Restaurant Brands's share price has been weak, despite a strong earnings update. Graphic / NZME
The recent raft of corporate earnings updates has been generally well-received by sharebrokers and fund managers.
Companies are increasingly under the spotlight in the face of rising interest rates and high inflation, so their earnings prospects have come into sharper focus during the latest run of annual meetings.
"There has been a lot of interest," says Devon Funds' head of retail Greg Smith.
"The earnings season has been and gone but there is a lot of interest in current trading, given that interest rates are rising, and given that there is still a lot of uncertainty around supply chains," he said.
Likewise, there was interest in how the consumer-facing businesses were doing, given the cost of living pressures and the general trading environment.
"A lot of bad news has been priced into markets this year," Smith said.
"As you can see with Mainfreight, any inklings of a positive upgrade are going to be well-received."
Mainfreight, in an investor day presentation, said it expects its first-half revenue to have improved by 32.5 per cent to $3.01 billion.
That forecast, along with its estimated first-half profit of $301.7m - up 66 per cent - was enough to drive the stock sharply higher.
Forsyth Barr upgraded Mainfreight from "neutral" to "outperform" after its earnings guidance.
"It's dangerous to underestimate Mainfreight; we've been guilty of doing this at times historically and we were again last week when we signalled the start of a downgrade cycle in light of (1) declining freight rates, (2) cyclical demand weakness, and (3) the lead shown by key global peers," the broker said in a research note.
"In contrast, Mainfreight's very strong first half 2023 provisional result and bullish investor day commentary highlight further customer wins, strong momentum in network development, and margin improvement strategies across its three core products, particularly Air & Ocean (A&O).
"We broadly reverse our downgrades from last week, but more importantly accept a higher level of sustainability within current A&O profits and higher customer win driven growth over the medium term, despite cyclical risks," Forsyth Barr said.
At Fletcher Building's annual meeting, shareholders were told that trading since the 2022 year-end announcement had been in line with management's expectations.
The company reiterated its 2023 guidance for earnings before interest and tax (Ebit) of $855m, against Jarden's estimate of $838m.
"We had been concerned that the New Zealand housing slowdown in September was pointing to an earlier-than-expected market downturn, however, management indicated that post-September, spring trading is showing a pick-up in customer visitations," said Jarden's director of equity research, Grant Swanepoel.
"While the company continues to see unbroken momentum in most of its businesses, what we liked in particular was the company referencing that it is preparing for a slowdown, whether it be the back end of full-year 2023 or into full-year 2024 - in our view a positive update."
Energy company Mercury revised its 2023 guidance for earnings before interest, tax, depreciation, amortisation and financial instruments (Ebitdaf) up by $40m to $620m, largely due to higher 2023 hydro generation, higher yields in commercial industrial sales and improved trading results.
Forsyth Barr left its dividend forecast unchanged, expecting Mercury to remain cautious with its capital management ahead of expected high capital spending requirements in coming years.
"Also impacting value considerations is the sharp increase in interest rates, with the 10-year swap rate now above 5 per cent, reducing the attractiveness of yield stocks such as Mercury," the broker said.
Fast food company Restaurant Brands (RBD) issued a positive earnings update this week but the company's share price has remained weak - trading at about half their value of a year ago.
NZX-listed RBD's sales for the third quarter shot up by 32 per cent over the same period last year as the business recovered from Covid-19 restrictions.
Total sales for the quarter came to $322m. The company said worldwide inflationary pressures continued from the last quarter, and it was still experiencing significant cost inflation across all regions.
Restaurant Brands, which is about three quarters-owned by Mexican investor Finaccess Capital SA de C, said it continued to implement price increases where possible in response to increased costs.
The stock last traded at $7.15, down from almost $16 this time last year.
Analysts put much of the weakness in its share price down to RBD's lack of pricing power, or its inability to pass on higher input costs - particularly for food ingredients in these inflationary times.
"The market overall has fallen with high multiple growth stocks having generally fallen more – at its $16 peak, Restaurant Brands certainly had a lot of growth expectation built in. It is far from alone in this," said Salt Funds managing director Matt Goodson.
Is not the only fast food joint to suffer from a soggy share price.
Industry peer, Australia's Dominos, has fallen from a brief A$160 peak to A$60 and Collins Foods from A$13.20 to A$9.
Goodson said the impending departure of the highly-regarded CEO Russel Creedy and CFO Grant Ellis from RBD next year could also be depressing the stock.
He added that RBD would experience significant cost pressures from labour, rent and food inputs which may not be able to be fully recouped in its pricing.
Skellerup's track record of continued improvement in earnings appears to be intact.
The company's first quarter was line with the prior corresponding period.
Demand remained solid and the company expects its net profit for the year to be $48m to $52m, ahead of the record 2022 result of $47.8m.
Additional comments from management made at the annual meeting pointed to continued price increases, a solid agricultural growth outlook, particularly in the UK, and further margin improvement potential in the Industrial division.
"Whilst the global economic outlook is uncertain, we remain attracted to Skellerup's growth track record, capital-light business model and ungeared balance sheet," Forsyth Barr said.