Corbin Advisors Research: Bearish Tone Continues as Earnings May Disappoint and Fewer See U.S. Equity Valuations as Sustainable
- Institutional investors continue to hold a cautious view this survey, extending a trend from last quarter, as 33% hold a neutral to bearish outlook
- 45% of surveyed investors expect first quarter results will be worse than consensus, up from just 30% last quarter
- 58% assert current market valuations are sustainable, down from 70% last quarter
HARTFORD, Conn. -- (BUSINESS WIRE) -- Corbin Advisors, a leading investor research and investor relations (IR) advisory firm, released today its quarterly research report Inside The Buy-side®, which captures changes and trends in institutional investor sentiment heading into the earnings season. The survey, based on responses from 80 institutional investors whose firms manage over $2.0 trillion in total assets, remained open from March 11 - 31, 2015.
As U.S. equities turned in a mixed performance for the quarter, investor sentiment continued the softening trend our research first captured last quarter. Expressing deep concerns about the strengthening dollar and its expected negative effect on corporate earnings, 46% of those surveyed maintain that current valuations only partially reflect currency risks. As well, the percentage of respondents expecting slowing growth in organic sales, EPS and free cash flow increased across the board for the second straight quarter, with the outlook for earnings especially downbeat. Rajesh Venkiteswaran, Portfolio Manager at Vision Investment Services noted, "Valuations are higher due to low interest rates, which is not an adequate justification for high valuation."
Continuing, the number of respondents indicating executive tone is “more negative” rose for the third straight quarter, while investors reporting a “bullish” outlook declined during the same period, as executives have continued to guide expectations down.
“Surveyed investors are expressing more concern about the effect of the strong dollar than current market valuations would imply. If first quarter earnings, especially for U.S. multi-nationals with significant FX exposures, justify those concerns, valuations could tumble,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors.
Notably, the Fed’s rate hike, now largely expected by surveyed investors to occur in the second half of 2015, is anticipated to be less aggressive in timing and magnitude given continued global growth concerns, lower oil prices and the strong U.S. dollar.
Finally, investors reaffirm their preference for business reinvestment as the best use of excess free cash, followed by “smart” M&A. Meanwhile, for the first time since 1Q12, share repurchases surpassed dividends as the top choice for returning cash to shareholders.
Since 2006, Corbin Advisors has tracked investor sentiment on a quarterly basis. Inside The Buy-side® and other research on real-time investor sentiment, IR best practices and case studies are available at CorbinAdvisors.com.
About Corbin Advisors
Corbin Advisors assists public companies with systematically understanding and positively influencing critical institutional investor sentiment by leveraging our priority research-based approach. We provide senior level executives and IR professionals with company-specific quantitative and qualitative feedback from investors and analysts and then draw upon our firm's considerable expertise to guide management teams in shaping those perceptions and maximizing valuation. Our clients range from highly sophisticated mega-caps to micro-caps worldwide across diverse industries. Our quarterly investor research report, Inside The Buy-side®, which tracks changes in global institutional investor sentiment, has been covered by news affiliates worldwide and featured on CNBC's Squawk on the Street.
To access the full report, visit our website: www.corbinadvisors.com/research-library
Bronwyn Swanson, 203-283-7997