Corbin Advisors Releases Inside The Buy-side®: Q2'20 Earnings Primer

July 9, 2020

Survey Findings Reveal Significantly Less Bearish Sentiment Despite Expectations for a Very Weak Q2

  • 80% of surveyed investors and analysts expect Worse Than sequential earnings
  • Greater than 80% expect EPS, Margins and FCF to have Worsened quarter-over-quarter, while 67% anticipate Organic Growth deterioration
  • 48% describe themselves as Bearish or Neutral to Bearish, down from a record high of 77% last quarter; 46% characterize executives as downbeat, a significant improvement from 83% quarter-over-quarter
  • 44% are More Positive or Cautiously Optimistic relative to their expectations at the onset of COVID-19; less than 25% are More Negative
  • 70% report U.S. equities are Overvalued, while 60% and nearly half believe Europe and Asia stocks, respectively, are lofty; 54% believe valuations will Contract from Here in 2020

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HARTFORD, CT – July 9, 2020 – Corbin Advisors, a research and advisory firm specializing in investor relations (IR), today released its quarterly Earnings Primer, which captures trends in institutional investor sentiment. The survey, which marks the 43rd issue of Inside The Buy-side®, was conducted from June 5 to July 2, 2020 and is based on responses from 86 institutional investors and sell side analysts globally, representing more than $2.1 trillion in equity assets under management.

After identifying record downbeat sentiment last quarter as the COVID-19 pandemic escalated globally, our survey this quarter finds investors remain cautious but are notably less downbeat. Fewer than half, 48%, of investors describe themselves as Bearish or Neutral to Bearish, down from a record high of 77% last quarter. Management tone, while still downbeat, is also perceived to have reset, with only 46% viewing executives as Bearish or Neutral to Bearish, an improvement from 83% last quarter. Furthermore, 44% of investors are More Positive or Cautiously Optimistic relative to their expectations at the onset of COVID-19 and, importantly, less than 25% are More Negative.

Heading into the second quarter earnings season, greater than 80% expect Margins, Free Cash Flow and EPS to have Worsened sequentially, while 67% anticipate deteriorating Organic Growth.

Mark Mandziara, Senior Managing Director at BTC Capital Management commented, “The tone of executives has been more so geared to setting a floor regarding expectations. They’ve followed the sentiment exhibited by analysts regarding downward revisions. Upside surprise is acceptable versus executives having to explain what they may have missed should the surprise be downward. This latter aspect will resonate with companies being penalized in price movement given that management, analysts and investors have re-geared their expectations during the last three to four months.”

Despite 75% being concerned with the economic fallout due to COVID-19 and U.S. unemployment levels, more than 50% believe U.S., China and Europe economies will improve over the next six months, and nearly 60% expect U.S. unemployment levels to improve over the same time period. Second quarter U.S. GDP is expected to contract 11.5%, on average, while 2020 U.S. GDP is anticipated to decline 5.0% for the year, indicating relatively optimistic outlooks for the back half of 2020.

Still, views on the type of recovery that will emerge diverge significantly with 30% expecting a W-shaped, 28% a hockey stick and 17% a U-shaped recovery, demonstrating a healthy level of uncertainty, particularly amid the alarming number of positive COVID-19 cases in the U.S. and further state actions to pull back on re-opening the economy.

Despite less downbeat views, 70% now report U.S. equities are Overvalued, while 60% and nearly half believe Europe and Asia stocks are lofty, respectively. More than half, 54%, believe valuations will Contract from current levels in 2020, while fewer than 20% expect Expansion. Still, 60% continue to report Net Buying or Rotating, while fewer than 20% are Net Selling.

“Heading into the second quarter earnings season, low-bar investor expectations should set the stage for handy beats across sectors but the market will be driven by executive outlooks, which are likely to remain generally cautious given the uncertainty and continued knock-on effects of COVID-19. The majority of investors do not expect companies to reinstate formal guidance but are anticipating the continuation of enhanced disclosure, including scenario analyses and monthly trends,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “As the pandemic marches on with no end in sight, we are seeing a pick-up in company restructurings, including many furloughs and shortened work weeks morphing into permanent layoffs. We believe there will be continued announcements of this nature during this earnings season and through the remainder of the year, further exacerbating unemployment levels and economic distress. It appears we are in the early stages of a marathon during which the most resilient of companies will thrive.”

With cash conservation moving from top priority last quarter to third, debt reduction and reinvestment are now cited as the leading capital deployment preferences, with 73% preferring a Net Debt-to-EBITDA ratio of 2.0x or below. Notably, 30% are now supportive of M&A, more than doubling from last quarter, with 60% in favor of bolt-ons and almost one-quarter open to transformational acquisitions.

Despite the exuberance, most sectors are seeing more bears than bulls with REITs seeing a record level of bearish sentiment. Biotech, technology, healthcare and communication services experienced the most bullish sentiment and, as relatively safe harbors, are expected to continue to benefit from inflows.

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

About Corbin Advisors

Corbin Advisors is a specialized investor relations (IR) advisory firm that partners with C-suite and IR executives to drive long-term shareholder value. We bring third-party objectivity as well as deep best practice knowledge and collaborate with our clients to execute sound, effective investor communication and engagement strategies. Our comprehensive services include perception studies, investor targeting and marketing, investor presentations, investor days, specialized research, and retainer and event-driven consulting.

Inside The Buy-side®, our industry-leading research publication, is covered by news affiliates globally and regularly featured on CNBC.

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