HARTFORD, Conn.--(EON: Enhanced Online News)--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.
“It’s a strengthening indication that investors are looking for organic earnings growth to drive market-cap expansion given today’s relatively high P/E multiples.”
Despite ongoing concerns about global growth and geopolitical events dominating headlines, investor opinion is improving. The majority of surveyed investors assert Europe has turned the corner, pointing to “positive PMI and GDP surprises” and the perception that the slowly recovering economy should boost demand. As Chief Executive Officer Peter Webb from U.K.-based Webb Capital comments, “My view is that demand will exceed expectations and operational costs will remain under control giving better than expected profit improvements as a result.” In general, nearly 20% of buy side contributors identify themselves as “bullish,” up from 10% in 2Q13 though still far below the giddy optimism of 1Q13 when 42% described themselves as such.
Still, complex geopolitical events, particularly the Syrian Civil War, U.S. Fed policy and economic slowdown in China continue to offset optimism to some extent.
Important to note, while investor sentiment is on the rise, executive tone has declined as the number of respondents indicating that management is “more negative” has doubled from last quarter while those who maintain management tone is “less negative” has decreased for the first time since 2012.
Further, Corbin Perception’s channel checks on best uses of excess free cash reveal that reinvestment continues as the leading investor preference, a rising trend noted last quarter. “While dividends continue to be a preferred method for returning cash to shareholders, investor penchant for reinvestment has doubled since 1Q13,” commented Rebecca Corbin, Founder and President of Corbin Perception, adding, “It’s a strengthening indication that investors are looking for organic earnings growth to drive market-cap expansion given today’s relatively high P/E multiples.”
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.
Follow us @CorbinResearch
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 heading into the third quarter earnings season; selected findings include:
- 77% expect results to be in line or better than consensus
- 44% describe management tone as having stayed the same quarter-over-quarter, which they largely describe as “already guarded”, while 25% say it is more negative
- Bullish market sentiment doubled from last quarter, with 20% exhibiting exuberance; still, the majority, or 54%, describe their outlook as “cautiously optimistic” in regard to industry coverage
- Organic growth, capital allocation discipline and valuations are key areas of focus
- Reinvestment topped investors’ preference for use of excess free cash, followed by dividends and sensible M&A share repurchases, historically a close second to dividends, fell to fourth in the current environment
- Overwhelmingly participants expect the Fed to begin to taper QE by year-end (interviews were conducted prior to the FOMC’s September 18 meeting); when tapering does commence, 43% expect only a slight pullback for stocks
- Geopolitical events, U.S. Fed policy and the economic slowdown in China are cited as top concerns
- 62% assert that the North American non-residential construction rebound is real and sustainable though note that “rate volatility could derail the recovery temporarily”
- 76% maintain the European economy has taken a turn for the better, citing improving PMI surveys in particular
About Corbin Perception
Corbin Perception is an IR research and 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 Strategy Communication.
To access the full report, visit our website: www.corbinperception.com/research-library