quarter 2018 top and bottom-line figures according to its reports by 27% and 3% respective, as the gross premium written grew from N3.7billion to N4.7billion and profit after tax grew N654million to N671million in the corresponding period.

Courteville

Courteville Business Solution Plc , Computer Based Systems company in ICT sector has also announced its 2017 q4 results with a 0.9% marginal decline in revenue from N1.13billion to N1.12billion.

The company’s profit after tax though very insignificant, grew from N36.8million to N39.8million in the corresponding period.

 

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