Pavan Sharma

The New Zealand market (NZX 50 Index, -0.7%) fell on Monday with investors concerned about the direction US and European equities will take this week.  Heavyweights Fisher and Paykel Healthcare (-2.6%) and Mainfreight (-1.2%) led the market down, with the former, as well as Pacific Edge (-3.2%) contributing to Heathcare stocks (-1.4%) declining the most on the day.

Xero plunged after Chief Executive Steve Vamos announced their resignation effective February 1, 2023 after 5 years in the job. Further, the company reported its earnings for the six months to September 30. Revenue jumped +30.0% from last year to NZ$658.5m, and total subscribers increased +16.0% (to 3.5 m), all the while its net loss increased +172.9% to NZ$16.1 million from NZ$5.9 million the previous year, due to combination of increased costs and investment into growth and non-cash impairment against its Waddle business.

Find below a link to our “Guide to Markets” summary for Q3 earnings, focusing on US equities. It’s a “one stop” sheet with our recommendations for the US equities we currently cover, alongside our commentary on each company and the quarter overall in markets.

The New Zealand market (NZX 50 Index, -0.5%) fell on Thursday, despite a few favourable earnings reports.  Mainfreight (-1.9%) failed to advance after announcing its half-year financial results to 30 September 2022, the strong result pre-released to the market. Revenue climbed +32.0% (or $729 million) to $3 billion and an interim dividend of $0.85 per share (payable on 16 December) was announced. The downside gleaned from the report is the company note that they expect a “moderation” in revenue from its Air and Ocean division in line with the decline in sea freight rates. 

James Hardie shares slumped  despite delivering strong half year result. What spooked investors was the dramatic change in the outlook for the housing market across all its key markets. 

The New Zealand market (NZX 50 Index, -0.1%) fell marginally late on Wednesday, after spending most of the day in positive territory. Consumer Discretionary (+0.8%) led sectors after data showed that credit card spending stays elevated, rising 1% in October, driven by spending on durables and consumables

The New Zealand market (NZX 50 Index, -1.2%) was dragged down by Fletcher Building (-3.7%) after its Australian counterpart James Hardie Industries (-13.7%) lowered its 2023 earnings forecast in the face of a slowing housing market.  Other heavyweights down on the day included Freightways (-3.7%) and Fisher and Paykel Healthcare (-0.9%), tempered by the rally in A2 Milk (+4.1%). 

Starbucks displayed some signs of recovery in their Q4 earnings. As we wrote in our initiation report, this is a “show me” story and management, to their credit, has worked tirelessly to show the market what a turnaround looks like. The company grew revenues 3% YoY to $8.4B, and it grew same-store sales in the U.S 11% YoY. Credit where credit is due – this is an exceptional performance in a very tough environment to do business. However, we think a lot of Starbucks’ performance is due to passing on costs to the consumer and we retain a hold rating on the stock.

Westpac shares fell after reporting a 1.0% decline in its 2022 cash profit to $5.276 billion. Additionally, the bank noted the many uncertainties facing the company and their clients, including high inflation and rapidly rising interest rates however, they had not yet registered an increased in hardship or stressed assets. Most parts of the result were mostly inline but given the strong run in bank stocks over the last month investors were expecting better net interest margins towards the close of the year.