In a fully priced market, companies whose results reveal negative surprises can expect to get hammered, writes Christopher Adams.

Analysts are anticipating solid earnings growth this results season, but warn the sky-high valuations of many companies means stock prices could take a battering if negative surprises are revealed.

The season kicks off on Thursday when casino operator SkyCity will unveil financials for the six months to December 31.

Other major firms reporting this month include Contact Energy, Fletcher Building, Port of Tauranga, Air New Zealand, Mighty River Power and Meridian Energy.

Most companies will be reporting half-year results.

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Sharebroker Forsyth Barr is forecasting normalised earnings per share (EPS) growth of 9.7 per cent on an aggregated basis from the 50 firms reporting, with revenue growth of just 0.5 per cent.

"Dividend growth is forecast to be up 14 per cent, boosted by the reinstatement of dividends by NZR," Forsyth Barr said in a report.

"Of the 50 companies in our reporting season snapshot, 22 companies are expected to deliver normalised EPS growth in excess of 10 per cent."

In a note Craigs Investment Partners said firms with defensive earnings would have fared better than more cyclical stocks given economic conditions had been mixed.

Despite last month's global sharemarket rout, the S&P/NZX 50 is still trading at roughly 19 times earnings, well above the historical average since 2001 of around 15 times.

"Since our market's priced pretty highly you could see some ugly responses if you do get any disappointing results," said Mark Lister, head of private wealth research at Craigs.

James Grigor, equity strategist at Macquarie Private Wealth, agreed there was little room for companies to disappoint.

"If you do get a surprise on the downside those stocks that are trading at high levels would certainly trade down," Grigor said.

He said Macquarie was wary of some companies with offshore earnings, including Fletcher Building, as a result of economic conditions overseas.

"Although we've upgraded [Fletcher] to neutral, their Australian businesses look like they could still struggle," Grigor said.

Lister said he was expecting a reasonably solid set of results to be revealed. "You've got a really fragile economic growth story globally ... but agriculture aside the domestic reporting starts economy still looks pretty strong with tourism, migration and the unemployment numbers," he said.

Lister said the retail sector looked in reasonable shape overall.

"But company to company it's going to be pretty patchy."

New Zealand's biggest listed retailer, The Warehouse Group, last month forecast an up to 21 per cent jump in adjusted net profit, to between $43 million and $45 million, for the six months to January 31.

Kathmandu released a positive trading update this month, saying total sales in the half-year lifted 9.1 per cent, while gross margin had improved and the firm was on track to deliver annual profit of $30.2 million.

The Warehouse last month forecast an up to 21 per cent jump in adjusted net profit for the six months to January 31. Photo / NZME
The Warehouse last month forecast an up to 21 per cent jump in adjusted net profit for the six months to January 31. Photo / NZME

Briscoe Group, the operator of Briscoes and Rebel Sport, reported a 15.3 per cent lift in fourth quarter sales, to $193.1 million, last week and expects to report its full-year result on March 15.

Hallenstein Glasson, on the other hand, disappointed the market on Friday when it revealed half-year profit was expected to fall by 20 per cent. The company said it would trim its dividend as a result of competition and the weaker Kiwi dollar, which made importing clothing more expensive.

Hallenstein shares closed down 8.4 per cent on Friday at $2.95.

Meanwhile, the oil price slump is expected to bolster the results of companies that benefit from lower fuel prices, including Refining NZ and Air New Zealand.

In October the national carrier said it expected interim pre-tax profit to exceed $400 million, which would be a jump of at least 85 per cent on the same period a year earlier.

"I've got high hopes for the Air New Zealand result. A lower oil price is part of that, as well as stronger tourism and operating trends look solid," Lister said.

Craigs said a number of companies including apple exporter Scales Corporation, which recently upgraded earnings guidance would benefit from weakness in the Kiwi dollar. "We expect Scales will continue to perform well given further weakness in the New Zealand dollar and the ongoing demand for its high-quality apples," Craigs said.

Grigor said a big focus for investors this result season would be guidance around companies' outlook for the year ahead.