Corbin Advisors Releases Inside The Buy-Side®: Q1’21 Earnings Primer
Record Bullish Sentiment Fueled by Growth Grandeur While the Near-term Impact of Inflation and Supply Chain Disruption Looms Large
- 75% of surveyed investors and analysts expect Better Than sequential earnings
- 75% describe themselves as Neutral to Bullish or Bullish, up from 64% last quarter; 88% describe executive tone as more upbeat, an increase from 73% last quarter – bear
- Average 2021 U.S. GDP forecasts increase to 5.5% on average from 4.0% last quarter
- 78% expect organic growth will improve sequentially, a high watermark
- 76% cite reinvestment as the leading use of cash, also a record high; 57% emphasize growth over margins at this point in the recovery
- 64% identify inflation as the most significant concern, with 75% expressing moderate to high concern with companies’ ability to offset / pass on costs
HARTFORD, CT – April 15, 2021 – 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 46th issue of Inside The Buy-side®, was conducted from March 9 to April 8, 2021 and is based on responses from 80 institutional investors and sell side analysts globally, representing more than $1.9 trillion in equity assets under management.
Building on three consecutive quarters of increasing bullishness, investor sentiment and perceived management tone register at record positive levels as revenue growth exuberance accelerates amid the vaccine rollout and despite another wave of country lockdowns. Three-quarters of investors and analysts describe themselves as Neutral to Bullish or Bullish, up from 64% last survey and, even more, 88%, describe executive tone as upbeat, an increase from 73%.
Driving this sentiment, nearly 80% expect organic growth will improve sequentially, the highest percentage recorded in our survey’s history, with 76% identifying reinvestment as the leading use of cash, also a high watermark. Amid outsized focus on reinvesting for growth, 57% of investors believe companies should prioritize revenue expansion over margins at this time, while still asserting profitably is important.
Supporting clear-cut optimism, 75% are forecasting sequential earnings improvement and 60% expect consensus beats. Most still expect FCF and EPS to improve and 60% also report net buying or rotating within equities.
Tom Maher, Portfolio Manager at Hilton Capital Management commented, “I am still constructive on equities. Reopening is driving optimism, and while I have some caution given how far stocks have moved, I still expect a positive reaction to companies that provide strong results and/or outlooks.”
Survey findings also reveal inflation is now the leading concern for nearly two-thirds of investors, surpassing COVID-19 for the first time since the onset of the pandemic, which is now cited by fewer than one-third of surveyed participants, down from 80% last quarter. Lofty valuations, corporate taxes, rising interest rates and supply chain disruption round off the most significant risks in 2021.
“Growth dominates investors’ mindset, as anticipation of strong sales momentum supersedes concerns with inflation and supply chain disruption. Investors have baked in handy beats and expectations for guidance raises are high,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “Juxtaposed against the explosive growth recovery and easy Q2 comps is rapidly rising costs and a dearth of materials globally that could be a real problem for delivering on current demand levels as vaccine roll-outs progress. While investors currently favor growth over margin, companies that can successfully expand while preserving profit will capture outsized mindshare. Addressing growth plans, both organic and inorganic, as well as inflation and supply chain disruption mitigation strategies is critical this quarter, as is managing heady investor expectations.”
Regarding sector sentiment, Financials, Industrials and Materials experienced the greatest increases in bullish sentiment, with financials seeing a record number of bulls. Technology also remains in favor, while Healthcare and Biotech register the largest pullback in positive sentiment. Despite a slight thaw, Utilities and REITs continue to see the highest level of bearish 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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