Corbin Advisors Releases Q1’22 Inside The Buy-Side® Earnings Primer®

FARMINGTON, CT – April 14, 2022 – Corbin Advisors, a strategic consultancy accelerating value realization globally, today released its quarterly Earnings Primer®, which captures trends in institutional investor sentiment. The survey, which marks the 50th issue of Inside The Buy-Side® Earnings Primer®, was conducted from March 8 to April 7, 2022 and is based on responses from 83 institutional investors and sell side analysts globally, representing more than $7.3 trillion in equity assets under management.

After investor sentiment rebounded and inflected more favorably heading into 2022 as the prospect of continued strong demand outweighed headwinds, our survey this quarter finds a reversal in sentiment given more pronounced inflation concerns as well as emerging growth uncertainty amid the geopolitical environment, rising interest rates and less upbeat consumer confidence.

Approximately one-quarter of surveyed investors, 26%, describe themselves as Neutral to Bullish or Bullish, down from 52% last quarter, while 43% are downbeat, more than double last quarter and the highest level since June 2020. Driving more bleak sentiment this quarter is 89% reporting more concern or a continued high level of concern with inflation, with four interest rate hikes expected on average in 2022, and 68% believing consumer confidence will Worsen over the next six months.

Furthermore, more than 80% report being concerned about the impact of the Ukraine-Russia war on the global economy and equity markets, with 66% expecting the Eurozone to Worsen over the next months amid rising energy prices and increasingly challenged supply chains, followed by China (43%) and the U.S. (34%).

As a result, while margin concerns have been prevalent since mid-2021, additional headwinds have now also created investor angst around the sustainability of growth and demand for the second half of 2022 into 2023. Nearly 60% expect Margins to Worsen, with mixed views on FCF and EPS. While Organic Growth is expected to Stay the Same or Improve this quarter, this is less rosy than previous expectations with 42% believing the first half would be stronger from a growth perspective than the second half. Moreover, only 45% now expect strong demand levels to continue throughout 2022, a significant decrease from 82% last quarter, though U.S. GDP expectations remain at 3.3% for the year, down from 3.6% last quarter. In a pulse survey over the last week, 53% believe we are more likely to see a recession in the next 12 months.

For the first quarter 2022, 70% believe earnings will be flat to improving sequentially, down from 84% QoQ, while nearly 60% expect results to be reported in line with consensus. Mark Mandziara, Senior Managing Director at BTC Capital Management commented, “Macro, geopolitical events, rising input costs and supply chain challenges hampered 1Q 2022 earnings. Earnings should be in line with consensus, reflecting a downward trend in analyst revisions through Q1 2022.”

“Heading into 2022, the positive demand narrative from executives was enough to offset the challenges companies were facing with higher costs and labor availability but the geopolitical environment and rising interest rates have now swung the pendulum and created more investor uncertainty around the sustainability of growth,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “In times of greater uncertainty, investor sentiment rotates to be more draconian and the importance of providing a deep level of transparency into outlooks becomes more critical, including the cadence of results throughout 2022. As a result, investors often look for companies with operational prowess, resilient balance sheets and time-tested management teams that can execute through any business environment and effectively manage investor expectations. Management commentary this quarter will be critical to provide greater certainty into the challenges companies are facing and ability to sustain top-line growth.”

As for investing patterns, 66% report Holding or Rotating, up from 58% last quarter, while Net Buyers decreased to 19% from 33% and Net Sellers increased to 15% from 6%. With consumer confidence expected to worsen, Consumer Discretionary registers its second-highest level of bears in survey history, trailing only the onset of COVID-19. In the near term, Energy and Financials see the most upbeat sentiment amid rising oil prices and interest rate hikes.