Corbin Advisors Releases Q4’21 Inside The Buy-Side® Earnings Primer®
Investor Sentiment Upbeat Despite Companies Contending with Continued Headwinds
- 52% of investors and analysts describe themselves as Neutral to Bullish or Bullish, up from 45% last quarter
- 69% describe executive tone as Neutral to Bullish or Bullish, up from 55% last quarter
- 82% expect strong demand levels to continue in 2022, an increase from 62% last quarter
- 86% report more concern (aided) or a continued high level of concern with inflation, up from 78%, followed by labor availability at 79%
- 45%+ expect 2022 guides for FCF and EPS will be stronger than 2021 results, with organic growth anticipated to be in line to better
- 52% cite rising interest rates as a top area of concern amid the current inflationary environment, doubling from the prior quarter
HARTFORD, CT – January 13, 2022 – Corbin Advisors, a strategic consultancy accelerating value realization globally, today released its quarterly Earnings Primer®, which captures trends in institutional investor sentiment. The survey, which marks the 49th issue of Inside The Buy-Side®, was conducted from November 30, 2021 to January 7, 2022 and is based on responses from 75 institutional investors and sell side analysts globally, representing more than $6.6 trillion in equity assets under management.
After a meaningful pullback in investor sentiment last quarter following four consecutive quarters of near-record positive sentiment, this quarter our survey finds investor sentiment has rebounded and inflected more favorably heading into 2022, as the prospect of continued strong demand outweighs concerns over inflation, labor availability and supply chain disruption.
More than half of surveyed investors, 52%, describe themselves as Neutral to Bullish or Bullish, up from 45% last quarter, while only 20% are downbeat, an improvement from 28%. Driving more upbeat sentiment this quarter, the vast majority, 82%, expect continued strong demand levels in 2022 and annual guides to be in line to better than 2021 results for free cash flow, EPS and organic growth. Further bolstering sentiment, those who describe executive tone as more upbeat increased – from 55% to 69% QoQ.
Indeed, heightened growth expectations for this year remain intact, with 2022 U.S. GDP forecasts of 3.6% on average and continued views that Global Capex will increase over the next six months. With that backdrop, reinvestment is cited as the leading preferred use of cash by 47% of investors, up from 38% last quarter, followed by M&A at 37%.
Still, holding back investor sentiment from the record levels identified in the second quarter are continued headwinds, particularly inflation, in which 86% of investors report more concern or a continued high level of concern this quarter, up from 78%. Labor availability, further exacerbated by the current COVID-19 surge, is also top of mind. Amid rampant inflation, more than half, 52%, cite rising interest rates as worrisome, doubling from the prior quarter, with 55% now anticipating an increase in rates in the first half of 2022, up from just 30% last quarter. Supply chain disruption continues to cause perturbation but at less meaningful levels than last quarter, with 67% expressing high concern, down from 86%.
Barry Dawes, Executive Chairman at Martin Place Securities commented, “My overall market sentiment is neutral because of an overextended tech market, internal rotation, higher input costs and tight labor availability.”
“With investors having expected a relatively challenging third quarter impaired by supply chain and inflation and companies largely delivering better-than-expected results, earmarked by the near-universal corporate refrain of ‘strong demand continues’, our survey this quarter finds investor sentiment has rebounded and the view that 2022 will be another strong demand year abounds,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “With growth squarely in focus, investors continue to meaningfully support reinvestment and now M&A, which rose to the second preferred use of cash for the first time since Q2 2016. For now, the positive demand narrative is enough to offset headwinds but the challenges companies face of higher costs, labor availability, further impacted by the COVID spike, ongoing supply chain issues and now the prospect of rising interest rates remain. The combination of these factors will place a premium on operational execution and balance should be struck between the attendant risks and the myriad of opportunities created by this unprecedented environment.”
As for investing patterns, 39% report Holding or Rotating, while Net Buyers nearly doubled to 33% QoQ. With the prospect of rising interest rates, Financials register the most bullish sentiment while defensive sectors – Consumer Staples, Utilities and REITs – see the most downbeat sentiment.
About Corbin Advisors
Since 2007, 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.
Corbin is a strategic consultancy accelerating value realization globally. We engage deeply with our clients to assess, architect, activate, and accelerate value realization, delivering research-based insights and execution excellence through a cultivated and caring team of experts with deep sector and situational experience, a best practice approach, and an outperformance mindset.
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