Revenue up, but no big profits tipped for earnings season

Brokers are tipping this earnings season to show listed companies increasing revenues, but not profits. File photo / NZ Herald

New Zealand listed companies will show revenue growth in the latest earnings season, though that won't translate into fatter profits, according to broker Forsyth Barr.

The broker predicts aggregate sales growth of almost 11 per cent across 46 companies previewed in the latest earnings season, though net profit will shrink 0.3 per cent and earnings per share will decline 1.7 per cent. Earnings before interest, tax, depreciation and amortisation are flagged to rise an aggregate 2.6 per cent.

"We can expect a cautious tone from earnings season," said Craig Brown, senior investment analyst at OnePath NZ.

Construction materials supplier Steel & Tube kicked off the season last week, posting a 2.4 per cent fall in first-half profit to $6.4 million, or 7.2 cents per share, falling in line with its own guidance and in between forecasts by Forsyth Barr and First NZ Capital.

Fund managers have been circumspect about the prospects for company earnings this season, as delays to the Canterbury rebuild weigh on companies looking to cash in on the reconstruction effort, such as index heavyweight, Fletcher Building.

Last week, Fletcher's stock rose to a four-month high as investors shook off some of their gloom over the delayed rebuild. Forsyth Barr expects Fletcher Building to post a 6.3 per cent decline in reported earnings, even as revenue climbs 31 per cent. First NZ Capital forecasts a 10 per cent decline in net profit for the construction company.

Grant Williamson, director at Hamilton Hindin Greene, said investors have been buying the stock after getting spooked late last year when the construction company downgraded its forecast.

"Investors are starting to wake up to the fact that the Christchurch rebuild will happen," he said.

Shares in Fletcher Building rose 2.3 per cent to $6.73 in trading on Friday.

The economy expanded 0.8 per cent in the third quarter, faster than the Reserve Bank had expected. It tips 0.6 per cent growth for the final quarter of 2011, with the economy set to pick up pace through 2012.

The earnings season will be Telecom's first as a standalone retail unit, having carved out its network business, Chorus, into a separate listed entity last year. Forsyth Barr's Guy Hallwright expects the phone company to post reported profit of $142 million, on revenue of $2.48 billion. The shares fell 0.7 per cent to $2.145 on Friday.

Contact Energy, the third biggest company on the bourse, is expected to show a 7.1 per cent increase in sales to $1.28 billion, though reported profit is forecast to fall 16 per cent to $69.9 million by Forsyth Barr. The stock has been hovering near 8 -year and climbed 2.7 per cent to $4.94 on Friday.

Mark Lister, head of private wealth research at Craigs Investment Partners, said retailers are still finding it tough, and people are expecting "sluggish commentary" from those companies when they report.

Warehouse Group, the biggest listed retailer, is expected to show a 2.2 per cent gain in revenue to $927.9 million, even as reported profit falls 8.1 per cent to $48.8 million in a Forsyth Barr analysis. The stock fell 1.1 per cent to $2.68 on Friday.

Kathmandu, the outdoor equipment chain, is forecast to show sales growth of 7.2 per cent to $136.3 million and a 19 per cent drop in reported profit to $8.5 million. Its shares gained 1.7 per cent to $1.76.

Hallenstein Glasson, the clothing chain, is forecast to show zero growth in sales and profit at $105 million and $7.8 million respectively, after it reported strong demand during the Christmas and January sales periods. The stock rose 1.4 per cent to $3.72 on Friday.