The local reporting season ramps up next week, putting many of our largest listed corporates under the microscope.
We’ve only seen a handful of releases so far, with most businesses choosing to schedule announcements for the last two weeks of August.
The sharemarket has rebounded over the last few months, with the NZX 50 index up more than six per cent from its recent lows and July the strongest month since April 2020.
However, we shouldn’t expect that optimism to be reflected in earnings releases, with many results likely to make for sombre reading.
These will cover the six months to the end of June, which proved to be a very difficult period for the New Zealand economy.
It contracted further on a per capita basis, continuing the downward trend that’s been in place for 18 months.
House prices declined in four of those six months, while mortgage rates increased to 16-year highs and unemployment pushed steadily higher.
This backdrop will have meant that businesses exposed to the economic cycle, and particularly those reliant on discretionary spending, have endured another challenging period.
However, since the books were closed at balance date on 30 June we might’ve seen a bit of progress.
During July, the ANZ Business Outlook survey saw the biggest jump in confidence in nine months, with construction and services reporting the sharpest rise in future activity outlook.
That supports anecdotal evidence of improving conditions in the past month, at least from some industries.
While patchy, these early green shoots could be due to further falls in inflation, a long-awaited decline in mortgage rates, or simply a belief things can’t get much worse.
Any early signs of recovery will be more evident in outlook commentaries from management, rather than in the hard numbers.
That’s what analysts will be hoping for, as earnings forecasts for 2025 still reflect a solid rebound.
There’ll be plenty to watch next week, with many of the market heavyweights set to announce results.
Contact Energy, Auckland Airport, the NZX itself and Spark are part of the lineup, while quarterly releases from Westpac and ANZ Bank across the Tasman will offer additional insights into the state of play.
As traditionally useful barometers of economic activity, Freightways and Port of Tauranga will be in focus.
Two other companies that will get a lot of attention are a2 Milk and Fletcher Building, with these at opposite ends of the performance spectrum this year.
While a2 Milk has rallied more than 60 per cent to three-year highs, Fletchers has slumped by more than a third to levels we haven’t seen since 2002.
Beyond those, there will be many more to watch through to the end of the month.
The listed property sector is potentially nearing an inflection point with interest rates set to fall, while electricity company profits will be in the spotlight amidst soaring wholesale power prices.
There are a few bright spots amongst the gloom, but the period this reporting season will cover is close to the point of maximum pain for our economy.
Investors should brace themselves for some disappointing results, while also hoping for some encouraging comments about how the balance of this year, and 2025, is shaping up.
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.