Real economic pain is set to show up in company earnings reports this season. Video / Alyse Wright
It’s been a tough three years for anyone invested in New Zealand-listed companies, but this month’s busy earnings season could signal a turning point for some stocks.
“We’re wary about how [these] last 12 months have been but we’re seeing some green shoots,” Harbour Asset Management portfolio manager Shane Solly told Markets with Madison.
“Maybe we see a peak in energy costs, maybe we see a peak in interest costs? Certainly the tone has changed.”
More than 30 NZX-listed companies were set to report financial results this month, including heavy-hitters Fletcher Building, Spark, a2 Milk, Air New Zealand, Auckland International Airport, SkyCity, as well as retailers, property developers, retirement village operators, power generators, and steel distributors.
Expectations for most of their finances in the months up to now were not high, Solly said.
“We’ve seen a lot of companies that are cyclically exposed, so companies that depend on activity in the economy, those are the ones that have been hit really hard, down 15%, 20%, 30% in some cases in their earnings.
“Fletcher Building has been the unfortunate poster child for this earnings reset. That’s the sort of business that has been really put through the mill.”
Forsyth Barr senior equity analyst Aaron Ibbotson and senior quant analyst Matthew Leach said this earnings season was set to be the sixth in a row of negative revenue growth.
“Despite bad news being well-flagged, we enter earnings with expectations of more negative surprises than positives,” they wrote in a research note last week entitled The Dichotomy Edition.
They said a potential cut in the official cash rate this week may have more of an impact on the NZX than earnings would.
Companies closely tied to the economic cycle such as Fletcher Building were ones to watch this financial reporting season. Photo / Natalie Slade
If there was any silver lining from the profit pain caused by this economic cycle, it had put pressure on management teams and boards to perform, Solly said.
“I’m really excited about the structural changes that we’ve seen inside businesses.”
Watch Shane Solly discuss which stocks to watch this earnings season, and his timeline for a revenue recovery, in today’s episode of Markets with Madison above.
Get investment insights from executives and experts on Markets with Madison every Monday and Friday here on the NZ Herald, on YouTube and wherever you get your podcasts.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
