Survey Finds Near-Record Bullish Industrial Investor Sentiment
85% of surveyed investors and analysts expect Better Than sequential earnings
91% expect Free Cash Flow to improve QoQ, while 87% believe the same for EPS and 83% for Operating Margins, up from ~65% last quarter
80% describe themselves as Neutral to Bullish or Bullish, up from 57% QoQ, while only 7% are Neutral to Bearish or Bearish; nearly 90% also describe management tone as optimistic
Expectations are for 2021 U.S. and global industrial organic growth of 5.0% and 4.0%, respectively
78% cite reinvestment as the leading preferred use of cash, registering at the highest level in over two years
Sentiment on Auto is the highest in our survey’s history and tops all other sub-sectors in bullishness
HARTFORD, CT – January 21, 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 follow the industrial sector. Buy side firms manage more than $2.1 trillion in assets and have ~$148 billion invested in industrials.
Following last quarter’s survey that saw the highest level of bullish industrial investor sentiment since September 2018, we find sentiment continues to climb and reaches near-record bullish levels. With almost 60% affirming last quarter’s earnings were Better Than expectations, 85% now believe earnings will Improve sequentially and 65% are expecting consensus beats.
As well, 95% believe revenue growth will Improve sequentially, the highest percentage ever recorded, with full-year 2021 industrial organic growth expectations for 5.0% in the U.S., on average, and 4.0% globally. With significant emphasis being placed on growth, 78% now cite reinvestment as the leading preferred use of cash, registering the highest level in over two years.
Following last quarter’s survey, when 51% classified industrial equities as Undervalued, nearly 60% now consider equities Fairly Valued. Commensurate with that view, 30% report Rotating within the sector, an increase from just 8% last quarter. Growth and digitalization are identified as the most compelling investment themes and 50% view small caps as favorable at this time. Tom Hayes, Managing Director at Northcoast Research, commented, “There has been a move to quality and it’s reflected in valuations.”
Regarding 2021 outlooks, nearly 70% remain keenly focused on the pace of recovery, while capital allocation, including M&A, as well as organic growth expectations are cited as the top areas to address on upcoming earnings calls.
“Industrial sentiment in the second half of 2020 was marked by increasingly more upbeat views as performance continued to improve from the April crater. Industrials have once again demonstrated their resilience as they proved out their ability to swiftly cut costs, execute with agility through the recovery, and emerge stronger amid an unprecedented environment,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “This year will be marked by a significant emphasis on growth, as industrial investors seek to identify investments well-positioned to capture growth and put the stockpiles of free cash flow to work. We expect a reinvigorated focus on innovation as demand strengthens and deal activity picks up in the months ahead.”
In terms of sector bets, Machinery, Agriculture and Metals & Mining saw the biggest swings in positive sentiment, while Auto is experiencing the highest number of bulls across all sub-sectors for the first time in our survey’s history. Notably, Non-Resi Construction sees the highest number of bears, surpassing Commercial Aerospace, which had seen the most downbeat sentiment each quarter since the onset of COVID-19.
Since 2006, 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.
About Corbin Advisors
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.
To learn more about us and our impact, visit CorbinAdvisors.com.
Hot Paper Lantern
Chuan Ting Toh