New Zealand is expected to fare better than Australia. Business editor Dene Mackenzie reports.
The impact of a lower New Zealand dollar will be a key theme through the reporting season, Craigs Investment Partners broker Chris Timms says.
The currency averaged US74c during the first six months of 2015, well below the US85c average of the corresponding period in 2014.
That should ensure strong results were seen from exporters such as Delegat, Diligent and Scales, he said.
Since the end of June, the kiwi had averaged an even lower US66c, meaning outlook statements should be upbeat.
Although Fisher & Paykel Healthcare was not reporting this month, the company was holding its annual meeting, which would mean an update on trading conditions. That was likely to be another positive update, he said.
''We should also see strong support for companies that can display steadily increasing dividends given the two official cash rate cuts we have seen and the expectation of further falls in interest rates.''
Contact Energy and Mighty River Power should be well supported, with Meridian Energy in particular likely to report strong results.
Other companies with above average yields included Gentrac, Spark and Steel & Tube, Mr Timms said.
''We believe Refining New Zealand represents an excellent opportunity heading into its result, as we think the company could announce a return to paying dividends for the first time in two years.''
Companies exposed to migration trends and the tourism sector could do well. Metlifecare was a beneficiary of strength in Auckland house prices, which had been driven higher by migration. Auckland Airport and Air New Zealand should report solid results, in part due to visitor arrivals.
However, what was likely to be a very strong Air NZ result could be tempered by concerns over increasing competition.
Another company likely to benefit strongly from the strength in the tourism sector was Tourism Holdings, Mr Timms said.
Forsyth Barr analysts were forecasting revenue growth of 1.1% at an aggregated level for the 48 companies due to report, with operating profit growth forecast at 3%.
Broker Andrew Rooney said dividend growth was forecast to be up 7.3% at an aggregated level, boosted by Air New Zealand.
At a sector level, the building and transport sectors were boosting the positive earnings per share growth expectations. The utilities sector had flat or negative growth and was depressing the overall aggregated market growth estimates.
Abano, reporting tomorrow, had provided profit guidance of $7.2 million to $7.8 million, a strong lift on the previous year, underpinned by growth in dental and a material improvement in audiology.
Summerset was another company liked by Mr Rooney because of confirmed strong sales, gains in pricing and resales/development margins.
Turning to Australia, Mr Timms said earnings downgrades had been ''fairly mild'' in 2015, despite a few more emerging in recent months.
Forecasts for the six months to June had been more resilient than for the December half for two thirds of the sectors.
Earnings revision momentum for cyclical companies - excluding resources - had been good.
''The Australian market often outperforms global peers during the results season and this time, earnings look likely to be good enough for the same theme to occur.''
Looking back at the last reporting season, while the market as a whole did well, there was significant volatility at the stock specific level, he said. That was primarily due to above average valuations, meaning stocks that disappointed were punished.
As was the case in New Zealand, the impact of a lower Australian dollar would be the key theme through the reporting season. Some of the companies that could benefit from the currency weakness included Amcor, Brambles, CSL, Lend Lease and Westfield Group.
Stocks that could be candidates for a ''relief rally'' - non resource stocks that had underperformed the market by 5% or greater - included Ansell, IOOF and Westpac.
AGL Energy was another company with potential for a strong result and a good performance.
''In another similarity with New Zealand, we believe sustainable dividend yields will remain a positive theme. Regardless of whether the RBA takes further action here or not, we expect interest rates to remain low in Australia for some time.''
That increased the appeal of equities generally and, in particular, the high yielding sectors. Companies with sustainable dividend yields such as ANZ, APA Group, National Australia Bank, Sydney Airport and Westpac would be supported further in that environment, Mr Timms said.
It was difficult to predict how the reporting season would go for the resources sector. Commodity prices had fallen heavily and while the Australian dollar would soften the blow, the miners would still feel the brunt of the slowdown.
There was potential for some companies to report some good cost out progress, with staff numbers reducing and firms putting pressure on contractor margins. However, expectations for cost cutting were already optimistic, which could limit any positive reaction, he said.
At a glance
• August 11: Diligent, PGG Wrightson, Property for Industry, Summerset Group.
• August 12: Sky City, Vital Healthcare, Commonwealth Bank and ASB.
• August 13: Fairfax, Goodman Group, Pacific Edge.
• August 14: Nuplex.
• August 17: Contact Energy, Freightways, Steel & Tube.
