Corbin Advisors Releases
Q1’21 Inside the Buy-Side®
Industrial Sentiment Survey®
Continued Optimism on Lofting Growth Expectations but Inflation and Supply Disruptions Serve to Temper Last Quarter’s Euphoria
- 83% of surveyed investors and analysts expect Better Than sequential earnings
- 94% describe management tone as Neutral to Bullish or Bullish, a record high, surpassing the previous high watermark achieved in Dec. 2017
- 83% believe earnings will Improve QoQ and nearly 60% anticipate Q1 earnings beats, just slightly below last quarter’s record
- Expectations are for 7.0% U.S. Industrial Organic Growth in 2021, up from 5.0% last quarter
- 55% cite inflation (unaided) as the top concern while 60% believe it will Worsen over the next six months; optimism on Margin and FCF expansion takes a hit
- Materials and Commercial Aero, two sub-sectors that saw the most significant pullbacks in sentiment during COVID-19, now register the highest number of investors expecting improvement over the next six months
FARMINGTON, CT – April 22, 2021 – Corbin Advisors, a strategic consultancy accelerating value realization globally, today released its quarterly Industrial Sentiment Survey®. The survey, part of Corbin Advisors’ Inside the Buy-Side® publication, is based on responses from 35 institutional investors and sell side analysts globally who actively cover the industrial sector. Buy side firms manage more than $1.8 trillion in assets and have ~$160 billion invested in industrials.
Following last quarter’s near-record bullish investor sentiment, our survey finds continued momentum with nearly 80% describing themselves as Bullish or Neutral to Bullish, and a record 94% classifying management tone as upbeat, surpassing the previous record set in December 2017.
The vast majority, 83% believe earnings will Improve sequentially, and nearly 60% anticipate Q1 earnings beats, just slightly below last quarter’s record expectations, which were accurate. According to S&P 500, 80% of companies beat consensus. As well, more than 75% expect revenue growth will Improve sequentially, with expectations for 7.0% U.S. industrial organic growth, on average, up from a projected 5.0% last quarter. With significant emphasis being placed on growth, 74% cite reinvestment as the leading preferred use of cash and 100% cite growth investments as the most compelling investment theme in 2021.
After setting records last quarter, views on FCF performance soften amid rapidly rising costs, from 94% expecting levels to Improve to just 46% this quarter, while 29% now anticipate caches to Worsen, up from 0%. Similarly, 47% expect margins to Improve sequentially, down from 83% last quarter, while 39% anticipate flat performance, up from just 17%.
Nick Heymann, Co-Group Head-Global Industrial Infrastructure at William Blair commented, “I am bullish; we have the best U.S. GDP growth in almost 50 years and very robust global GDP growth [though] I expect industrial earnings could come in worse than expectations due to supply chain disruptions, severe winter weather and sharply higher input prices for logistics, raw materials and labor.”
Regarding upcoming earnings calls, 80% of investors and analysts encourage executives to address demand trends and growth outlooks, 50% supply chain disruptions, 33% investments and uses of cash and 25% inflation. ESG is also cited by nearly one-quarter of the surveyed group.
“World-class Industrials typically thrive in periods of extreme change where cost management, margin expansion and growth reinvestment are the order of the day. Industrials weathered COVID well but as we shift gears to a period of rapid growth, a new set of winners will emerge – those that have combined digital transformation, advanced analytics, and a proven operating model to quickly absorb the shocks from rapid inflation and supply disruptions with a growth muscle to capture opportunity and share gains,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “Culture will play a significant role in the COVID aftermath, as companies contend with sector-wide labor shortages, hybrid working structures and employee burnout, while at the same time trying to satisfy increasing pent-up demand. This quarter presents another opportunity for executives to effectively manage investor expectations, balancing the excitement of revenue growth, record backlogs, and easy Q2 comps with the counterweights on the horizon.”
In terms of sector bets, Materials and Commercial Aerospace saw the biggest swings in positive sentiment, with Materials experiencing unanimous bullishness, a survey first. Notably, Defense attracted the highest number of bears, surpassing Non-Resi Construction, which has maintained the most out-of-favor spot for two consecutive quarters.
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.
