Weekly Outlook: Nvidia and Prudential first-half results

23 August 2024

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Hannah Williford

Monday 26 August

US durable goods orders

Tuesday 27 August

S&P Case Shiller US house price index
US Conference Board consumer confidence index
In Asia, quarterly results from CNOOC
In Australia, quarterly results from BHP
In Europe, quarterly results from Vinci

Wednesday 28 August

First-half results from Hochschild Mining
US oil inventories
In Asia, quarterly results from Cosco Shipping, Air China, China Construction Bank and Wuliangye Yibin
In Europe, quarterly results from Ageas and Brunello Cucinelli
In the US, quarterly results from CrowdStrike, NetApp, Bath & Body Works, Abercrombie & Fitch, Campbell Soup, Kohl’s, JM Smucker and Foot Locker
Nvidia first-half results
Prudential first-half results

Nvidia results

Magnificent Seven member and AI enabler Nvidia will release its second quarter results on Tuesday after the share price retreated this August in the market sell-off.

The semiconductor company is the world’s third-largest company in terms of market cap. Following the tech sell-off, Nvidia’s share price has increased again, but still remains below July’s peaks.

Danni Hewson, AJ Bell head of financial analysis, and Dan Coatsworth, AJ Bell investment analyst, said: “From a fundamental, earnings point of view, Nvidia has demolished consensus estimates and raised guidance for each of the past five quarters, which helps to explain its stellar share price performance.”

For the second quarter, chief executive Jensen Huang raised the bar yet again from the first quarter. He did, however, put more reserved expectations on near-term costs and profits.

“Whether he was just sandbagging the numbers or not, we are about to find out, and it is against that guidance that these second-quarter figures will be benchmarked,” Mould and Hewson said.

“Analysts will also look for any steer on what the third quarter and remainder of the year to end of January may look like.”

Nvidia has set a second-quarter sales guidance of $28bn, and forecasts for the third quarter sit at $30.7bn. Huang has given guidance of a gross margin of 75%, creating a net profit of $15bn.

Analysts will also have ears perked for the mention of the Blackwell data centre chipset, which had reported delays. The project was intended to accelerate in the second half of the year.

“The possible Blackwell glitch raises one small question and Nvidia’s balance sheet raises another. The company had to work through an inventory bulge in 2022 and has done a good job since,” the AJ Bell duo said.

“Inventory may be rising but given the strong sales growth that is hardly a surprise and inventory days are back to pretty normal levels, by historic standards, at around 95 days.”

Prudential Results

Prudential will share its half-year results on Wednesday following a year where the share price dragged down over a third.

The company’s share price has struggled without the strong support from the Asian markets of Hong Kong and China, which have not fully recovered in the wake of COVID-19. In 2022, Hong Kong was Prudential’s strongest market, following by Singapore and mainland China.

“After the spin-offs of London-headquartered fund manager M&G in 2019, a major fundraising in Hong Kong in 2021 and the demerger of America’s Jackson Life in 2022, Prudential is now a play on demand for financial services in Asia and Africa,” Mould and Hewson said.

“The firm is a leader in savings and health and protection products, and has a strong distribution network for bancassurance too (where banks sell insurance products). Prudential’s long-term strategy is to position itself for both population growth as well as increased prosperity and the rise of the middle class, as this is potentially the sweet spot for increased demand for financial products and services.”

Now, the financial objectives for Prudential include a new business profit compound growth of 15% to 20% from 2022 to 2027 and double-digit compound growth in operating free surplus for the asset management and in-force insurance through the same timeframe.

“This set of first-half results for 2023 will be the first step along that path and this set of figures will be judged in that context,” the AJ Bell duo said.

“After that, analysts and shareholders will assess four near-term metrics to gauge whether the results are good, bad or somewhere in the middle – the share price suggests expectations are low and little or no near-term growth is expected across key business lines.”

Near-term metrics include the annual premium equivalent, which grew by 37% last year, new business profit, which hit 45% last year, operating profit, which was $2.9bn in 2023, and dividend, which was 16.5p a share in 2023.

“Prudential launched a $2 billion share buyback programme in June, with target completion date of mid-2026,” Mould and Hewson said.

“That represents around 9% of the company’s current stock market capitalisation and supplements the 2.8% yield implied by the forecast 17.5p-a-share dividend.”

Thursday 29 August

US Q2 GDP growth
US pending homes sales
US weekly initial unemployment claims
In Australia, quarterly results from South32 and Qantas
In Europe, quarterly results from Pernod Ricard, Iliad and Delivery Hero
In the US, quarterly results from Dell, Marvell, Dollar General, Brown-Forman, BestBuy and Birkenstock