We’re making an exciting enhancement to our stock analyst notes by embracing Smart Brevity. Below we've outlined the reasons for this change and we've used a recent example by Equity Analyst Angus Hewitt on Air New Zealand AIZ. 

What is Smart Brevity?: Smart Brevity is a way of writing for the reader to be clear, concise and impactful. It focuses on value for investors.

Why it matters: At Morningstar, we put investors first and Smart Brevity is writing with you in mind. Your time is precious. Smart Brevity prioritises clarity and engagement, allowing you to swiftly digest key insights to help you make informed investment choices.

How it works: Our team has developed a structure, based on Axios’ book Smart Brevity, to enhance how our stock analysts write notes, putting the information you need front and centre. That means each note is focused, with clear headings, and our most valuable analysis and opinions prominent and easily digestible.

Key stats: Stock analyst notes are the most frequently produced content from Morningstar’s Equity Research team. They contain analysis of key events and changes to key assumptions, estimates, and data points for the companies under our equity research coverage. Notes are typically written at least four times per company, per year, across our comprehensive global coverage of more than 1,600 companies – and this won’t change with Smart Brevity.

Between the lines: The Smart Brevity style applies to the first 2,000 characters of each stock analyst note – the section where we aim to capture the most valuable parts of our analysis. However, analysts are still able to write longer free-form notes where we see investor value in digging deeper.

The company report format remains the same. These reports provide in-depth analysis on the strategic positioning and competitive advantages, risks, financial health, proprietary Morningstar data points, such as fair value estimate, fair value uncertainty, moat, and capital allocation; and financial forecasts of the companies we cover.

Coming up: You’ve likely already seen some of the first examples of Smart Brevity-styled stock analyst notes. We will continue to transition to this format through to the first half of 2025. In our products, you’ll initially see thisas a plain text version of the notes, but as the rollout continues, you can expect to see the content in a rich text format, showing the bullets and bolded sub-headings.

These changes are designed to make our unique value and insights easily accessible. By simplifying your investment journey, we continue our mission to empower investor success.

Air New Zealand: Engine issues stall earnings

Air New Zealand expects first-half fiscal 2025 pretax profit to be NZD 120 million-NZD 150 million as persistent engine issues affect aircraft availability. This is about 27% lower than the previous corresponding period but more than a threefold increase on the second half of fiscal 2024.

Why it matters: The trading update is better than we anticipated. We lift our fiscal 2025 pretax profit forecast by 45% to NZD 188 million, 15% lower than fiscal 2024. We maintain our fiscal 2026 pretax profit forecast at NZD 277 million.

  • Earnings weakened over fiscal 2024 due to cost inflation, engine maintenance issues, weak economic conditions in New Zealand, and increased international competition. We expected these issues to weigh more heavily on fiscal 2025 earnings, particularly in the first half.
  • However, Air New Zealand appears to be handling issues relatively well, managing capacity through leases while keeping a tight control on costs. Corporate travel is also beginning to recover, and competitive capacity to North America is gradually easing.

The bottom line: We maintain our NZD 0.80 (AUD 0.73) fair value estimate for no-moat Air New Zealand. Despite increasing our near-term earnings forecast, we make only minor changes to our long-term forecasts. Shares in Air New Zealand screen undervalued at current prices.

  • We continue to expect a material step-up in earnings from fiscal 2026 and into fiscal 2027. Maintenance issues should begin to roll off from fiscal 2026, increasing aircraft availability and reducing temporary costs.
  • Domestic travel in New Zealand is at cyclical lows, and government travel remains subdued. We expect recovery as economic conditions in New Zealand improve. Similarly, while corporate travel is improving, it remains well below pre-covid-19 levels.

Between the lines: Up to six Airbus 320/321 Neos and four Boeing 787s, the airline's newest and most efficient aircraft, have been grounded at times during the half due to engine maintenance issues.

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