Executives’ tone more bullish, Corbin Perception survey shows
Investor optimism about company earnings turned sharply positive in the second quarter as commentary from executives took on a more positive note and savings from previous cost-cutting efforts took effect, according to the latest quarterly buy-side research from Corbin Perception.
About 80 percent of investors predict second-quarter earnings will be in line with or better than consensus, compared with the first quarter, when 77 percent expected earnings in line with or worse than consensus. The 20 percent that predict worse-than-expected earnings say sell-side estimates are overly optimistic, however.
Respondents who say executives they have contacted maintain a ‘bullish’ stance nearly doubled to 32 percent from 17 percent while those detecting a ‘cautious’ tone dropped to 50 percent from 60 percent. Geopolitical tensions, domestic US politics, emerging markets and high valuations top the list of concerns expressed by executives, according to the survey of 50 financial professionals worldwide.
The number of investors who consider themselves ‘cautiously optimistic’ also jumped to 51 percent in the second quarter from 39 percent in the first quarter while the percentage saying they are ‘bullish’ rose to 18 percent from 10 percent. Most investors also say they expect improvement in free cash flow, earnings per share and organic growth.
Sixty-five percent of those surveyed say consistent cash flow is among a company’s most important financial characteristics, followed by 47 percent who cite ‘balance sheet flexibility’ and the same number who name operating margins among the most important areas. Earnings growth potential comes next, at 41 percent.
Dividend growth remains the preferred method to handle cash flow, as cited by 89 percent of respondents. Reinvestment comes a close second, at 87 percent, followed by mergers and acquisitions at 69 percent, share buybacks at 68 percent and debt reduction at 60 percent.
Asked about sell-side research, 48 percent of respondents say they look at it but do their own research while 36 percent use sell-side models and research and 10 percent say they don’t use it at all.
