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

 

ETS Review: Modelling Documents Released

Three technical documents are being released to help New Zealanders engage with the Emissions Trading Scheme (ETS) review, Climate Change Minister Paula Bennett says. More>>

ALSO:

Northland: Govt Plan Targets Transport, Web, Maori Assets

The government has released a 10-year plan to attract investors and lift economic growth in Northland, a region that perennially underperforms the rest of the country even while being endowed with natural beauty, productive land, minerals, a potential workforce, scope for manufacturing, forestry and aquaculture, and proximity to Auckland. More>>

ALSO:

Statistics: Unemployment Rate Falls To 5.3 Percent

The unemployment rate fell to 5.3 percent in the December 2015 quarter (from 6.0 percent), Statistics New Zealand said today. This is the lowest unemployment rate since March 2009. There were 16,000 fewer people unemployed than in the September ... More>>

ALSO:

Employment: Labour Urges Talley’s To End AFFCO Lockout

Labour has urged Talley’s to resolve the ongoing industrial dispute with AFFCO workers which is having a severe effect on the employees, their families and their communities, Labour’s Workplace Relations spokesperson Iain Lees-Galloway says. More>>

ALSO:

Three Kings: Govt To Oppose Appeal Blocking $1.2B Auckland Housing Plan

Environment Minister Nick Smith and Housing New Zealand have joined legal proceedings in support of Auckland Council and Fletcher Building opposing a bid by community groups to only allow low-rise housing in a $1.2 billion housing redevelopment on the disused site of the Three Kings quarry. More>>

ALSO:

Transport: Jetstar Expands Regional Network With Three New Routes

More New Zealanders than ever before will have access to Jetstar’s affordable flights when new services take off today from Auckland to New Plymouth and Palmerston North, and Nelson to Wellington. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news