Corbin Perception Research Indicates Buy Side Sentiment Waning

1Q14 Earnings Largely Expected To Be In Line With Or Below Consensus; Management Tone More Cautious

HARTFORD, Conn.--()--Corbin Perception, an investor research and investor relations (IR) advisory firm, released today its quarterly research report Inside The Buy-side®, which captures trends in institutional investor sentiment heading into the earnings season.

Following a solid if unspectacular first quarter for U.S. equity markets, investor sentiment has turned downward with just 39% of buy side professionals describing themselves as “cautiously optimistic,” a significant decline from last quarter’s 75%. As earnings season gears up, participants largely expect results to be in line with or worse than consensus estimates after “the worst winter in 25 years depressed revenue and earnings growth in the manufacturing, retail and transportation industries,” said Norm Conley, CEO and Chief Investment Officer of JAG Capital Management.

Buy side participants also raise questions about the sustainability of valuations given they are “unlikely to be sustained as the rate cycle turns,” commented Stephen Mitchell, Portfolio Manager at Caledonia Investments.

Further, management tone is reported as turning more cautious and even slightly negative since last quarter. While 60% of surveyed investors report executives remain cautious in their communication, those describing management as “less negative” has declined substantially while those who are hearing “more negative” commentary grew from last quarter.

“Our channel checks confirm investors and senior management seem to be tempering their optimism, at least in the short-term, and adopting a cautious stance,” commented Rebecca Corbin, Founder and President of Corbin Perception. “Considering the tough winter, slowing emerging markets, currency devaluations in key export countries and geopolitical uncertainty as well as looking ahead to rising interest rates, it is easy to understand such concern.”

Continuing, Corbin Perception’s quarterly analysis on preferred uses of excess free cash reveals dividend growth is the preferred choice following two consecutive quarters in which reinvestment was on top. Meanwhile buybacks continue to lag in popularity as equity valuations remained strong.

Since 2008, Corbin Perception 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 CorbinPerception.com.

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Excerpts from Inside The Buy-side®

Corbin Perception interviewed 50 global institutional investors across diverse industries and investment styles in an effort to capture current sentiment; selected findings include:

  • As earnings season gets underway, 77% of those surveyed expect 1Q14 results to be in line with or below consensus expectations
  • While the majority forecasts organic growth, EPS growth and FCF to improve this quarter, it is a notably smaller number while the percentage of respondents expecting these metrics to worsen has risen significantly from the previous quarter
  • 60% of participants describe executives’ tone as more cautious quarter-over-quarter
  • 39% of those surveyed characterize their current market sentiment as “cautiously optimistic”; down significantly from the 75% who held this view last quarter
  • Investment professionals report favoring the IT, Healthcare and Financial sectors and express bearish sentiment toward Utilities, Energy and Consumer Staples
  • Dividends reemerge as the top choice for use of excess free cash followed by reinvestment and “smart” M&A
  • The Fed, economic growth and a lack of viable investment alternatives are the primary drivers of the equity rally, say those surveyed; 35% assert market valuations are not sustainable at current levels
  • Regarding the global macro outlook, concerns about China’s growth and credit are the top issues weighing on investor sentiment, followed by a stagnating U.S. economy and emerging geopolitical risks
  • While innovation is largely difficult to quantify, 61% of surveyed investors report that it is an important factor in their investment thesis

About Corbin Perception

Corbin Perception is an investor research and IR advisory firm assisting public companies with driving long-term shareholder value. Core advisory services include Investor Perception Studies, Investor Targeting, Investor Presentations, Investor Days and Management Consulting.

To access the full report, visit our website: www.corbinperception.com/research-library.

Contacts

Corbin Perception
Bronwyn Swanson, 203-283-7997
bronwyn.swanson@corbinperception.com

Release Summary

As equity markets lost some of their mojo in 1Q14, investor sentiment turned more sober, with 39% of surveyed respondents describing themselves as “cautiously optimistic” compared to 75% last quarter.

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Contacts

Corbin Perception
Bronwyn Swanson, 203-283-7997
bronwyn.swanson@corbinperception.com