Contact eyes capital raising as earnings season kicks off

New Zealand’s earnings season picks up pace this week with Contact Energy among the headliners on Monday, amid reports across the Tasman that it’s hungry for cash to fuel an expansion of the electricity generator-retailer’s renewable energy footprint.

Analysts expect a strong performance from Contact, along with Freightways and a2 Milk Co, in what’s expected to capture the recovering economy through the second half of 2025, while the Reserve Bank’s Wednesday policy review will keep people on tenterhooks as they look for signs of the central bank raising interest rates later this year.

Meanwhile, Australian futures are pointing at a positive start to the trading day when the ASX opens, as its own earnings season speeds up, with Treasury Wine Estates, rail freight operator Aurizon, BlueScope Steel and property group GPT among those reporting today.

US markets are closed on Monday after a mixed session on Friday, when tamer inflation than predicted stoked expectations that the Federal Reserve will cut its key rate earlier than previously thought.

More power

Contact Energy is among companies reporting its first-half result today as earnings season gathers steam on both sides of the Tasman, with Forsyth Barr analysts predicting a 32% gain in earnings as the power company beds in the acquisition of Manawa Energy. The interim dividend is expected to stay unchanged.

Meanwhile, the Australian Financial Review’s Street Talk column reported Contact hired UBS to help it raise $525 million in an institutional placement to help fund its five-year strategy, involving an expansion of its renewable energy portfolio.

Among other companies reporting on this side of the Tasman today, courier operator Freightways is forecast to lift earnings 9.8% and pay a fatter dividend as the domestic economy gets back on track, while infant formula company a2 Milk is expected to report a sharp jump in earnings and its dividend.

Skellerup Holdings and South Port New Zealand kicked off the reporting period last week, with both reporting record results.

The Reserve Bank’s policy review on Wednesday is expected to keep the official cash rate at 2.25%, with economists looking for signs of when the central bank will start taking the foot off the accelerator to tame inflation pressures.

Advance Australia fair

Across the Tasman, the big results will come later in the week when mining giants BHP and Rio Tinto report, but today’s schedule includes Treasury Wine Estates, Aurizon, takeover target BlueScope Steel, GPT and Stockland.

Better-than-expected results from Commonwealth Bank of Australia and ANZ Group Holdings last week spurred a rally among financial stocks, which helped buoy the S&P/ASX 200 index last week, although disappointments from the likes of AMP, CSL and Nick Scali were savaged.

Australian futures are pointing at a 0.6% gain for the ASX200 when trading opens, following its 2.4% last week – its biggest weekly gain in nine months. New Zealand’s S&P/NZX 50 index fell 1.8% last week, with a sharp decline on Friday.

Wall Street’s lead on Friday was mixed, with the S&P 500 and Dow Jones Industrial Average both nudging up 0.1%, while the tech-heavy Nasdaq Composite dipped 0.2% as fears about the expanding impact of artificial intelligence continue to play on investors’ minds. The volatility index – known as Wall Street’s fear gauge – dipped 1.1% on Friday, but remains elevated at 20.60.

US stocks initially gained in the session after Bureau of Labor Statistics figures showed consumer prices rose at a 2.4% annual pace, coming in below expectations, and fuelling expectations the Federal Reserve may cut the federal funds rate in June.

“January CPI readings have been strong in recent years given annual price resets, and many economists had called for a larger lift this time, particularly amid concerns that firms would pass more tariff‑related costs to consumers,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note.

The yield on 10-year US treasuries fell 7 basis points to 4.05%, and the kiwi dollar was little changed at 60.37 US cents at 7am in Auckland from 60.32 cents last week.

Across the Atlantic, stock markets were mixed on Friday with the UK’s FTSE 100 up 0.4% and Germany’s DAX 30 gaining 0.3%, while France’s CAC 40 fell 0.4%.

Local data today include the BNZ-BusinessNZ performance of services index, which moved into expansionary activity in December for the first time in almost two years, while Statistics New Zealand’s January report on electronic card spending is also due, with mixed leads from internal bank spending figures.

Reporting by Paul McBeth. Image from Curious News.