Q1'24 Inside The Buy-Side® Earnings Primer®

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Corbin Advisors Releases Q4’22 Inside The Buy-Side® Earnings Primer®

Survey Finds a Challenging 2023 Anticipated but Investors Less Draconian QoQ Amid Expectations for a Soft Landing – Downbeat Management Tone Approaches Near-Record Level and Capital Allocation Is In Focus 

  • 44% of surveyed investors and analysts describe themselves as Neutral to Bearish or Bearish, an improvement from 56% last quarter; fewer identify as outright bears (18% vs 27% QoQ) 
  • 52% describe executive tone as Neutral to Bearish or Bearish, up from 46% in Q3, the second-most downbeat level recorded and only the second time exceeding bearish investor sentiment 
  • 44% anticipate Lower sequential earnings, down from 68% last quarter, while 46% expect in line with consensus results 
  • ~50% anticipate Lower 2023 Organic Growth, Margin, EPS, and FCF guidance relative to 2022, with slightly more optimism identified QoQ 
  • 80% are bracing for a recession, with 61% predicting landfall between now and the end of Q2 2023; over three-quarters anticipate a soft landing 
  • 62% favor debt reduction as the top use of cash, up from 58% last quarter and the highest level recorded since Q2 2014, amid the onset of expectations for an industrial recession; still, 58% encourage maintaining or increasing growth capex 

HARTFORD, CT – January 12, 2023 – 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 53rd issue of Inside The Buy-Side® was conducted from December 9, 2022, to January 4, 2023, and is based on responses from 80 institutional investors and sell side analysts globally, representing ~$3.8 trillion in equity assets under management. 

Following last quarter’s survey, which found the most bearish investor sentiment and perceived management tone in more than a decade, excluding the onset of the COVID-19 pandemic, this quarter’s survey finds continued broad-based expectations for weakening results and lower 2023 guidance versus 2022 results, but with less draconian views in general. 

After positive investor sentiment reversed course in September 2021 and inflected negatively in March 2022, perceived management tone has followed course, with 52% of investors and analysts now describing executives as downbeat, the most negative level recorded since Q1 2020, and more bearish than investors for only the second time in our survey’s history.  

Notably, 58% are mostly concerned (unaided) with U.S. Fed policy, surpassing inflation, which was the leading identified issue for four consecutive quarters and nearly 80% express a high level of concern (aided) with talent and labor availability and associated costs, more than doubling QoQ.  

Amid continued headwinds, 80% are bracing for a recession, with the majority, 61%, predicting landfall between now and the end of Q2 2023. However, if the economy experiences a recession, 76% anticipate a “soft landing.” 

Views on most key economic indicators over the next six months are less pessimistic QoQ, with Global Capex seeing the most significant sentiment improvement. Investors note events that could support accelerated optimism are moderating inflation (33%), stronger-than-expected growth (23%), a potential Russia-Ukraine resolution (23%), and supply chain investments (15%).  

Mark Mandziara, Senior Managing Director at BTC Capital Management commented, “My market sentiment is neutral. While neutral in personal sentiment, management has been guiding lower. This may be posturing yet positioning for some modest positive surprise.” 

For Q4 results, approximately half expect performance across key measures – Organic Growth, EPS, Margins, and FCF – to Worsen QoQ, with fewer than one-quarter forecasting Improving sequential performance, though this is less downbeat than last survey’s findings heading into Q3. Continuing, 46% anticipate results to be in line with sell side consensus with fewer expecting misses. As well, half of investors and analysts are assuming lower Organic Growth, Margins, EPS, and Free Cash Flow guidance for 2023 relative to 2022 results. Top areas to address on earnings calls include margins/expense management (44%), capital allocation priorities (37%), demand trends (35%), inflation/pricing power (32%), and labor shortages/costs (29%). 

“After identifying a meaningful reversal in bullish investor sentiment more than a year ago in September 2021 and increasing investor bearishness in consecutive subsequent quarters, our Q4 survey finds management bearishness, as perceived by tone, has surpassed that of investors, who are less draconian quarter-over-quarter,” said Rebecca Corbin, Founder and CEO of Corbin Advisors 

“With most surveyed investors anticipating sequential deceleration, a recessionary environment, and lower 2023 guides relative to 2022 performance, the table is set for corporate conservativeness. To begin to decouple equity performance from the macro, a healthy dose of ‘under promise’ is required given more economic uncoiling remains. Companies with ironclad balance sheets or plans to achieve, an aggressive expense management approach, and a commitment to reinvest to support future growth stand to benefit in the near-term.” 

Broad-based capital deployment preferences overwhelmingly favor debt paydown (62%) and conserving cash (50%). However, reinvestment is on the rise, with 58% encouraging companies to Maintain or Increase growth capex (vs. 33% last quarter) given expectations for a “soft landing” and the importance of positioning for long-term, sustainable performance. Only 18% now prefer buybacks, down from 31% QoQ, while 65% favor moderation or cessation of repurchase programs.  

As for 2023 market performance, 53% expect U.S. equity valuations to contract, with 61% positioning for a weaker first half and stronger second half. As a result, most, or 36%, report Holding, in line with last quarter. Notably, just 18% report Net Selling, marking a retreat from record levels last quarter, which were the highest since December 2018. Biotech and Financials see the largest increase in bullish sentiment, while bears move into Tech, joining Consumer Discretionary, REITs, and Building Products, all of which remain out of favor. 

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.

Inside The Buy-Side®, our industry-leading research publication, is covered by news affiliates globally and regularly featured on CNBC.

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© 2024 Corbin Advisors. 
All Rights Reserved.
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