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

 

Scoop Business:
NZ Puts Seven New Oil And Gas Areas Put Up For Tender

A total of seven new areas will be opened up to oil and gas exploration under its block offer tendering system, as the New Zealand government seeks to concentrate activity in a few strategically chosen areas. More>>

ALSO:

Half Full: Dairy Payouts Steady, Cash Will Be Tight

Industry body DairyNZ is advising farmers to focus on strong cashflow management as they look ahead to the 2015-16 season following Fonterra's half-year results announcement today. More>>

ALSO:

First Union: Cotton On Plans To Use “Tea Break” Law

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>

ALSO:

Scoop Business: NZ-Korea FTA Signed Amid Spying, Lost Sovereignty Claims

A long-awaited free trade agreement between New Zealand and South Korea has been signed in Seoul by Prime Minister John Key and the Korean president, Park Geun-hye. More>>

ALSO:

PM Visit: NZ And Viet Nam Agree Ambitious Trade Target

New Zealand and Viet Nam have agreed an ambitious target of doubling two-way goods and service trade to around $2.2 billion by 2020, Prime Minister John Key has announced. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news