By Silvano Grimaldi, CEO of the independent asset management firm Grimaldi & Partners AG.
Monthly Review
International equity markets ended September 2024 mostly with gains.
Driving Factors
- A significant 50-basis-point interest-rate cut by the Federal Reserve at its September meeting.
- Investor expectations of more accommodative monetary policy in the United States and China.
- Growing hopes that the US economy could avoid a recession.
- In response to China’s weakening economy, the People’s Bank of China announced extensive measures to stimulate economic activity, including plans to reduce interest rates on existing mortgages.
Stock in Focus
Straumann Adjusts Its Full-Year Targets and Divests DrSmile
Straumann once again delivered a positive surprise.
In addition to divesting its slower-growing DrSmile aligner business, the dental-implant manufacturer reported unexpectedly strong results for the first half of the year and revised its full-year targets.
During the first six months, Straumann generated revenue of CHF 1.27 billion, representing growth of 11.3%.
Organic growth, excluding acquisitions and currency effects, reached 16.1%, compared with 7.5% in the previous year.
DrSmile was already excluded from these figures. Including DrSmile, organic growth would have been considerably lower at 12.9%.
The sale of the aligner business affected not only the results for the first half of the year but also Straumann’s full-year outlook.
For 2024, the company now targets:
- Low double-digit organic revenue growth, compared with its previous high single-digit forecast.
- A margin of approximately 27% to 28% at constant exchange rates, compared with around 26% previously.
During the first six months, the operating profit margin reached 26.4%, while EBIT increased to CHF 336 million, compared with CHF 312 million in the previous year.
The core operating profit margin, excluding certain exceptional items, reached 27.8%.
Corresponding core EBIT increased to CHF 354 million, compared with CHF 332 million previously.
Normalisation Expected
CEO Guillaume Daniellot explained that the revenue guidance appeared relatively cautious because of uncertainties surrounding the second half of the year.
Although the US market performed better during the second quarter than during the first quarter, the outlook for the US economy remained subject to certain risks.
Management also expected growth rates in Asia, currently Straumann’s strongest-growing region, to slow moderately.
This was primarily linked to the Chinese market, where Straumann expected a gradual normalisation of growth.
Daniellot anticipated that the company could achieve annual growth of between 15% and 20% in China.
The announcement was received very positively by investors and analysts, as demonstrated by a share-price increase of more than 13%.
A JPMorgan analyst noted that, following a generally disappointing reporting season in the dental sector, Straumann had delivered an exceptionally strong quarter and increased its profit.
Outlook – October 2024
Opportunities
- Strong Q3 reporting season: The upcoming reporting season for the third quarter of 2024 could reveal solid corporate earnings that are mostly better than expected.
- Positive seasonality: October traditionally marks the beginning of a historically favourable period for equity markets, often associated with positive returns.
Risks
- Escalation in the Middle East: The conflict could develop into an uncontrolled escalation and place pressure on global markets.
- Technology-sector earnings disappointments: Negative surprises in published earnings figures from major technology companies could weigh on investor sentiment.
Performance Expectations
For October 2024, we expect an upward trend in international equity markets.
Stock Recommendation: Straumann
This publication is provided for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument. Past performance is not indicative of future results.
