The reporting season kicks off next week and we can expect a plethora of releases across the NZX.
About two thirds of the companies on our market will report earnings through August and September.
Six out of ten are forecast to see profits improve on the previous year, with the median change in earnings expected to be an increase of about three per cent.
That’s a little lacklustre, but it’s no surprise when you consider where the economy is at.
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We’ve ran into increasing economic headwinds over the past six months.
Higher interest rates and the rising cost of living have taken money out of our collective pockets, so we might see softer numbers from the likes of KMD Brands (formerly Kathmandu), Michael Hill and The Warehouse.
Margins will be under pressure for many, with Restaurant Brands warning investors just a few days ago that rising ingredient and wage costs will impact its earnings.
Other companies tied to the economic cycle will be worth keeping an eye on for evidence of a slowdown too, such as Freightways and Move Logistics.
Another part of the world that looks particularly challenged at present is China, which hasn’t reopening with the same vigour many were hoping for in 2023.
Our agricultural sector is facing the brunt of this, with weaker demand pushing dairy prices to three-year lows. Cautious guidance might be forthcoming from a2 Milk and Skellerup as a result.
The construction sector will also be in the spotlight, with earnings releases from Fletcher Building, Steel & Tube and Vulcan Steel likely to reflect a challenging backdrop.
The news won’t all be downbeat though, with several listed companies likely to strongly swing back into profitability.
Air New Zealand, Auckland Airport, Sky City, Tourism Holdings and Vista Group were grappling with border closures and other pandemic-related disruptions a year ago. Those clouds have lifted in 2023.
Sky TV could be another one to watch. The company is in a much more stable position these days, with customer churn having subsided and key content locked in.
Then you’ve got the more reliable performers which tend to grow earnings and dividends steadily no matter the conditions.
Solid but unspectacular is likely to be the order of the day for EBOS Group, Mercury, Meridian Energy, Spark and Vector.
As always, outlook commentaries will be very important to investors. These are likely to be muted, with management teams cognisant of a raft of looming uncertainties.
However, there are bright spots on that front too.
While costs are still rising, we’re past the worst and labour shortages are beginning to abate. House prices have stabilised and interest rates are close to a peak.
The election is still creating some uncertainty, but in a couple of months we can put that behind us and refocus on the task at hand.
Recent polls suggest a change of government is increasingly likely, which could be another positive for business confidence.
One final positive is that the local sharemarket has been relatively quiet this year, which means huge expectations aren’t baked into share prices.
The NZX 50 index is up four per cent in 2023, which puts it 12.7 per cent above the lows from June last year.
That’s a solid rebound, although it’s still some way below the 2021 peak and a far cry from the 25 per cent rally we’ve seen from world shares since October last year.
In aggregate, the next several weeks will allow us to take the pulse of corporate New Zealand, providing some real-time insights into where the economy is at and where it’s headed.
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.
Mark Lister
Investment Director
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.