Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ earnings season may fall short of 'rock-star' economy

NZ 2014 earnings season may fall short of 'rock-star' economy

By Tina Morrison

Aug. 6 (BusinessDesk) - New Zealand's upcoming profit reporting season, which kicks off next week, is likely to contain a wide range of results, with the potential to disappoint investors who may have bet on the nation's "rockstar" economy to provide an underlying boost to earnings.

Of the 48 companies scheduled to report earnings over the coming weeks, brokerage Forsyth Barr estimates average sales growth of about 5 percent and earnings growth of about 3 percent, while earnings per share will probably decline about 0.4 percent on average.

The brokerage is expecting 13 of the companies it follows to post a decline in their latest six-month earnings of more than 20 percent, while 12 will likely report earnings growth of more than 20 percent.

"There's quite a dispersion of performance," said Rob Mercer, head of private wealth research at Forsyth Barr. "There's a lot of disappointing results coming through and there's a lot of positive results."

Retailers have been among the worst performers, pulled down by under-performances from Warehouse Group, Hallenstein Glasson Holdings and Pumpkin Patch, while Michael Hill International and Kathmandu Holdings are weighed down by short-term issues. By contrast, Briscoe Group and Restaurant Brands New Zealand are expected to post solid performances.

"The markets have gone up 25 percent over the last 18 months so equity markets have been pretty strong, pointing to a recovery in economic conditions, but it’s not easy work out there for sales growth," Mercer said. "You do get periods of intense competition and cycles for retailers. They do have to roll with the ebb and flow of the economy and the seasons."

Cyclical stocks such as Cavalier Corp. and Nuplex Industries have also struggled to grow earnings while New Zealand Refining is expected to post the biggest decline.

"We are continuing to see a better earnings pathway over the next few years but the current reporting season is going to remind people that there’s going to be quite a big dispersion of performances between those that are actually doing OK and delivering double-digit earnings growth and those that are actually still finding life fairly difficult.," Mercer said. "Most of these adjustments have already been worked through, we have already seen the downgrades and the upgrades come through and so share prices should already reflect that information."

"Generally speaking the market has shown some comfort around pushing aside the short term negative contributions and focusing on the medium to long term," he said.

Stocks expected to outperform include OceanaGold Corp, as it starts to deliver on new assets, and Ebos Group which is set to benefit from acquisitions. Air New Zealand is expected to show good growth while Metlifecare recovers and electricity companies post solid performances.

Investors will be most focused on the outlook for earnings in the current 2015 financial year, Mercer said.

"It’s not a market that’s cheap," he said. At current prices, shares aren't showing any discount to valuations, compared with an historical trend for a 10 percent discount, he said. "It’s hard to find good value for risk ideas at the moment," Mercer said.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Post-Post: Brian Roche To Step Down As NZ Post CEO

Brian Roche will step down as chief executive of New Zealand Post in April 2017, having led the state-owned postal service's drive to adjust to shrinking mail volumes with a combination of cost cuts, asset sales, modernisation and expansion of new businesses. More>>

ALSO:

Company Results: Air NZ Rides The Tourism Boom With Record Full-Year Earnings

Air New Zealand has ridden the tourism boom and staved off increased competition to deliver the best full-year earnings in its 76-year history. More>>

ALSO:

New PGP: Sheep Milk Industry Gets $12.6M Crown Funding

The Sheep - Horizon Three programme aims to develop "a market driven, end-to-end value chain generating annual revenues of between $200 million and $700 million by 2030," according to a joint statement. More>>

ALSO:

Half Full: Fonterra Raises Forecast Milk Price

Fonterra Co-operative Group Limited today increased its 2016/17 forecast Farmgate Milk Price by 50 cents to $4.75 per kgMS. When combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total payout available to farmers in the current season is forecast to be $5.25 to $5.35 before retentions. More>>

ALSO:

Keep Digging: Seabed Ironsands Miner TransTasman Tries Again

The first company to attempt to gain a resource consent to mine ironsands from the ocean floor in New Zealand's Exclusive Economic Zone has lodged a new application containing fresh scientific and other evidence it hopes will persuade regulators after their initial application was turned down in 2014. More>>

Wool Pulled: Duvets Sold As ‘Premium Alpaca’ Mostly Sheep’s Wool

Rotorua business Budge Collection Limited (Budge) and sole director, Sun Dong Kim, were convicted and fined a total of $71,250 in Auckland District Court after each pleading guilty to four charges of misrepresenting how much alpaca fibre was in their duvets. More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news