Soft retail sales are expected to have a negative impact on Freightways' full-year result to be released today, with revenues and profit up but profit margins under increasing pressure.
Following strong trading for the first half, up 9.7% on the previous corresponding period, the second half of the year is expected to reflect the impact from additional expenses and slowing retail sales. Freightways is the largest express package business in the country.
Brokers Forsyth Barr had a ''reduce'' recommendation on the stock, with a 12-month price target of $4.10, while Craigs Investment partners has a ''hold'', with a target price of $4.17.
Craigs Investment Partners broker Peter McIntyre expected Freightways to book increased sales for the full year, from $382 million a year ago to $406 million, and after-tax profit to rise by 5% to $37.8 million, ''in line'' with earlier guidance of $38 million.
''We expect a significant slowing in the second-half run rate, due to slower retail sales, additional expenses and changes to product mix impacting on margins,'' Mr McIntyre said.
Early last month, Freightways said in an outlook it expected its full-year 2014 result to be similar to the 2013 result, with in earnings before interest, tax and amortisation (Ebita) improving by 5% and after-tax profit up by 6%.
At the time, the company said analysts were expected to review downward their earlier consensus forecast of a 7% increase in Ebita and after-tax profit up 10%, to more ''closely reflect'' Freightways' present operating performance.
Forsyth Barr broker Peter Young said he expected ''few surprises'', given Freightways' outlook last month.
The key points were slowing momentum in growth and margin pressure on its Information Management division, from rising Australian rental costs''The slowdown was most pronounced in the closing months of the year and are likely to spill over into full year 2014,'' Mr Young said.
He picked total sales for the full year at $404.3 million and after-tax profit at $38.2 million.
Last month, Freightways managing director Dean Bracewell said the company expected to be operating in a ''positive but slow growth environment for the foreseeable future''.
