Findings Reveal Record Downbeat Sentiment with Expectations Generally for a U-shaped Recovery
- 84% of surveyed investors and analysts expect Worse Than sequential earnings and 76% believe earnings will be Below consensus, both the highest percentages ever recorded
- More than 80% expect all key metrics – EPS, Organic Growth, Margins and FCF – to Worsen sequentially
- 77% describe themselves as Bearish or Neutral to Bearish, while 48% categorize themselves as outright Bearish, up from 1% last quarter
- Negative views on global economies are nearly ubiquitous, with 82% expecting the Eurozone to Worsen, 78% for the U.S. and 75% for Latin America; China is the only region expected to Improve, a view held by nearly 50% of surveyed participants
- Investors are expecting 2.7% U.S. GDP contraction in 2020 on average, with nearly 50% expecting a U-shaped recovery
HARTFORD, CT – April 15, 2020 – Corbin Advisors, a research and advisory firm specializing in investor relations (IR), today released its quarterly Voice of Investor™ Earnings Primer, which captures trends in institutional investor sentiment. The survey, which marks the 42nd issue of Inside The Buy-side®, was conducted from March 4 to April 7, 2020 and is based on responses from 89 institutional investors and sell side analysts globally, representing more than $1.1 trillion in equity assets under management.
After identifying a sea change in investor sentiment last quarter, which skewed toward neutral to bullish amid corporations handily beating consensus and expectations that 2020 earnings would be in line or better than 2019 despite continued slowing economic growth, not surprisingly, our survey this quarter finds record downbeat sentiment.
As the threat of a global recession looms, more than 80% of investors and analysts expect all key performance metrics – growth, margins, cash flow and earnings – to Worsen sequentially and 76% believe earnings will be Below consensus, also an all-time high.
Max Gokhman, Head of Asset Allocation at Pacific Life Fund Advisors commented, “The hit from COVID-19 is likely to be more baked into Q2 reports than Q1, as the economy was on solid footing through the end of February and outside of energy, hospitality, and airlines, did not start to feel the full brunt of quarantine until late in March.”
Underscoring the widespread pessimism, 77% of investors and analysts describe themselves as Bearish or Neutral to Bearish, while 48% categorize themselves as outright Bearish. When it comes to C-suite posturing, 83% describe executive tone as Neutral to Bearish, up from 19% last quarter, with outright Bearish management increasing seven-fold.
Globally, over 75% anticipate capex levels and PMI will Worsen over the next six months, with negative views on economies nearly universal across the globe. Deterioration is expected in the Eurozone by 82%, the U.S. by 78% and Latin America by 75%, slightly lower given that region has suffered for an extended period. A small green shoot, China is the only region expected to Improve, a view held by nearly 50% of surveyed participants amid the restart of industry, further supported by the reopening of Wuhan, the hardest-hit city in China since the novel coronavirus outbreak.
“While our survey affirms investors are expecting a very challenging earnings season over the next two quarters, the general view that a U.S. GDP contraction in 2020 is likely to be less than 3% indicates most are forecasting a back-half recovery. We believe the full societal and economic impacts of COVID-19 globally are more than what the Street currently understands today,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “The COVID-19 Pandemic will be a test of lessons learned from the 2008/2009 period. While all recessions develop differently, what we have gleaned is that each sector has its own cycle and is impacted at different times by the chain of events set in motion, this time by the outbreak of the novel coronavirus. Record government stimulus and decisive corporate actions will serve to lessen the near-term blow, but we’ve learned that economic crises like these tend to be more destructive and last longer than initially expected.
Corbin continued, “With 55% of surveyed investors reporting increased cash holdings, companies have an opportunity to capture their share of wallet through effective and agile execution and clear, transparent communication. Quelling fears, clearing up misperceptions and providing a level of transparency that assists investors in understanding the impact, risks and sensitivities, as well as the near-term strategy to navigate the challenging landscape, will build credibility and create value. Top of mind for investors this earnings season, the most complex communications environment any of us have seen since the Great Recession, is COVID-19 response and contingency plans, balance sheet and liquidity, expense management and capital preservation, including cost savings actions, margin outlook and capital deployment reprioritization, as well as the outlook for next quarter, including scenario analyses. What they are not expecting is management to provide full year 2020 outlooks.”
Despite widespread pessimism, investors are divided on equity valuations, with just over one-third believing U.S. and Asia equities are Undervalued. 28% of investors report being Net Buyers, compared to only 20% Net Sellers.
Among sectors, healthcare, biotech and consumer staples benefit at the expense of consumer discretionary, building products and energy. Still, consumer discretionary is the only sector to register record bearish sentiment.
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 CorbinAdvisors.com.
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.
To learn more about us and our impact, visit CorbinAdvisors.com.
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