Will green shoots for earnings emerge from the upcoming reporting season? Photo / Four888 – stock.adobe.com
Will this month’s company reporting season offer signs of green shoots for what has been a flagging sharemarket?
PGG Wrightson kicks off the season on August 12 when it reports its annual result.
The rural services firm is expected to report strong earnings, thanks to its exposure to an increasingly resilient agriculture sector.
Others, particularly those exposed to retail, construction and hospitality, might not be so lucky.
Company “confessions” to date have been largely concentrated in retail and construction sectors, with others across the market holding up reasonably well.
After a “bruising” New Zealand reporting season in February, Craigs Investment Partners portfolio manager Mohandeep Singh said the market will be looking for stability.
For those companies reporting annual results, the month will offer management teams their first opportunity to set their initial earnings guidance for the year ahead.
“Anecdotally, we are starting to see some improvement in economic activity across New Zealand,” Singh said.
“However, the headline numbers probably do a good job of hiding the disparity across different regions and sectors.
“With the primary sector performing well, we are certainly seeing stronger regional economies and weaker metropolitan performance.”
Singh expected construction, retail and hospitality to remain challenged.
“The first place you would expect to see green shoots would be in those volatile sectors like retail and construction, but the data there has been quite negative, so it does not feel like we have turned the corner,” he said.
“Maybe we are not getting any worse, but we are just kicking along the bottom.”
For many of the market’s bigger companies, such as Fisher and Paykel Healthcare (16% weighting on the S&P/NZX50 index), what happens at home matters less.
The same could be said for companies like Ebos (due to report its financials on August 27), with its extensive interests in Australia.
And the big power generators tend to be a bit removed from what’s going on in the economy.
“While the macro backdrop is important to understand, we note that many of our companies are, to varying degrees, insulated from the cyclicality of the domestic economy,” Singh said.
Conversely, stocks like Fletcher Building, KMD Brands and The Warehouse are more sensitive to domestic economic trends.
A key stock for the market – logistics and transport firm Mainfreight – has not started its new financial year well.
“While [it’s been] a slow and disappointing start to our year, we expect ongoing improvement in trading, particularly through the second half,” the company told shareholders at the annual meeting this week.
Mainfreight said its profit before tax across its three main areas in the first 17 weeks of its 2026 year were all down by double digits.
Broker Forsyth Barr said the firm’s almost three-year earnings downgrade cycle continues.
“With revenue growth marginally positive in the year to date, the sharp drop in earnings stems from further margin pressure across all three products,” the broker said.
“As has happened at various times in Mainfreight’s history, a weak start to the financial year can be offset and despite sequentially improving performance year-to-date, in this instance the magnitude of the year-to-date decline and the relatively soft prior-year comparative suggest this is unlikely in 2026.
“Despite this unfavourable earnings backdrop and repeated downgrades over the past three years, Mainfreight still offers long-term growth potential, as illustrated by further new customer wins.”
Auckland International Airport’s annual result, due on August 21, will be closely watched.
The airport’s decision to lower the prices it charges airlines, along with the announcement from the Ministry for Business, Innovation and Employment that it is not considering a change to airport regulation, had eased some of the regulatory tension surrounding the stock.
But with passenger levels still tracking at around 90% of pre-Covid levels, expectations of a standout 2025 result are not running high.
The big four power generators – Mercury, Meridian, Genesis and Contact – will be centre stage as the market awaits a key Government report on the sector.
“Financial year 2025 will have been challenging for most of the big four, given low hydro storage and inflows through the latter part of summer,” Craigs’ Singh said.
“Elevated wholesale prices and gas market challenges have added to the political heat on the sector.
“We don’t expect this political noise to ease in the near term, but given recent rainfall events, the sector is starting 2026 on better footing from a storage perspective.”
Another key stock, Spark, is due to report on August 20.
The elephant in the room for Spark remains where the 2026 dividend guidance will land.
Market expectations are for 18c but some see it going as low as 15c.
The telco is currently looking to divest part of its data centre business.
A successful sale would ease the current tension between maintaining a higher dividend and managing balance-sheet flexibility, analysts said.
The Australian Financial Review (AFR) said it’s down to the short strokes in Spark’s auction of a stake in its data centre platform.
Pacific Equity Partners is among the final bidders still active in the auction, after Jarden collected binding bids last week, the AFR said.
There are high hopes for Port of Tauranga (due to report on August 29) and Scales, which has an interim result out soon.
Companies doing it tougher and having provided downgraded earnings heading into results include Heartland Bank (August 21), Tourism Holdings (August 25), Delegat Group and Comvita.
As Sky City Entertainment’s result approaches on August 21, broker research suggests risk remains to the downside in the near term for the casino operator.
In a note highlighting key theme, Craigs looked at the potential impact of mandatory carded play (MCP).
With mandatory carded play, people will only be able to gamble at SkyCity with a card issued by the casino, which verifies their identity and can be used to track the duration of their play.
“SkyCity’s resilience has been tested repeatedly in recent years, which is a trend we expect will continue through 2026,” Craigs said.
“With macro conditions challenging, NZ International Convention Centre Commissioning still to take place, MCP now live in New Zealand and fines pending, we see downside risk to earnings per share in the near term and a number of negative catalysts which could weigh on investor sentiment.
“Furthermore, we see Sky City’s balance sheet as stretched, with increased risk of an equity raise/ongoing dividend suspension if capital recycling doesn’t take place in the next five months.”
Despite these headwinds, Craig’s analysis highlighted the value on offer for patient investors willing to weather near-term uncertainty.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.