The local reporting season begins this week, and I’ve got high hopes for a more optimistic tone.
To be fair, the bar is low.
It’s been a very difficult couple of years for most businesses.
The New Zealand economy has contracted for seven of the past eight quarters on a per capita basis (with the one other quarter being flat, rather than up).
However, things are getting better.
The Official Cash Rate has fallen from 5.50 to 4.25 per cent, and by next Wednesday afternoon it’ll start with a three.
Business confidence has bounced to ten-year highs, and the Fonterra payout for this season will be the highest in history.
Those positives won’t be reflected in the earnings releases we see over the coming weeks, mind you, with most set to make for relatively sombre reading.
These results will cover the six months to the end of December, which was still a very challenging period for the economy.
Outlook commentaries should be better though, and I’m hopeful many businesses are seeing a pickup in activity.
The sharemarket rebounded strongly over the second half of last year, with the NZX 50 index up 11.9 per cent.
That was the strongest rise since 2020, and investors are expecting 2025 to be a more buoyant year.
Trading conditions should be stronger, pushing corporate earnings and dividends higher, while boosting investor optimism.
If that’s the case, another year of solid gains is on the cards.
There’s plenty to watch, with many of our largest listed corporates under the microscope and some of the heavyweights set to announce results in the coming days.
Fletcher Building, Sky City and Spark are some up next week. They’ll be closely watched, after all three performed very poorly in 2024.
As traditionally useful barometers of activity, Freightways and Port of Tauranga will be in focus.
Quarterly releases from Westpac and ANZ Bank across the Tasman will offer additional insights into the state of the New Zealand economy.
The a2 Milk Company made some great progress last year, while the NZX itself was a quietly impressive performer with a 44.2 per cent return in 2024.
Investors will be monitoring these and the other stars of 2024 to see if their momentum can be maintained, with the likes of Infratil and Summerset still highly favoured by the analyst community.
There will be many others to watch through February and into early March.
The listed property sector is potentially nearing an inflection point with interest rates falling and tenants in a stronger position.
The ‘big four’ electricity companies, long-time favourites of income-seeking investors, are likely to deliver a mixed bag of results.
The dry winter of last year might’ve dented Meridian’s earnings, while Contact’s result will be overshadowed by the Commerce Commission decision over its Manawa acquisition.
The period this reporting season will cover is close to the maximum pain point for our economy, but there are plenty of bright spots emerging.
Investors should brace themselves for another batch of uninspiring results, while putting more emphasis on the encouraging comments we hope to hear about how this year 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.