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

 

Housing: Affordability Drops 14%, Driven By Auckland Prices

Housing affordability across New Zealand fell 14 percent in the year ending November 2014, with Auckland’s lack of affordability set to reach levels it hit during the height of the global financial crisis, according to the latest Massey University Home Affordability Report More>>

ALSO:

The Dry: Fonterra Drops Forecast Milk Volumes By 3.3 Percent

Fonterra Cooperative Group, the worlds largest dairy exporter, reduced its milk volume forecast for the 2014-2015 season by 3.3 per cent due to the impact of dry weather on production in recent weeks. More>>

ALSO:

Strike: Lyttelton Port Workers Vote To Escalate Dispute

Members of the Rail and Maritime Transport Union (RMTU) at Lyttelton Port today voted to escalate their industrial action. Around 200 RMTU members have been operating an overtime ban since 17 December and today they endorsed a series of full withdrawals of labour at the port. More>>

ALSO:

Scoop Business: NZ Dollar Falls To 3-Year Low As Investors Favour Greenback

The New Zealand dollar fell to its lowest in more than three years as investors sold euro and bought US dollars, weakening other currencies against the greenback. More>>

ALSO:

Scoop Business: NZ Govt Operating Deficit Smaller Than Expected

The New Zealand’s government’s operating deficit was smaller than expected in the first five months of the financial year as a clampdown on expenditure managed to offset a shortfall in the tax-take from last month’s forecast. More>>

ALSO:

0.8 Percent Annually:
NZ Inflation Falls Below RBNZ's Target

New Zealand's annual pace of inflation slowed to below the Reserve Bank's target band in the final three months of the year, giving governor Graeme Wheeler more room to keep the benchmark interest rate lower for longer.More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news