Q1'24 Inside The Buy-Side® Earnings Primer®

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Corbin Advisors Releases Q1’24 Inside The Buy-Side® Industrial Sentiment Survey®

Industrial Investor Optimism Continues to Rise as Expectations for Broad-Based Weakness are Replaced with Anticipation of an Improving Landscape Amid Inventory Normalization and Orders Green Shoots

  • 68% characterize current sentiment as Neutral to Bullish or Bullish, more than double the 32% observed last quarter
  • 66% describe executive tone as Neutral to Bullish or Bullish, up from 45% last quarter; perceived stances reverse two quarters of ebbing positivity
  • Fewer than half, 47%, now expect broad-based Industrial weakness, down from 90%+ captured in the prior three consecutive quarters
  • 54% expect results to be In Line with consensus while those expecting beats more than doubles QoQ
  • Regarding Q1 KPIs, the majority anticipate Improving performances, particularly in Revenue and EPS; fewer than one-quarter expect Worsening results across all measures
  • Reinvestment remains the preferred use of cash, with 44% in support of Increasing growth capex; M&A continues to see increasing backing with 94% In Favor or Highly in Favor of bolt-on acquisitions

HARTFORD, CT – April 18, 2024 – 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®  flagship research publication, was conducted from March 14 to April 9, 2024, and is based on responses from 52 institutional investors and sell-side analysts globally who actively cover the Industrial sector. The buy-side firms represented in our survey manage more than $1.8 trillion in assets and have $184 billion invested in Industrials.

Following last quarter’s survey which found investors shifting into Neutral territory from a largely Neutral to Bearish stance the period prior, this quarter’s survey finds a jolt of optimism among respondents amid anticipation of Industrial growth potential.

“Persistently high investor expectations for broad-based Industrial weakness have been slashed in half and replaced with increasing optimism after a challenging stretch of inventory destocking, which was first identified as a concern in our Q3’22 survey,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “Investors describing their own outlook and executive tone as positive experience meaningful surges amid anticipation of a strong first quarter and signs that orders, especially for short-cycle products, are beginning to germinate. Reflecting this rising tide, views on capital allocation continue to prioritize growth with reinvestment cited as the leading preference, followed by M&A, which sees increased support for the third consecutive quarter. However, despite rosier attitudes overall, the lion’s share of investors expects executives to hold annual guides firm this quarter, while leading topics for earnings calls include demand and order rate trends, margins and pricing power, and inflation, which garnered a step-up in attention this survey. While our channel checks indicate stabilization versus continued deceleration is occurring in pockets across Industrial sub-sectors, investor sentiment at these levels could be slightly ahead of company reality and proactive expectations management will be an important element of earnings calls this quarter.”

Importantly, fewer than half, 47%, expect broad-based Industrial weakness, down from 90%+ captured for three consecutive quarters, and 59% report prioritizing growth over margins at this time, up from 32% in Q3’23. Moreover, 46% now expect 2024 Industrial organic growth to be higher than 2023, up from 38% QoQ, and those expecting a lower growth rate declined from 50% to 27%.

Continuing, survey contributors anticipate steady to improving order rate conditions over the next six months, particularly for short-cycle products, and 76% report industrial companies within their coverage universe are still passing on cost. Amid these factors, concern over margins is notably lower QoQ.

“Companies gave more guarded Q1 guidance but are optimistic toward 2024 overall. As the quarter rolled along, companies said they felt much better about Q1 and that is backed up by better-than-expected economic data,” commented a portfolio manager whose firm has $5.2 billion invested across the Industrial sector.

Reinvestment remains the preferred use of cash, with 44% in support of increasing growth capex, up significantly from just 3% in Q3’23. Debt paydown, after a silver podium finish last quarter, falls to fourth on the priority list behind M&A and dividend growth. Notably, bolt-on acquisitions continue to garner meaningful investor support QoQ at 94%, and those outright against large deals decreases for the third consecutive quarter.

Regarding industry sentiment, bulls outweigh bears across the majority of the sector. In particular, Industrial Equipment & Components and Water are the largest bull gainers, with the latter seeing no trace of negative sentiment this quarter. Materials sees the highest influx of bears QoQ, while Ag and Transportation are decidedly out of favor. As far as geographic exposure, North America remains the regional darling for eight consecutive quarters, while APAC (ex-China) sees increasing support. Leverage to AI and nearshoring/reshoring activity are cited as the most attractive Industrial investment themes.

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.

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© 2024 Corbin Advisors. All Rights Reserved.
© 2024 Corbin Advisors. 
All Rights Reserved.
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