Corbin Advisors Research Finds Market Priced For Perfection; 1Q17 Earnings Predicted To Be Strong Amid Heightened Top-Line Growth Expectations

  • Heading into 1Q17 earnings season, 44% of surveyed investors expect results to top consensus, up from 35% last quarter and the highest level since December 2013
  • Expectations for higher organic growth spike to 62% from 45% last quarter, marking the fourth consecutive period of anticipated improvement; however, those expecting margins to deteriorate nearly double
  • 97% see current U.S. equity valuations as fairly to overvalued with 43% predicting a contraction; net buyers have declined by nearly 40%
  • Trump policy reform – namely proposed tax rate cuts, infrastructure spend and repatriation – are all expected to pass; still, exuberance over the U.S. economy and GDP has weakened quarter-over-quarter
  • All non-U.S. regions see an uptick in positive sentiment with global trade expected to improve; Eurozone sees the most significant improvement in sentiment Click here to access the report

Click here to access the report

HARTFORD, Conn.--()--Corbin Advisors, a specialized investor relations (IR) advisory firm, today released its quarterly Inside The Buy-side® Earnings Primer report, which captures trends in institutional investor sentiment. The survey is based on responses from 83 institutional investors and sell side analysts globally.

Heading into 1Q17 earnings season, expectations for a strong performance are prevalent with investors largely counting on improved top- and bottom-line growth. While survey participants describe executive tone as more upbeat, general investor sentiment has tempered slightly from last quarter’s post-election exuberance. Concerns about Trump policy execution and valuation – 97% believe equity markets are fairly to overvalued – are serving as reality checks.

“Valuation is one of the toughest issues today. If interest rates stay low, everything is cheap. On the other hand, from the historical point of view, things are on the high side of reasonable. The truth probably lies somewhere between the two, but where?” commented Fla Lewis, Chief Investment Officer at Weybosset Research & Management.

According to our survey, the most significant driver of the sustained U.S. bull market rally is, not surprisingly, pro-business Trump policy. What is surprising is that the majority of investors expect most of the proposed bills, including corporate and personal tax cuts, repatriation and infrastructure expansion, to pass in 2017. Still, the controversial border adjustment tax is seen as dead on arrival.

As U.S. equity markets seemingly overheat, investors are looking toward international opportunities given more reasonable valuations. Across the board, investors are more optimistic about non-U.S. economies, with the Eurozone seeing the most significant improvement in sentiment, followed by India and Brazil.

“Our research indicates clear and widespread investor acceptance that Trump-based animal spirits and pro-business policy reforms will stimulate growth and extend what is already an exceptionally long recovery cycle,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors.

Ms. Corbin added, “Valuations are lofty, especially when considering the reality that much, if not all, of the upside is priced in even as the Fed appears poised for a series of rapid rate hikes. Thus, any stumble in policy execution will likely have significant, negative consequences. Investors are increasingly aware of these risks as indicated by our survey; however, we have yet to see this awareness manifested in their actions. Stay tuned.”

Finally, sector rotation is evident as higher-beta stocks take center stage at the expense of defensive plays. Technology and Industrials regain favor, while Financials are bolstered by increasing interest rates and talk of deregulation. Not surprisingly, anticipated rate hikes continue to pressure yield-oriented sectors with REITs and Utilities seeing the most bearish sentiment in our survey.

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.

Contacts

Corbin Advisors
Renee Gilroy, 860-269-9702
renee.gilroy@corbinadvisors.com

Contacts

Corbin Advisors
Renee Gilroy, 860-269-9702
renee.gilroy@corbinadvisors.com