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NZ earnings season underwhelms investors

NZ Newswire logoNZ Newswire 8/03/2017 Sophie Boot

National flag of New Zealand with a large display of daily stock market price © Shutterstock National flag of New Zealand with a large display of daily stock market price New Zealand's listed companies delivered "solid but not spectacular" results in the February earnings season, providing little reason to drive up stock prices in a market where rising interest rates have eroded the appeal of dividend yields.

The latest round of reporting saw roughly two-thirds of companies on the benchmark S&P/NZX 50 Index report either first-half or full-year earnings, with the remainder generally using a March balance date and set to report in May.

Of the companies that did report, it was a roughly 60-40 split between those that produced good results relative to expectations and those with subpar earnings relative to expectations, according to Mark Lister, head of private wealth research at Craigs Investment Partners.

"It was a reasonably steady reporting season but it certainly didn't set the world on fire," Mr Lister said.

"The New Zealand market is a modest growth market at the moment. We've got a lot of sectors like infrastructure, utilities and real estate, that are more slow and steady. We're seeing signs that we're starting to approach that peak in the earnings cycle and margins are starting to hit their limits."

Before reporting season, analysts were predicting an average of 6.1 per cent earnings growth in the 2017 financial year, which has now slipped back to 5.8 per cent, Mr Lister said.

Companies that did well, included retirement village operators Metlifecare and Summerset Group, which have both seen an uplift in earnings forecasts, with A2 Milk Co, Mercury Energy and Auckland International Airport also coming out strong.

A2 is the best performer on the local benchmark index so far this year, up 15 per cent, while Auckland Airport, Summerset and Metlifecare have all advanced 13 per cent. The NZX50 index itself is up 4.1 per cent so far in 2017.

On the flipside, Genesis Energy was weaker, with NZX, Comvita, New Zealand Refining, Fletcher Building and Sky Network Television also disappointing, Mr Lister said.

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