Coherent beats Q4 estimates and issues strong AI-driven guidance

Market Commentary

South African Market Summary

South African equities weakened on Wednesday, with the JSE All Share declining 0.83% to 114,980.89 and the Top 40 falling 0.81% to 107,214.40. Shoprite Holdings said it expects annual headline earnings to increase by as much as 14.7%, supported by continued sales growth and expansion in its core grocery operations. Merchandise sales from continuing operations for the 52 weeks ended 28 June rose 7.2% to approximately R270.8 billion from R252.7 billion a year earlier. Investors are now awaiting June mining production data for further indications on domestic economic conditions. Separately, the Constitutional Court rejected a direct application to appeal a lower-court ruling that halted public hearings by a committee investigating whether the president should face impeachment proceedings.

European Market Summary

European equities eased from record highs on Wednesday as investors assessed corporate earnings and Middle East developments, while benign US inflation reduced concerns over a September Federal Reserve rate increase. The STOXX 600 fell 0.16% to 659.48, although recent gains have been supported by robust earnings, with LSEG estimating second-quarter earnings growth of 22%. Kingspan rose 7.6% after announcing the €850 million acquisition of BMC Manufacturing. London’s FTSE 100 declined for a third consecutive session, despite Balfour Beatty reaching a record high after raising its annual forecast. Investors now await UK GDP data, expected to show no month-on-month growth in June, while markets price a 46% probability of a 25-basis-point Bank of England rate increase in December.

US Market Summary

The S&P 500 and Nasdaq closed higher on Wednesday as stronger results from artificial-intelligence infrastructure companies and benign US inflation supported sentiment. July consumer prices increased only modestly as gasoline costs fell for a second consecutive month, while underlying inflation remained subdued, reinforcing expectations that the Federal Reserve will leave rates unchanged in September. Traders assigned a 62% probability to a September hold, compared with previously balanced expectations between a hike and no change. AI-related shares led gains, with Super Micro Computer rising 19% after forecasting fiscal 2027 revenue above expectations. Nebius Group surged 34% following better-than-expected second-quarter results, while IREN gained almost 10% and Applied Digital advanced 4.9%.

Asian Market Summary

Asian equities advanced on Thursday after US inflation matched expectations, reducing expectations for further near-term Federal Reserve rate increases, while oil remained near $80 a barrel amid continued US-Iran deadlock over ending the Gulf conflict. In Japan, producer prices rose 7.2% year on year in July, following a revised 7.3% increase in June and below the 7.4% market forecast. Persistent wholesale inflation, alongside increasingly hawkish Bank of Japan communication, reinforced expectations for a September interest-rate increase. In Australia, the government announced A$2.5 billion ($1.76 billion) in support to keep Rio Tinto’s Tomago aluminium smelter operating beyond 2028. The package, jointly funded with New South Wales, will support 3 gigawatts of new electricity generation for the facility.

Currency Market Summary

The South African rand strengthened on Wednesday, trading near a five-month high as the US dollar weakened after inflation data met expectations and reinforced expectations that the Federal Reserve will leave interest rates unchanged in September. Sterling remained close to a one-month high against the dollar ahead of further UK and US economic releases later this week. The dollar eased 0.06% against the yen to 159.32 amid growing expectations that the Bank of Japan could raise interest rates next month, earlier than the previously anticipated December timetable. Those expectations were supported by Japanese wholesale prices, which increased 7.2% year on year in July. The dollar index was broadly steady at 99.93 against a basket of major currencies.

Commodity Market Summary

Oil prices fell more than $1 on Thursday as weaker demand expectations and rising US inventories outweighed persistent Middle East supply risks. OPEC cut its 2026 global oil demand growth forecast to 580,000 barrels per day, while the IEA now expects consumption to contract by 1.6 million barrels per day this year, versus a previous forecast of 1 million. US commercial crude inventories rose by 17.4 million barrels to 424.4 million barrels in the week ended 7 August, against expectations for a 1.4 million-barrel decline. However, stalled US-Iran talks and attacks on shipping through the Strait of Hormuz and Bab el-Mandeb continued to support prices. Gold reached a more than two-month high after US inflation met expectations.

Domestic Company News 

Shoprite Holdings Limited (SHP) +8.20%
Shoprite’s core Supermarkets RSA business, contributing 84.5% of Group sales, increased sales by 7.1%, adding R15.2 billion year on year, while like-for-like sales rose 2.0%. Internal selling price inflation remained subdued at 0.8%, below food and non-alcoholic beverages inflation of 3.9%. Checkers and Checkers Hyper sales grew 10.0%, while Shoprite and Usave increased 4.3%. Sixty60 sales advanced 34.5% to R25.5 billion, while adjacent businesses grew 57.4%. Supermarkets Non-RSA sales rose 11.0% in rand terms and 7.1% in constant currency. The Group opened a net 262 Supermarkets RSA stores during the year, taking the total to 2,839, while pharmacy sales increased 9.2% overall. No shares were repurchased during the reporting period.

Impala Platinum Holdings Limited (IMP) +0.56%
Implats expects materially stronger earnings for the year ended 30 June 2026, supported by improved precious and base metal pricing. Achieved revenue per 6E ounce sold increased 51% to R38,116, while refined and saleable 6E production rose 5% to 3.56 million ounces. Group EBITDA increased to approximately R43.6 billion and free cash generated improved to R22 billion. Headline earnings are expected at R21.8–R23.8 billion, with HEPS of 2,429–2,652 cents, versus R0.7 billion and 82 cents previously. Basic earnings are forecast at R30–R32 billion, including an R8.1 billion impairment reversal. Stock-adjusted Group unit costs increased 8% to R24,249 per 6E ounce. Results are expected around 3 September 2026.

Resilient REIT Limited (RES) +0.24%
Resilient declared an interim dividend of 274.38 cents per share for the six months ended June 2026, up 11.7% year on year, while headline earnings per share increased to 281.78 cents from 226.23 cents. Revenue rose to R1.99 billion and South African like-for-like net property income increased 6.0%, with portfolio vacancies stable at 1.9%. Retail sales increased 2.9%, while lease renewals and new leases were concluded at an average 3.2% above previous rentals. The loan-to-value ratio improved to 36.1% from 37.8%. Resilient reaffirmed FY2026 guidance for distribution growth of at least 9%, implying a minimum distribution of 534.56 cents per share, despite lower South African base-rate benefits not recurring in the second half.

Global Company News

Cisco Systems Inc. (CSCO) +2.86%
Cisco forecast fiscal 2027 revenue above Wall Street expectations, signalling confidence that demand for artificial-intelligence networking equipment will continue supporting growth. Fourth-quarter revenue increased 17.6% to $17.25 billion, ahead of estimates of $16.82 billion. AI infrastructure orders from hyperscale customers reached $4 billion in the quarter ended 25 July, taking fiscal 2026 orders to $9.3 billion as cloud providers and enterprises expanded infrastructure for generative AI workloads. Cisco expects first-quarter adjusted gross margin of 65%–66%, slightly below the 66.10% market estimate. Shares initially rose 3% in extended trading before falling more than 4%, reflecting elevated investor expectations after the stock had gained more than 60% since the start of the year.

Coherent Corporation (COHR) +8.24%
Coherent reported fourth-quarter revenue of $2.05 billion, ahead of the $1.99 billion analyst estimate, while adjusted earnings of $1.74 per share exceeded expectations of $1.61. Data centre and communications revenue rose to $1.62 billion from $1.02 billion a year earlier, supported by continued investment in AI infrastructure, although industrial segment revenue declined 16% and full-year operating cash flow fell sharply. For the first quarter of fiscal 2027, Coherent expects revenue of $2.2–$2.4 billion, above the $2.14 billion consensus forecast, and adjusted earnings of $1.85–$2.05 per share versus expectations of $1.77. The company said customer demand remains strong as production capacity expands and new growth platforms begin ramping.

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