Corbin Advisors Releases Q3’21 Inside The Buy-Side® Industrial Sentiment Survey®
Industrial Investor Sentiment Grows More Cautious But Findings Indicate a Potential Underappreciation for Supply Chain x Inflation Impact; 2022 Outlooks Remain Upbeat On “Strong Demand”
- 86% identify supply chain disruption as the most significant concern this quarter, up from 26% last quarter
- 83% expect margins to Worsen sequentially, up from 13% last quarter and the second-highest percentage ever recorded (previous record in Q2’20)
- Despite views that executive tone is more cautious, 54% of investors and analysts describe themselves as Neutral to Bullish or Bullish, down from 70% last quarter but above pre-pandemic levels
- 70% expect revenue to Improve sequentially this quarter, albeit down from a record 100% last quarter
- 68% expect continued strong demand levels in 2022 with forecasts for 5% organic growth on average (versus expectations for 7.5% in 2021)
- 53% report Rotating within industrials, up from 15% last quarter; pure plays, North America and small caps in favor
FARMINGTON, CT – October 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 29 institutional investors and sell side analysts globally who actively cover the industrial sector. Buy side firms manage more than $2.7 trillion in assets and have ~$258 billion invested in industrials.
Following a slight pullback in industrial sentiment last quarter for the first time following four consecutive quarters of increasingly bullish views following last year’s second quarter cratering, our survey this quarter finds continued caution but still more optimistic leanings. While only 32% now describe management tone as Neutral to Bullish or Bullish, down from a record 96% last quarter, those describing their own sentiment as Neutral to Bullish or Bullish registers at a higher clip of 54%, albeit down from 70%.
For Q3, investors are baking in a deceleration in earnings and consensus misses amid massive inflationary and supply chain concerns, as well as worsening margins and free cash flow. Indeed, nearly 9 in every 10 investors expresses concern with supply chain disruption, up from 26% last quarter, and nearly 60% with inflation. Still, 70% expect revenue to Improve sequentially amid strong demand with 68% forecasting continuation into 2022. Specifically, 7.5% organic growth is expected for industrials this year and 5.0% in 2022, on average. A majority believe global capex will remain strong despite more than half predicting Global PMI and Consumer Confidence Worsen over the next six months.
“After industrial executive and investor optimism remained elevated amid soaring global demand in the front half of the year, this will be the first quarter where we see pervasive cost inflation and supply constraints materially impact results,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “As a tale of two cities emerges – with record demand levels offset by companies’ inability to deliver and the cost to do business ratcheting ever higher each day – we are registering significantly more negative sentiment across the board though investors and executives alike remain optimistic about demand levels remaining in place well into 2022. Sequential backlog, volume and order trends, as well as inventory levels – FOMO at play – will be important to watch this quarter and next, with China geopolitics and consumer sentiment two wildcards.”
Amid the changing tides, 53% of surveyed investors report Rotating within industrials, up from 15% last quarter. Pure plays, digitalization and cost-cutting initiatives are seen as the most compelling investment themes, while North America and small caps are also in favor. In terms of sector bets, Distribution sees the most significant increase in bulls with Building Products a growing target for bears amid consistent record setting.
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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