Companies will struggle to impress investors this earnings season as investors grow increasingly negative on the macro outlook, according to new research from Corbin Advisors.
The survey finds that investors are the most downbeat in almost two years, with 43 percent describing their view as either neutral to bearish or bearish. Just 26 percent are neutral to bullish or bullish, a drop from 52 percent last quarter.
Almost nine in 10 investors (89 percent) report more concern or a continued high level of concern with inflation, a rise from 86 percent in the last survey. Other major worries include the war in Ukraine, labor availability and supply-chain disruption.
The swirl of macroeconomic headwinds has created a ‘wall of perception’ where companies will find it hard to impress, says Corbin. The advisory firm coined the term in 2015, referring to times of macro uncertainty when investors grow increasingly bearish and ‘perception is often ahead of current operating performance or trends.’
Worsening expectations
The research finds that expectations around key financial metrics have dropped noticeably: around four in 10 respondents (41 percent) think earnings per share will worsen this quarter, a jump from 17 percent during the last earnings season.
In addition, only a quarter say free cash flow and margins will improve sequentially, a fall from around 50 percent three months ago.
‘I am getting more cautious,’ comments one respondent to the research, a buy-side generalist based in North America. ‘During this earnings season, people will generally make their numbers but provide more cautious guidance. Management teams are leaning more toward the bullish side but are more uncertain than I have heard them in a long time.’
The survey polled the views of 83 capital markets participants, with 78 percent on the buy side and 22 percent on the sell side. The investor respondents manage around $7.3 tn in assets under management collectively. Responses were collected between March 8 and April 7.
