Corbin Advisors Releases Q3’21 Inside The Buy-Side® Earnings Primer®
Investor Sentiment and Management Tone Reverse Four-quarter Positive Trend; Mixed Q3 Prints Expected
- 45% of investors and analysts describe themselves as Neutral to Bullish or Bullish, down from 68% last quarter; 28% are more downbeat and nearly 10% outright Bearish, up from 0%
- Just 18% describe executive tone as outright Bullish, down from 41% last quarter
- 63% identify supply chain disruption as the most significant concern; 9 out of every 10 investors say they are more apprehensive QoQ
- 42% expect Worse Than sequential earnings, the first time more are expecting deceleration than acceleration since June 2020
- 38% believe Q3’21 earnings will be Worse Than consensus, up from only 2% last quarter, and only 30% are expecting beats, down from 60%
- 35%+ see EPS, organic growth and free cash flow Worsening this quarter, which follows record high expectations last quarter
- Despite significant concerns, 64% expect companies to Maintain 2021 annual guidance and 62% expect strong demand levels to continue in 2022
HARTFORD, CT – October 14, 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 48th issue of Inside The Buy-Side®, was conducted from September 7 to October 6, 2021 and is based on responses from 73 institutional investors and sell side analysts globally, representing more than $3.7 trillion in equity assets under management.
After investor sentiment ebbed slightly last quarter following four consecutive quarters of increasingly bullish and record positive sentiment, this quarter our survey finds a meaningful pullback in upbeat views, as supply chain disruption and inflation are driving significant concerns.
Fewer than half now describe themselves as Neutral to Bullish or Bullish, down from 68% last quarter, while 28% are downbeat and nearly 10% outright Bearish, up from 0%. Weighing on sentiment is supply chain disruption, the leading identified concern cited by 63% of investors, more than tripling from last quarter. Inflation (58%), COVID-19 variants (25%), the Fed (17%) and a China economic slowdown (17%) are also identified as concerns. Views from respondents were captured ahead of the U.S. Consumer Price Index reported increase of 5.4% yesterday, October 13, above the 5.3% registered in August and in line with June and July, which saw the highest 12-month rates since August 2008.
To be clear, near-term expectations for company results are baking in negative impacts from rampant inflation and supply dislocation, with 42% bracing for a sequential slowdown, up from just 2% last quarter and views decidedly downbeat on margins – 60% predict QoQ erosion. Indeed, 64% expect companies to Maintain annual guidance.
Providing some light, views longer-term remain cautiously optimistic: 62% expect strong demand levels will continue in 2022 and more than 40% believe all key performance indicators will be in line with 2021, with fewer than one-third anticipating worsening results.
Joe D’Angelo, Portfolio Manager at Barrantagh Investment Management commented, “My sentiment is neutral to bullish; demand remains strong but supply chain issues are limiting growth near-term.”
“The headwinds we have been hearing about and quantifying in our research since the fourth quarter of last year, specifically inflation and supply chain disruption, are louder than ever and now having meaningful negative impacts on results. We do not expect the growing number of negatives to abate quickly and expect this super cycle to continue to play out in the fourth quarter and beyond as the pendulum swings back to the center,” said Rebecca Corbin, Founder and CEO of Corbin Advisors.
“While the positive demand narrative is a strong offset, there are a growing list of uncertainties, including how long cost increases will be tolerated, level of inflation in demand as the snap-up of scarce supply continues, and what the ultimate impact from China will be. To that end, for the first time in three quarters, investors’ preferred use of cash is debt paydown, while support for reinvestment saw a significant step down this survey. Market psychology is a powerful, often underappreciated factor and has the potential to dampen the global capex exuberance prevalent this year. We expect a lot of questions on 2022 and the sustainability of growth and demand, the only two positives identified this quarter.”
A notable shift from last quarter, 67% report Holding or Rotating, while Net Buyers decreased to 19% from 37% last quarter. Still, outright Sellers remained below 15%. Sectors see mixed views, with Healthcare and Technology registering the highest levels of bullishness and Consumer Discretionary and Building Products the lowest. As well, views on Energy are evenly divided, as the sector saw nearly 40% bulls and bears, with Oil & Gas markets expected to Stay the Same or Improve over the next six months.
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.
