Many investors note “much higher levels of uncertainty looking
into next year” and are expecting executives to address risk management
strategies on upcoming earnings calls in light of tariffs, rising input
costs and higher interest rate implications
- Expectations for key performance metrics fell to the most pessimistic
levels since Dec. 2015, with Organic Growth, EPS, FCF and Margins all
expected to worsen; sentiment and broader findings are nearly
identical to our Dec. 2015 survey, as investors at that time grappled
with slowing growth in China
- Over half of surveyed respondents, or 51%, believe the U.S. economy is Late
cycle, a significant increase from 31% last quarter; 40% now suggest
the U.S. markets peaked in 2018 – more than quadrupling QoQ
- Tariffs, rising input costs, interest rates and leverage levels are
identified as the leading concerns heading into 2019; 85%+ note they
are placing More Emphasis on operational excellence and balance
- Investor sentiment and perceived management tone have significantly
deteriorated; those reporting a Neutral to Bearish or Bearish
stance nearly doubled sequentially, while close to 60% expect 2019
corporate outlooks to be Weaker than 2018
- Investors report sitting on cash and looking for defensive
investments, with 50% increasing cash holdings QoQ
HARTFORD, Conn.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/earnings?src=hash” target=”_blank”gt;#earningslt;/agt;–Corbin Advisors, a research and advisory firm specializing in investor
relations (IR), today released its quarterly Inside
The Buy-side® Earnings
Primer report, which captures trends in institutional investor
sentiment. The survey was conducted December 5 to 26, 2018 and is based
on responses from 85 institutional investors and sell-side analysts
globally, representing more than $595 billion in assets under management.
Our 4Q18 survey reveals investors have turned decidedly more negative
and now believe that, for now, the best days are behind us, as FY 2019
outlooks are expected to be tempered. Investor sentiment and perceived
management tone are significantly more cautious, registering at the most
negative levels since Sep. 2016, in which concerns centered on China and
broader global growth, as well as consumer confidence ahead of the U.S.
“Rising input costs, specifically labor costs, in addition to the
continuing trade saga, appear to have suppressed investor appetite for
risk assets,” said Mark Mandziara, Senior Managing Director at BTC
Capital Management. “Couple this with the geopolitical aspects of a
Democrat-led House in the U.S., continuing fatigue of Brexit and the
changing of the guard in several Eurozone countries, all of which
further exacerbates uncertainty regarding the outlook for corporate
Despite the worst December U.S. stock market performance since the Great
Depression, over 50% of investors still classify U.S. equities as Overvalued
and more note they expect further contraction in the first half of 2019.
Approximately half expect U.S. and European economies to Worsen
over the next six months, a drastic decline for both.
Survey respondents’ downbeat outlook extended to the broader economy,
with 59% expressing Continued or More concern with a
potential U.S. recession versus one year ago, an increase from 47% last
quarter. Meanwhile, headcount reductions in reaction to higher costs and
the challenging macro rose sharply in 4Q18, with at least 34 companies
announcing more than 115,000 layoffs in total.
Strong C-Suite Messages Needed in Coming Earnings Reports
“As we head into the upcoming earnings cycle, the precipitous fall in
investor confidence has been rapid and stunning, spurred by continued
uncertainty around a myriad of issues, including trade conflicts, rising
interest rates and decelerating China growth,” said Rebecca Corbin,
Founder and CEO of Corbin Advisors. “Still, negative sentiment may be
overplayed as the market has priced in a measure of slowing global
growth, though a recession does not appear to be reflected yet.”
“It will be important for executives to address growth in the context of
risk management strategies, while balance sheet strength and margin
preservation will be in focus for investors,” added Ms. Corbin.
“Defensive sectors, as well as companies with recession-tested
management teams, conservative debt levels and strong operating models
will be safe harbors in this volatile period,” said Ms. Corbin.
As we noted last quarter, our proprietary research indicates Net
Debt-to-EBITDA thresholds continue to grow more conservative, with a
preferred level of 2.0x for most sectors, down from 2.5x in 2016.
As for sector views, Healthcare remains strong following outperformance
in 2018, while Utilities and REITs are no longer the most out-of-favor
for the first time in more than two years. Building Products, Consumer
Discretionary and Financials led a trend of significant increases in
bearish sentiment for most other sectors.
Since 2006, Corbin Advisors has tracked investor sentiment on a
quarterly basis. Access Inside
The Buy-side® and other research on real-time
investor sentiment, IR best practices and case studies at CorbinAdvisors.com.
About Corbin Advisors
Corbin Advisors is a specialized investor relations (IR) advisory firm
that partners with C-suite and IR executives to drive long-term
shareholder value. We bring third-party objectivity as well as deep best
practice knowledge and collaborate with our clients to execute sound,
effective investor communication and engagement strategies. Our
comprehensive services include perception studies, investor targeting
and marketing, investor presentations, investor days, specialized
research, and retainer and event-driven consulting.
The Buy-side®, our industry-leading research
publication, is covered by news affiliates globally and regularly
featured on CNBC.
To learn more about us and our impact, visit CorbinAdvisors.com.
Bronwyn Swanson, 203-283-7997