Investors Remain Positive on Industrials despite Tepid Organic Growth According to Corbin Advisors Research's Inaugural Industrial Sector Sentiment Survey
- Expectations for tepid growth in 2015 continue and 57% have priced in further downward guidance revisions in the back half of the year; views on the 2016 macro picture are more constructive
- While 45% maintain industrial valuation multiples are at a cycle high, only 14% are net sellers and 37% assert stocks have room to expand from here
- The majority of investors (60%), are forecasting that the U.S. will enter a recession in 2 to 3 years, suggesting the cycle still has time to play out
- Sector differentiation is an important theme; optimism abounds regarding Western Europe, residential and non-residential construction and the U.S. consumer while pessimism surrounds Oil & Gas, global capex, a continued strong dollar and China
- Sector-focused investors prefer that companies deploy excess cash towards organic growth investment over M&A and share buy-backs
HARTFORD, Conn. - (BUSINESS WIRE) - June 15, 2015 - Corbin Advisors, a leading investor research and investor relations (IR) advisory firm, today launched its maiden Industrials Sector Sentiment Survey, within its Inside The Buy-side® research group, pulsing global investor and analyst views following 12 months of industrial sector underperformance relative to the S&P 500. Corbin's independent poll identifies emerging trends, vertical bright spots and views around cycle timing and pockets of recovery that serve to assist both investors and corporates with navigating the diverse global industrial landscape.
The survey, comprising input from 58 institutional investors and sell-side analysts globally who follow the industrial sector, finds sentiment neutral to more bullish, as expectations seemingly have reset following largely uninspiring first quarter results and forward-looking commentary validating muted organic growth in 2015. Contributing firms manage $3.2 trillion in total assets and have $206 billion invested in industrials as of March 31, 2015.
"It would appear that additional downward revisions are largely priced in and that any potential short term-related stock price pressure in the back half of the year could prove a buying opportunity," commented Rebecca Corbin, Founder and CEO of Corbin Advisors. "Investor commentary would indicate that companies posting solid organic growth, all else being equal, should outperform."
Surveyed investors and analysts proffer positive views of the construction market, including both non-residential and residential, along with commercial aerospace and generally improved sentiment towards the Western European economy. Conversely, the Chinese economy and the metals and mining and agriculture markets are areas of concern for investors.
Initial views on 2016 growth across the industrials sector are largely neutral to more constructive, with 42% of participants expecting growth to accelerate off lower 2015 levels. While fear of a U.S. recession in the next 12 to 24 months is minimal, 60% predict a downturn 2 to 3 years out. "Multiples have room to expand from here. We are at a mid-cycle slowdown and industrials have underperformed the market. I expect an acceleration of growth to drive industrials to perform," said one buy-side participant.
Finally, the majority of industrial investors endorsed organic business reinvestment as the preferred use of excess free cash as excitement around M&A and enthusiasm for share buybacks appear to have waned given perceived relative high multiples.
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.