The latest reporting season for NZX-listed companies shows they experienced reasonable earnings growth, reflecting a strong economy but also a fully priced sharemarket, say fund managers.
Looking ahead, companies were generally circumspect about their earnings prospects, which meant analysts had to pare back their earnings per share forecasts a little for this year and next.
Even so, fund managers said the results season had shown the listed companies to be in reasonable shape.
"It was actually quite solid, but it wasn't pretty," said Shane Solly, director, portfolio manager and research analyst at Harbour Asset Management.
Pie Funds chief executive Mike Taylor told Liam Dann on Market Watch that the season reflected strong growth in the New Zealand economy, but he said the fact that the local market had not matched Wall Street's record breaking run meant it was fully valued.
For Harbour Asset's Solly, the "standouts" were in the defensive stocks, such as the power companies Mercury and Meridian. Alternative milk company A2 Milk was another outperformer.
Fund managers pointed to strong earnings growth in the retirement village sector from Metlifecare and Summerset.
Tourism Holdings reported strong earnings in line with a booming tourism sector.
However, in general, those analysts expecting the raft of corporate results to be a catalyst for the sharemarket to kick on higher would have been disappointed.
"When the dust settles, full-year earnings forecasts for 2017 and 2018 have been trimmed back a little bit, but in the scheme of things, it was not a bad reporting season from that point of view," Solly said.
"The market is delivering strong earnings growth but our [share] pricing is pretty full," Solly said.
Sky Network TV, which had its proposal to merge with Vodafone blocked by the Commerce Commission, disappointed with its result.
Similarly casino company Sky City Entertainment, fell short. Manuka honey maker Comvita, stock exchange operator NZX, power generator Genesis also disappointed.
Mark Lister, head of private wealth research at Craigs Investment Partners, said the reporting season "certainly did not set the world on fire".
There was little in the results to shift the market in either direction, Lister said.
As a rough guide, Lister said about 30 of the top 50 companies that reported performed as expected in terms of meeting their earnings forecasts.
The remaining companies' earnings were more or less as expected and a small group were slightly disappointing, he said.
"It was generally expected that the pace of earnings would slow this time around because we have had quite a few good reporting periods over the last few years and that was reflected in the numbers," he said.
Fund managers, pointing to the sharemarket's meteoric run up over the last five years, said there was a chance that companies' earnings were finally playing catch-up with their share prices.
"The New Zealand economy is tracking along very well and most of our corporates are doing good things," Lister said.
"Dividend yields are still pretty attractive and are growing, so I'm not worried about the New Zealand economy or the New Zealand market at all," he said.
"Obviously we have our challenges and the things that could go wrong, but at the moment this is pretty steady for us."
In the solid-but-predictable category came the market mainstays Auckland International Airport and the Port of Tauranga.
Then there were the enigmas, with Fletcher Building and Metro Performance Glass coming up short, despite the booming construction sector, illustrating that a strong macroeconomic tail wind does not necessarily translate into higher earnings.
In general chief executives were seeing solid growth in their businesses, but fund managers said the prospects of increased political uncertainty abroad, and potentially at home, had probably made them more cautious about their future prospects.
In addition, the possibility of increased trade protectionism and higher interest rates may also have also acted to curb their enthusiasm about what lies ahead.