Mixed profits tipped for earnings season

All four of the companies involved in the Government's state asset sell-down will report over the coming weeks. Photo / Richard Robinson, Christine Cornege, Peter Meecham

Analysts have mixed views on the outlook for the upcoming earnings season as some of New Zealand's biggest and most widely held firms prepare to report their annual results.

All four of the companies involved in the Government's state asset sell-down will report over the coming weeks. Meridian Energy will be the first cab off the rank on August 18, followed by Mighty River Power on August 20 and Genesis Energy and Air New Zealand on August 27.

Craigs Investment Partners head of private wealth research Mark Lister said he expected particularly good results from Meridian and the national airline. Air New Zealand, which has been outperforming its competition, expects to report normalised earnings before tax of $300 million, a 17 per cent increase on the prior year.

"Meridian will almost certainly beat its [prospectus] numbers by a healthy margin," Lister said. "People will be expecting a pretty buoyant reporting season and I think, generally, it will be pretty solid."

Milford Asset Management executive director Brian Gaynor was less bullish, saying he was taking a "cautiously optimistic" approach to the earnings season as there was some concern New Zealand's relatively strong economic performance could take a turn for the worse. The market's main focus will be on companies' outlook statements and how they impact analysts' forecasts, Gaynor said.

Harbour Asset Management portfolio manager Shane Solly said a modest, single-digit lift in earnings was expected across the market, reflecting low revenue growth, but he did not expect "any real broad earnings weakness".

"Dividends should be maintained, with potential for some companies to increase dividends or consider other capital management activity," Solly said.

Lister said the many sharemarket listings in recent months had been a distraction for the market. "A good reporting season will, potentially, bring the focus back on to some of the blue chips and the established companies," he said.

Lister said companies with exposure to Australia - including casino operator SkyCity, Fletcher Building and healthcare distributor Ebos - could be impacted by that country's sluggish economic outlook.

Forsyth Barr analysts have forecast a 3.4 per cent lift in normalised profit, at an aggregated level, for the 48 companies reporting this earnings season.

While the building and transport sectors had a positive outlook, negative growth expectations from the utilities, retail and telecommunications sectors were depressing overall growth expectations for the market, Forsyth Barr said.

Telecom will change its name to Spark on August 8 before it reports its full-year result on August 22. Forsyth Barr said the telco's result would be driven by cost reduction efforts.