Source: Radio New Zealand
Investment firm Forsyth Barr said 2025 looked to have ended on a strong note and it would be looking for revenue and profit margin growth. RNZ
The six-monthly company reporting season is about to start, with high hopes that earnings will start to reflect the turnaround in the economy.
Investment firm Forsyth Barr said 2025 looked to have ended on a strong note and it would be looking for revenue and profit margin growth.
“Many NZ corporates have had three-plus years to right size their businesses, therefore how they speak to operational improvements, cost control, and operating leverage will be key,” Forsyth Barr analysts said.
“This season will be the first litmus test.”
Sharesies head of data and analytics Jordan Cunningham said its customer base would be looking closely at the dividend payout of the big four power companies – Meridian, Contact, Mercury and Genesis.
“Expectations going into this earning seasons are quite subdued, but we think that our investors will be looking to New Zealand stocks in particular for dividends, if they’re looking for that growth potential for New Zealand.”
Power companies were also regarded as defensive stocks, often able to avoid or withstand market volatility.
Cunningham said only about 15 percent of the funds invested on the platform were in NZX-listed companies, with strong support from Air New Zealand, Auckland Airport and Spark.
“Despite that strong US focus, there really is still growing trading in New Zealand, and a really strong buy-to-sell ratio… In recent months for every dollar sold $1.50 was bought.”
The good, the bad, the ordinary
Forsyth Barr expected about 40 percent of reporting companies to have a positive outlook, including speciality milk company A2 Milk, healthcare and pet food firm EBOS, Port of Tauranga and casino operator SkyCity, despite its torrid time in recent years.
A similar proportion was likely to have a neutral outlook, with a handful of companies with potential to disappoint the market.
Among them was the national carrier Air New Zealand, which was expected to deliver a first-half loss, but with hopes of a more positive second-half outlook.
Forsyth Barr senior analyst Matt Montgomerie said companies most exposed to the economic cycle and which were hard hit by the recession such as building product firms, retailers, and service businesses might surprise on the upside.
He said many of the firms had aggressively cut costs, but might not be in a hurry to start spending again.
“This reluctance to re-expand costs creates strong operating leverage … As a result, net earnings growth during upswings can surprise to the upside, often materially outpacing consensus expectations.”
Window on recovery
Amova Asset Management head of equities Michael Sherrock said company reports should provide a steer on the economic turn around, with companies such as transport firm Freightways something of a bellwether.
“For the likes of Freightways, what is customer volume growth looking like? Six months ago, they started to see some pickup in that customer volume growth. How that’s tracking since they last updated the market.”
“The likes of SkyCity as well, somewhat cyclically exposed, but also some regulatory type of issues as well.”
Sherrock, the casino and hotel operator, has been required to implement carded play on pokie machines, and has just taken over the International Convention Centre, which would be pointers for the company’s future earnings.
Others to watch included Fletcher Building, pharmaceutical supplier and pet retailing chain EBOS and Sky Television.
“The market will be very, very focused on (EBOS) given that stock (price) has fallen … on the back of a disappointing result last year. They’ve got a new CEO. What are they telling the market ? And hopefully it’s a positive story, and there’s no disappointments.”
He said Sky TV would be watched to see if it delivered on plans to pay a dividend this year.
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
