ABN Amro Craigs broker Chris Timms said his analysis would focus on:
- Earnings.
- Balance sheet strength.
- Dividend payments.
- Outlook.
The prospect for sustainable earnings by companies reporting this week looked grim, he said.
"No-one has been able to tell clearly what lies ahead. Companies are struggling to put a number on the full-year profit in case they disappoint the market.
"That's the worst thing you can do: put a number out then come back two months later with a revision and see your share price slammed.
"Companies at the whims of international markets - those with high debt levels, exporters or those subject to discretionary spending are struggling to give full-year guidance."
Earlier this week, energy company Vector gave the market some heart with a better-than-expected forecast because it was was not exposed to the vagaries of the global economic meltdown. People still needed gas and electricity, Mr Timms said.
The same could be said for companies with infrastructure assets as their income base.
Balance sheet strength was becoming increasingly important as companies took on more debt to try to weather the downturn, he said.
Brokers were carefully monitoring the build-up of debt and working out how it could affect company ratings.
The cost of debt would go up as the value of the New Zealand dollar fell.
More importantly, that meant the ability of companies to refinance could be at risk, particularly for those with debt due for refinancing next year, he said.
Investors needed dividends for their income and a failure of a company to pay a dividend could see investors selling their stakes.
Freightways reported a good result on Monday but cut its dividend by 1.5c to keep money on its balance sheet.
"We need to see an indication that companies are maintaining the dividend streams for investors," Mr Timms said.
The outlook being given by companies reporting this week was not particularly heartening, with many forecasting tough trading conditions ahead.
Mainfreight, regarded as a reliable indicator of the economy, yesterday forecast poor trading for the rest of the year.
Auckland International Airport was "looking good" but was forced to write down its property investment portfolio by $41 million because of falling property prices.
Michael Hill International chairman Michael Hill warned yesterday that store growth could slow over the next 12 months until there were signs of an economic turnaround.
Auckland International Airport chairman Tony Frankham warned that the bullish profit forecast had to be tempered with the risk of falling passenger numbers or airline withdrawals.
"As always, this guidance is subject to any other material adverse events, significant one-off expenses, deterioration due to the current global market conditions or other unforeseeable circumstances."
