Significant Headwinds Temper Outlook but Near-term Growth Forecasts Remain Intact
- 75% express Moderate to High concern with trade wars and rising input costs, marking the second consecutive quarter in which both were cited as leading, unaided concerns
- 84% describe management tone as Neutral to Bullish or Bullish, down from 92% last quarter while only 29% characterize executives as outright Bullish, a significant decrease from 64% QoQ
- 54% expect earnings to beat consensus, with 67% predicting sequential improvement, a slight increase QoQ; forecasts for negative surprises more than double
- An increase from 18% last quarter, nearly 40% of investors now expect 2018 organic growth of at least 5.5%
- 61% report having a low level of concern about a recession, though one-third expect Industrial earnings to peak in 2019, more than double QoQ
- While half the group classify Industrials as Fairly Valued, Net Buyers nearly doubled QoQ while Net Sellers declined to zero
HARTFORD, Conn. – October 18, 2018 – Corbin Advisors, a research and advisory firm specializing in investor relations (IR), today released its quarterly Industrial Sentiment Survey, which reveals sentiment remains positive but headwinds, specifically trade wars, inflation and rising interest rates, have tempered outlooks. The survey, part of Corbin Advisors’ Inside The Buy-side® publication, is based on responses from 27 institutional investors and sell-side analysts globally who actively follow the Industrial sector.
Despite the most recent round of tariffs announced on September 17, expectations for 3Q18 earnings beats are at an all-time high, driven largely by continued U.S. economic strength. Organic growth, operating margins and cash flow are expected to improve sequentially but with less overall conviction following last quarter’s strong results and concerns over negative surprises more than doubled. Notably, only 29% of respondents characterize executives as outright Bullish, a significant decrease from 64% last quarter.
Continuing, 61% report having a low level of concern about a recession, though one-third expect Industrial earnings to peak in 2019, more than double QoQ. While half the group classify Industrials as Fairly Valued, Net Buyers surged QoQ, while none report being Net Sellers.
Contributors expect the U.S. economy to remain strong despite trade war tensions, while China views worsen. India and Southeast Asia also saw slight pullbacks in positive sentiment.
“Despite continued pressure on organizations amid rising input costs and three waves of tariffs, Industrial investor sentiment remains positive amid mid-single digit growth expectations, though headwind concerns are mounting. In the here and now, investors forecast continued strong 3Q18 performance but as we move closer to 2019, peak cycle fears continue to increase. No one is draconian in their view but the impact of tariffs on top-line growth and margins is unknown and uncertainty is investors’ kryptonite,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors. “To that end, management teams should be prepared to address the impact in as clear terms as possible and provide additional color into mitigation plans,” added Ms. Corbin.
While bulls outnumber bears, all sub-sectors saw decreases in positive sentiment. Defense remains the most favored, while Industrial Equipment experienced the sharpest decline in bullish sentiment. Auto remains the top laggard for the eighth consecutive quarter, while Metals & Mining bears increase to 31% from 4% last quarter.
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 www.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 www.CorbinAdvisors.com.
Bronwyn Swanson, 203-283-7997