Institutional investors to focus on top-line growth and margin expansion in first-quarter earnings, Corbin Perception survey shows
The number of institutional investors that consider themselves bullish rose sharply at the end of the first quarter as stock prices rose and the US economy showed signs of improvement, according to a quarterly report by investor relations advisory firm Corbin Perception.
The proportion of investors who feel bullish rose to 42 percent from 13 percent in the fourth quarter of 2012, according to the survey. At the same time, the number of investors classifying themselves as bearish plunged to 4 percent from 20 percent.
Still, 58 percent of those surveyed say the market rally in the first quarter was driven by the quantitative easing policies of the US Federal Reserve and that the rally is ‘probably not sustainable’. Roughly a third (32 percent) cite improving fundamentals as a key driver.
‘Despite continued geopolitical gridlock and uncertainty, investor tone has steadily improved with the vast majority of surveyed investors describing their sentiment as bullish,’ Corbin Perception says in its research. ‘[But] they remain leery about whether the recent market surge will receive continued support.’
Based on the survey data, Corbin Perception says ‘indications are that investors will be focused on earnings growth potential, cash flow generation, capital allocation strategy and, given the significant run-up, valuation.’
The survey, which includes 28 financial professionals from European, US and Canadian institutions with a total of $1.1 tn in equity assets under management, also shows that first-quarter corporate earnings are expected by the largest group of investors to be in line with fourth-quarter earnings, which generally exceeded expectations.
Forty-eight percent of those surveyed say earnings will be in line with the previous quarter while 26 percent say they will exceed the previous quarter and another 26 percent expect ‘muted’ results.
In corporate reporting, investors say they will be watching top-line growth, margin expansion, expense control, the North American growth rate and tax policy. When asked about the tone of management, 33 percent of those surveyed say it is ‘less negative’ while 33 percent say it is the same as in the previous quarter and 28 percent say it is ‘more negative’.
‘Our research also uncovers that a greater portion of participants are currently looking for dividend yield and continue to place a significant amount of importance on effective capital allocation strategies,’ Corbin Perception says.
The chief concerns among institutional investors include US policy and quantitative easing, the European sovereign debt crisis, US equity valuations, revenue growth, margin expansion and global political unrest.
Corbin Perception, in conclusion, recommends a ‘proactive targeting strategy’ in investor relations, including holding 10-12 non-deal roadshows a year with at least one overseas trip, an in-depth analysis of the current shareholder base and the use of software and databases to identify high-fit underweight and prospective investors.
