Results galore – so how exactly did the earnings season play out?

By Greg Smith, Head of Retail at Devon Funds

The results season, which has wound down this month, was once again keenly watched. Markets had made a brisk start to the year in January on the prospect of better than feared outcomes in 2023. An array of results (and outlook statements) from companies covering a cross-section of industries was also going to be a useful sanity check on whether investors had gotten too far ahead of themselves (or not far enough) with respect to the broader market, and individual company valuations.

Further complexity was added to the mix with the advent of two extreme weather events. Some companies were clearly impacted more than others, and from a broader perspective there was also much ‘interest’ in how the floods and cyclone damage would influence the RBNZ’s decision on further rate hikes. In the end the central bank looked through the short-term financial impacts.

On the whole, it appears to us that the corporate results in NZ were ahead of expectations on a revenue basis. The number of beats exceeded misses by a substantial majority. Inflation is boosting the top line in many cases, as companies are seeing the same cost pressures that consumers are facing, but are looking to pass these on where they can. Underlying earnings surprised positively more often than not, with the ratio of beats to misses for EBITDA (earnings before interest, tax, depreciation and amortisation) registering a ratio of almost 2-to-1.