Air New Zealand shares hit three-month low

Air New Zealand extended its decline after this week's profit warning. Photo / 123RF

New Zealand shares edged higher in relatively quiet trading as investors wait for company earnings season to kick off later this month. Air New Zealand dropped to a three-month low, extending its decline after this week's profit warning.

The S&P/NZX 50 increased 13.83 points, or 0.2 per cent, to 8,999.17. Within the index, 26 stocks gained, 17 fell, and seven were unchanged. Turnover was $131.5 million.

New Zealand and Australian equity markets were subdued, despite a stronger lead from Wall Street overnight. Company earnings begin next week in Australia including Commonwealth Bank of Australia and Insurance Australia Group, coming in the wake of Monday's royal commission report into financial services.

"Markets in New Zealand and Australia were pretty much flat on the day, on, with the odd exception, very light volumes and very light news flow," said Matt Goodson, managing director at Salt Funds Management.

New Zealand's earnings season really begins the following week, with Contact Energy the first major company to report. It was unchanged at $6.04 today on 3.9 million shares, more than three times its 90-day average.

First NZ Capital analysts predict normalised median earnings before interest, tax, depreciation and amortisation growth of 3.5 per cent across the market for the upcoming season. They see the potential for Meridian Energy and Skellerup to beat expectations. Meridian shares rose 2.3 per cent to $3.60 on volume of one million shares and Skellerup gained 0.5 per cent to $2.03 on 277,000 shares.

Among companies FNZC analysts see at risk of missing expectations, Chorus rose 0.6 per cent to $4.93 on a volume of 1.2 million, Comvita decreased 0.2 per cent to $4.56, Fletcher Building fell 0.8 per cent to $4.96, Michael Hill International was unchanged at 60 cents, NZX rose 2 per cent to $1.02, Sky Network Television was up 2.1 per cent at $1.93, and Vista Group International increased 0.3 per cent to $4.

Air New Zealand posted the biggest decline for the day, falling 4.6 per cent to close at a three-month low $2.68 on a volume of 1.9 million. The airline lowered its forecast for annual earnings earlier this week, citing schedule disruptions caused by ongoing issues with some of its Rolls Royce engines, slowing domestic travel and inbound tourism.

"We note Air New Zealand's recent downgrade and suggest that the potential exists for companies exposed to the New Zealand consumer cycle to either experience, or signal in their outlook statements, earnings downside associated with deteriorating sentiment," FNZC said in a note to clients.

The ANZ-Roy Morgan consumer confidence survey showed people's optimism was above long-run average. They were feeling better about the state of their finances and willing to make big-ticket purchases.

Retailer Kathmandu Holdings rose 2.5 per cent to $2.45 on half its average volume. The outdoor equipment chain last month lowered its earnings guidance after soft trading through Christmas.

Outside the benchmark index, rival retailers Briscoe Group fell 0.6 per cent to $3.22 and Warehouse Group rose 0.5 per cent to $2.06.

Vital Healthcare Property Trust fell 2.4 per cent to $2.05 on a volume of 696,000, more than twice its 90-day average. The owner of the healthcare property investor agreed to buy 11 properties from ASX-listed Healthscope for A$1.23 billion. While not a party to the deal, Vital is keen to be involved.

Goodson said Vital would probably need to raise capital to participate, which was why the price fell. However, he said people will probably be supportive if there were some changes in Vital's management fee arrangement.

Spark New Zealand was the most traded stock on a volume of almost 4 million. It fell 0.7 per cent to $4.025. Kiwi Property Group rose 0.4 per cent to $1.425 on a volume of 2.8 million, while Mercury NZ rose 0.6 per cent to $3.55. Precinct Properties New Zealand increased 0.3 per cent to $1.50 on a volume of 1.3 million.

Australia & New Zealand Banking Group was down 1.4 per cent at $26.14 and Westpac Banking Group fell 0.9 per cent to $25.77, while local lender Heartland Group decreased 0.7 per cent to $1.37.