At the Forefront of Best Practice

A Letter To Our Clients – 2025

13 min. read

Dear Clients,

Hello, Happy New Year, and Happy first-of-the-year Friday! I hope you all had a fantastic holiday and relaxing break filled with love, laughter, and quality time spent with family and friends. Hopefully, you’re still enjoying the last embers of this special holiday season. At Corbin, we wrapped up the year with our annual Strategy Offsite Meeting and Holiday Party in December where we came together to celebrate a successful 2024, discuss plans for 2025 and beyond, and spend meaningful time connecting with colleagues in person. It was inspiring!

Founder & CEO, Rebecca Corbin with the Corbin Team

With the Q4 2024 reporting season just around the corner, our team has been diving deep into market trends to uncover the key drivers we believe will define the year ahead. In our second inaugural Letter to Our Clients, we cover key themes to help prepare for 2025 and share selected actionable recommendations and best practices.

Importantly, we’ll be going over these topics and more in our upcoming Inside The Buy-Side® Earnings Primer® webinar The Big So What™ – Q4’24 Earnings Season on Wednesday, January 15th from 12:00 PM – 12:45 PM EST. Be sure to click the link to reserve your spot!

First, a Look Back at Our 2024 Projections

Having created an industry-leading Perception Study practice, we’re big on report cards here at Corbin.

As a reminder, at the beginning of last year we highlighted the following themes in our 2024 letter:

  • Geopolitical Considerations Will Remain in Focus for Investors and Companies as We Enter a U.S. Presidential Election Year
  • Artificial Intelligence: From Tinkering to Tactical, 2024 Could Be the Year Where the Rubber Meets the Road
  • Activism is Poised to Accelerate as the Deal Environment Improves

Verdict: Largely Correct!

Geopolitics dominated the narrative in 2024. From the high-altitude Chinese “weather” balloon and Taiwan military exercises escalating U.S.-China tensions to the Israel-Hamas war prompting Red Sea shipping disruptions, geopolitical events compelled companies to adapt quickly amidst heightened investor scrutiny. Indeed, these challenges consistently ranked high among unaided investor concerns, as reflected in our Inside The Buy-Side® Earnings Primer® publications, and became recurring topics on earnings calls.

At the same time, artificial intelligence advanced from buzzword to boardroom priority as companies shifted focus to practical applications and communicated detailed AI roadmaps. This evolution, explored in our recent white paper, underscored the tangible value of AI in augmenting workflows, such as synthesizing earnings and assisting in the investor research process.

Lastly, 2024 activism demonstrated traction, up 7% versus the five-year average1, though the deal environment remained cooler than initially anticipated. While seven rate cuts were expected heading into the year, only three materialized — 50 bps in September followed by 25 bp cuts in November and December — curbing the anticipated surge in M&A activity. Despite this, deal activity did show modest growth. Announced and completed deals in 2024 rose 8% YoY across North America and Europe,2 arresting a two-year trend of waning activity.

Chart: North America and Europe M&A Activity
Source: FactSet

With that context in mind, let’s dive into the key trends that we believe will define the narrative and priorities for 2025.

Three Trends That Will Shape 2025

Expect the Incoming U.S. Presidential Administration to Lean into Non-Traditional Forms of Communication; Ensure “X” and “Truth Social” Notifications Are Turned On

As President-elect Trump prepares to re-enter office, his unconventional and rapid-fire communication methods are poised to create both challenges and opportunities for companies.

With platforms like X (formerly Twitter) and Truth Social serving as President-elect Trump’s preferred communication channels — alongside the growing influence of podcasting and independent journalism, where he and his administration frequent — it is essential that communications teams, corporate and investor relations, monitor these outlets closely. Gone are the days of lengthy op-eds and carefully crafted trial balloons signaling shifts in administrative policy weeks in advance. Instead, policy changes and key messages will be delivered directly, often without warning, potentially requiring immediate attention and swift action.

In response, we foresee the formation of “Trump Task Forces” within companies, modeled after activist preparation teams and comprising representatives from investor relations, corporate communications, government affairs, legal counsel, public relations, and senior business leaders. These teams will focus on assessing remarks that could spark investor questions or concerns, particularly if your company or industry draws the ire of the President — potentially attracting heightened scrutiny from retail investors, too. This proactive approach ensures companies remain agile, aligned, and prepared to navigate what is sure to be a fluid communication environment.

In fact, we’ve already seen the first signs of this dynamic emerging in public company communications, even before the official transfer of power later this month.

For example, President-elect Trump’s November 12th announcement of the Department of Government Efficiency (“DOGE”) highlighted his administration’s readiness to implement sweeping reforms, leading to an 11.0% weekly decline among the 30 largest U.S. government contractors3 — significantly outpacing the S&P 500’s 2.4% drop during the same period.

Screenshot: Trump announcement of DOGE 11/12/24
Source: Truth Social
Chart: 2024 Federal Contractor Performance
Souce: FactSet

Further, and attracting even greater public and market attention, while comments regarding tariffs heated up during the election, on November 25 President-elect Trump posted two statements on Truth Social outlining his intention to institute a 25% tariff on all products imported from Canada and Mexico, and an additional 10% tariff above existing tariffs on Chinese goods.

Screenshot: Trump message 11/25/24
Source: Truth Social
Screenshot: Trump message 11/25/24
Source: Truth Social

As a result, November alone saw a 43% spike in tariff mentions among public companies vs. October. In aggregate, Q4 tariff mentions more than doubled (+132%) versus the prior year among North American and European transcripts and press releases.

Chart: Tariff Mentions, Transcripts and Press Releases
Source: Corbin Advisors

In an analysis of recent commentary, many companies warn new tariff-induced costs would likely be passed along to customers:

  • “We never want to raise prices. Our model is everyday low prices. But there probably will be cases where prices will go up for consumers.” CNBC Interview, John David Rainey, CFO, Walmart
  • “Historically, [tariffs] end up being costs that are shared to some extent. The vendors have some to some extent. But of course, we see that the customer ends up bearing some of the cost of the tariffs. And we’ve seen this before. And for us, that’s the hardest part. These are goods that people need, and higher prices are not helpful.” FY Q3’25 Earnings Call, Corie Sue Barry, CEO, Best Buy
  • “[Regarding tariffs], we don’t have any direct manufacturing exposure to China, Mexico, or Canada; we do buy it from China — about $100M today and we have active plans to reduce that exposure. We’re working with our current suppliers that are looking to move production out of China and looking at new suppliers. In terms of pricing, we have been very disciplined around pricing. Even when inflation was high, we started early on raising prices and we passed up cost increases to the market, to our customers, and we were price cost positive every quarter since spin. So, in case there are tariffs or higher inflation, we would look to pass that on to our customers.” Goldman Sachs Industrials and Materials Conference, Anshooman Aga, CFO, Vontier
  • “As for tariffs, we need to look at each end market specifically. There are certain end markets which are more price-elastic than others, easier to pass on the cost increases there. Obviously, if you move from Mexico to the U.S., the costs will be higher. The question is, is it going to be more than tariffs, can it be passed on, and can it be absorbed by our customers. I’ll reiterate, tariffs are a pass-through cost for us. It’s not something that we absorb.” FY Q1’25 Earnings Call, Michael Dastoor, CEO, Jabil
  • “To be blunt, we would prefer not to see incremental tariffs put in place. We don’t think that’s necessarily a great thing for the consumer. But we’ll deal with it. I would just also just emphasize, supply chains are not institutions that change overnight; it takes some time. We are preplanning where we can be in a position to respond as rapidly as we can.” Morgan Stanley Global Consumer & Retail Conference, John Vandemore, CFO, Sketchers
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With the Presidential Inauguration in 17 days, we will likely enter a highly reactive investment community environment, with tariffs taking center stage in upcoming discussions and other important yet unknown topics emerging throughout the year and beyond. With input from internal stakeholders — potentially through a “Trump Task Force” — consider these best practices for effective investor engagement:

  • Craft a Strong Response for Q&A: While the exact trajectory of tariff policies remains uncertain, discussions at recent industry conferences and off-cycle earnings calls highlight key areas of investor focus. These include geographic exposure, supplier diversification efforts, impacts on guidance assumptions, cost absorption strategies, and indications of pull-forward demand ahead of potential new tariffs. Be prepared to address the investment community with both qualitative and quantitative insights into the real-world implications of tariffs.
  • Demonstrate Reduced Exposure: Use historical context to your advantage. Reference “Trump 1.0” mitigation strategies still in place and lessons learned from the first round of tariffs. Highlight specific success stories, such as reduced reliance on China or diversified sourcing to other regions (e.g., nearshoring, friendshoring) and provide concrete examples of progress made in lowering exposure to high-risk areas. Additionally, outline targets for further improvement and the steps being taken to enhance resilience moving forward.
  • Highlight Supply Chain Investments and Levers: Investors want to know you won’t be caught flat-footed. Communicate how prior investments in supply chain diversity have strengthened your ability to navigate challenges effectively. Share the options your company has at its disposal, and if actions have already been taken, clearly articulate those steps. When applicable, emphasize the benefits of well-positioned domestic suppliers and detail specific levers such as alternative supply chain contracts, cost-sharing agreements, and contingency plans designed to mitigate risk.
  • Clarify Potential Customer Impacts and Margin Flexibility: Offer clarity around how additional tariffs could affect customers, including potential changes to pricing structures and product availability. At the same time, highlight your ability to safeguard margins through operational flexibility.

We’ll Say It Again: Anticipate a Surge in Activism; Current Rate Environment and Regulatory Conditions Are Likely to Propel More Deals into the Spotlight, and Portfolio Companies Are Likely Most at Risk

In 2025, we expect intensifying activist focus on M&A and portfolio breakup strategies.

Over the past decade, activist campaigns have been steadily rising. The chart below illustrates a clear upward trend in North America and Europe, with campaigns targeting companies of at least $500 million in market cap reaching their highest level in 2024. This reflects a growing appetite among activists to challenge large, established companies and push for significant structural change. Our proprietary research further emphasizes the influence of shareholder activism, with 62% of surveyed buy-side professionals giving it some or significant attention, while only 8% disregard it entirely.

Chart: Total Activist Campaigns, North America & Europe
Source: FactSet

Looking ahead, the relatively lower effective interest rate environment expected in 2025, coupled with potential political shifts at the FTC — including the likely appointment of Andrew Ferguson as chair, who is expected to favor deregulation and less aggressive antitrust enforcement — could foster a more favorable climate for M&A activity. Private equity sponsors are well-positioned to deploy capital aggressively, potentially inflating already lofty valuations, which could pose challenges to grow inorganically for public companies which have to answer to shareholders.

Moreover, activists are increasingly advocating for ‘de-conglomeration’, a topic we discussed in 2021, in response to investor preferences for streamlined operations, specialization, clear capital allocation priorities, and further M&A optionality. Elliott Management’s recent campaign against Honeywell exemplifies this trend, highlighting the growing momentum behind portfolio realignment and simplification.

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The combined effect of increasing pressure from activists and a favorable dealmaking climate means companies will face heightened portfolio scrutiny in 2025.

Consider the following best practices:

  • Conduct Periodic Strategic Reviews at the Board Level: It is essential to conduct a thorough assessment of various aspects of your company, including performance, valuation, strategic direction, portfolio composition, and governance, including management compensation. Programmatic strategic reviews with independent input support greater executive and board alignment on the long-term strategy and serve as a robust defense against activists, as these processes identify and create awareness on both strengths and weaknesses from an absolute and relative perspective.
  • Keep Valuation Assessments Current: Like all professional investors, activists begin with deep dive valuation analyses, seeking companies that are woefully underperforming absolute and relative benchmarks, specifically historical, industry, and proxy peer performances. Keeping a finger on the pulse of valuation and digging into what is creating the disconnect (more on that below) is critical to developing strategies to close the gap and ensure you’re not sending out a beacon unknowingly. Inviting various bankers, consultants, and other subject matter experts, such as shareholders and covering sell side analysts, to present to the board annually provides outside-in perspective on the macro, competitive landscape, and company-specific notables, as well as general board enrichment.
  • Proactively Assess and Communicate Portfolio Rationale: Take a hard look at the strategic value of each segment and ensure synergies and alignment with long-term goals. In 2025, be prepared to explain why portfolio assets remain integral to the business. If you cannot defend your portfolio’s rationale, be your own best activist and determine if certain businesses are better suited for divestiture. In 2024, we saw a YoY rebound in mid-cap M&A-related activist demands, though small-caps continued to dominate overall activity.

North American and European Activist Campaigns with M&A-Related Demands by Market Cap4

Large- & Mega-Cap Mid-Cap Small-Cap
2014-2022 Avg. 30% 25% 45%
2023 Avg. 30% 16% 54%
2024 Avg. 33% 26% 41%
  • Leverage Resegmentation or Realignment as a Strategic Tool: Resegmentation can help clarify your business structure, allowing companies to emphasize areas of growth and do the important work in preparation for a future divestiture of non-core businesses, as necessary. In our prior Thought Leadership piece on resegmentation, we explored how it can be a powerful tool for refining corporate messaging with operational realities, isolating high growth areas of portfolios, and responding to shifting market dynamics.
  • Sharpen Your Activist Defense Readiness with Regular Perception Studies: Monitoring investor sentiment through regular Perception Studies — ideally every two years — engages shareholders and analysts on a deeper level, providing management and the board with invaluable insights into evolving expectations. These studies deliver historical data, benchmarking, and actionable feedback, equipping companies to address concerns early and avoid those unexpected (and unwelcome) knocks at the door.
  • Proactively Engage and Robustly Communicate with Shareholders: Developing a rapport with the Street through a comprehensive shareholder engagement strategy that involves proactively reaching out to and building relationships with both active and passive shareholders, prospects, and analysts is key. Our research shows that roughly nine in ten investors point to: 1) getting out on the road and attending non-deal roadshows, 2) conducting investor days, and 3) publishing ongoing investor presentations as the top three most important tools in a company’s IR arsenal. Delivering on investor expectations in this regard serves to harden your defense as activists, following the valuation analysis, will dive deeper into their research. Is the company reactive, “sleepy” or “insular”? Does management communicate in the dialect of the Street? Are the company’s IR materials up to date? Along with execution, effective communication is a critical ingredient in thwarting activism.

Market Psychology is a Powerful Catalyst – 2024 Taught Us a Valuable Lesson: Be Conservative Out of the Gate Amid a Plethora of Unknowns

2024 underscored the importance of cautious guidance amidst an environment where market psychology can rapidly drive sentiment positively or disrupt it sharply.

With X-factors like tariffs, taxes, tighter immigration policies, and evolving regulatory conditions still looming, companies must approach 2025 with an acute focus on what they can control and avoid overreliance on unpredictable macro narratives. After analyzing recent industry conferences, off-cycle earnings reports, and analyst commentary, resilient consumer spending, solid real income growth, and relatively stable labor markets continue to support economic growth expectations. Notably, the NFIB Small Business Optimism Index climbed eight points in November to 101.7, marking its highest reading since June 2021 and breaking a 34-month streak below the 50-year average of 98.

However, inflation concerns remain persistent, with the term “sticky” resurfacing in discussions, and the recent Q4 uptick in consumer confidence was not sustained through December (the Consumer Confidence Index® declined 8.1 points in December to 104.7, back to the middle of the range that has prevailed over the past two years).5 Meanwhile, the implementation of Trump’s proposed tariffs could present additional challenges — Goldman Sachs projects that core PCE inflation could increase from 2.4% to 3.0% under such a scenario. In the end, analysts expect real GDP growth of 2.0% (median, with a range of 1.3% to 2.7%) in 2025, down from the 2.7% projected for 2024.6 According to FactSet, nearly all 2025 S&P 500 price estimates reflect cautious optimism; the bottom-up aggregation of analyst price targets predicts a closing price of 6,713.13 in 12 months, an implied gain of 14.1% from year-end levels.

As American Economist Benjamin Graham famously stated, “If I have noticed anything over these sixty years on Wall Street, it is that people do not succeed in forecasting what’s going to happen to the stock market.”

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  • Don’t Own the Macro and Set Appropriately Conservative Guidance: While small business and investor confidence suggest a revival of “animal spirits,” whether this translates into sustained economic momentum remains to be seen. Our takeaway: bullish expectations forming around 2025 underscore the risks of overconfidence in an unpredictable market environment. Resist the temptation to anchor guidance on hopefulness. If tailwinds materialize, they should be positioned as incremental upside — conservatism remains the best approach in a volatile environment. While our proprietary research of the S&P 500 finds average annual initial guidance spreads for EPS (based on a range of $7.88 and $8.22) and revenue contracted slightly in 2024, given continued uncertainty and likely increased volatility in the first half as we adapt to a new administration, we recommend companies take a conservative approach when developing full-year 2025 earnings guides. As is our mantra: under promise and over deliver.
Chart: S&P 500 Annual Avg. Initial EPS Guidance Spreads, 2018 - 2024
Source: Corbin Advisors
Chart: S&P 500 Annual Avg. Initial Revenue Guidance Spreads, 2018 - 2024
Source: Corbin Advisors
  • Prepare for the Inflection from Cost-Cutting to Growth Communications: While selected industries remain challenged, there is growing optimism for an accelerating growth environment in 2025. Based on preliminary results from our Inside The Buy-Side® Earnings Primer® survey, two-thirds of investors are now prioritizing growth over margins — marking the first time a majority has favored growth since December 2023. As market psychology potentially plays a role in igniting confidence in spending, it’s important to be prepared to move from the largely cost-cutting, expense management mode that has dominated the past two years to one of investment. Highlight how cost-saving measures have made the business stronger and show how those savings are being reinvested in areas like innovation, market expansion, or enhancing customer experience. It’s a fine balance, but shifting the narrative from belt-tightening to smart investments will set the stage for investors if/when this becomes a larger focus in 2025.

In Closing

As we kick off the new year and dive into earnings season over the next few weeks, we’ll be keeping a close eye on these trends and more as they unfold. Keep an eye out for our 61st edition of Inside The Buy-Side® Earnings Primer®, which we will publish on Thursday, January 9.

Thank you for allowing us to serve as a trusted advisor — we truly appreciate your support and readership. Here’s to a successful and standout 2025!

All our best,
Rebecca & Team

  1. Source: FactSet; represents North American and European companies >$1B in market cap
  2. Source: FactSet; represents transaction values of at least $150M
  3. Companies identified through Executive Mosaic’s GovCon Index
  4. Source: FactSet; companies > $500M Market cap; demands include blocking an acquisition, seeking sale, advocating for an acquisition, breaking up the company, blocking a merger, or encouraging review of strategic alternatives; n=442
  5. Source: The Conference Board
  6. Source: FactSet