Following the recent company reporting period, research by broker ABN Amro Craigs rated the average growth in EPS at 2.3%.
However, with a tougher trading environment ahead, growth for 2008 has been downgraded from 3.5% to -1.2% and in 2009 the earnings growth expectations have been slashed from 9.9% to 3.7%.
Earnings per share, where a company's net profits are divided by the number of shares and expressed as cents per share, is used to compare ongoing earning potential.
ABN broker Chris Timms said during the recent two-month reporting period, 17 of the 31 companies reported increased after-tax profit, 13 reported a decline, and one was flat.
‘‘Our forecasts for companies factor in a continued slowdown in economic activity in New Zealand during the next 12-18 months and increased pressure on corporates' borrowing costs as banks continue to increase the rates and margins at which they lend,'' he said.
The EPS downgrade was indicative of the slowing in growth terms across the whole market, he said.
Although year-ahead outlooks by companies contained a ‘‘cautious tone'', especially retailers relying on discretionary household spending, utility and port companies in strong market conditions were more upbeat, he said.
‘‘Some sectors are going to prove more susceptible than others,'' he said.
A strong result from Contact Energy meant the utilities and energy sector had largely bucked the trend of sector downgrades and earnings growth for 2008 and 2009 were respectively upgraded by 5.9% 15.4 %.
‘‘Key sector companies, Contact and TrustPower, remain well positioned to benefit from the impending carbon emissions trading economy.
‘‘Subsequently, the utilities and energy sector is our favoured exposure in the current environment,'' he said.
For 2008 and 2009, the retail sector had been downgraded respectively by -5.2% and -13% because of the challenging retail conditions.
Mr Timms said the reporting period ‘‘produced more earnings surprises than disappointments'', with 16 of 32 companies delivering better than expected after-tax profits.
