Analysts said that while earnings looked healthy enough, it was still an open question whether future earnings prospects were good enough to justify the current high share
prices.
Forsyth Barr's analysis of outlook statements for the year to come meant it had issued more earnings downgrades than upgrades for the 40 or so companies which reported results over the month.
The broker had downgraded Tourism Holdings, for example, despite its strong result, based largely on timing issues surrounding its increase in investment.
However, Forsyth Barr issued earnings upgrades for retirement village operators Summerset and Metlifecare, and rubber goods company Skellerup.
Mercer said companies themselves would need to come out with higher earnings upgrades in order to justify today's high share prices.
Fletcher Building had posted a disappointing performance, "cleared the decks" and had come out with a $190m loss — only the second time it had sunk into the red since it listed in 2001.
Mercer said Fletcher Building would "not be one to chase" if economic conditions deteriorated further.
This year the construction and building-products company suspended its interim dividend and didn't declare a final payment. Fletcher said it expected — "subject to satisfactory trading performance" — to be able to resume dividends in the current financial year.
It was the opposite story at a2 Milk, which produced a 116 per cent lift in net profit to $195.7m for the June year, with analysts marvelling at its ability to turn sales into cashflow.
A2 has been extending and widening relationships with suppliers and distributors as it develops its supply chain and enters new markets.
The company has teamed up with Fonterra, the world's biggest dairy exporter, and in April it signed an exclusive distribution deal with Yuhan Corp in South Korea.
In July, it extended its infant formula supply deal with New Zealand dairy processor Synlait Milk until at least July 2023, then doubled its stake in the supplier to 16 per cent.
The company has been highly successful in Australia and China and is now setting its sights firmly on what it sees as its next big opportunity, the United States.
While corporate earnings turned out to be favourable for the most part in the latest reporting season, business confidence fell further last month, according to the latest ANZ Outlook survey, prompting a warning that lower investment by firms could dent GDP growth.
A net 50 per cent of the 369 firms surveyed in the ANZ Outlook survey for August expected general business conditions to deteriorate in the coming 12 months, 5 points lower than July's result.
In July, the survey showed confidence falling to levels not seen since the global financial crisis in 2008, but that drop in confidence has yet to manifest itself in either earnings or company outlook statements.
"It was a portfolio manager-friendly reporting season, with no companies dropping big bombs, nor huge upside surprises," said Josh Wilson at NZ Funds.
"Of the companies we heard from, there was no sign of weak business confidence affecting the coming year's earnings."
Wilson noted the strong performance of the sharemarket over the month of August.
"But rather than reflecting outstanding results, in our view this is as much to do with the Reserve Bank signalling interest rates could be lower for longer earlier in the month, the subsequent fall in the NZ dollar, and a positive lead from offshore markets," Wilson said.
JBWere's New Zealand equity manager, Rickey Ward, agreed that there appeared to be a mismatch between what was showing up in confidence surveys and what was surfacing in company results and earnings statements.
"There seems to be a difference between what the corporates are telling you, post-results, with the print that we are getting out of business confidence," he said.
Even so, going into the future, it would be difficult for companies to achieve the same run rate of earnings growth that they have enjoyed over the past few years.
The worrying thing for analysts is that share prices have rallied to the point where they are looking expensive, relative to their earnings prospects.
Or, as Ward puts it: "Multiple expansion on earnings reduction makes it even more expensive if you believe that price earnings ratios are the right metric to use."
He said cost pressures were showing up in results, but not in any meaningful way.
"But clearly there will be some cost pressures," he said.
"It's going to get harder to get revenue growth in the current climate."
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