Corbin Advisors’ 1Q19 Buy-Side Survey: Institutional Investor Sentiment Improves to a More Neutral Stance After 4Q18 Freefall as Fears of Imminent Recession Recede; Still, a Gradual Deceleration in Growth Expected in 2019

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Investors are largely in a holding pattern, awaiting clarity as the
upcoming earnings season progresses. Topics of interest for earnings
calls include margin trends, capital deployment strategies and 2H19
outlooks


  • Overall investor attitudes improve as one-third of respondents now
    describe their sentiment as Neutral, an increase from just 14%
    last quarter, while management tone is perceived as Neutral or Neutral
    to Bullish
  • Those expressing Continued or More Concern with a
    recession fell to 43% from 59% last quarter
  • Rising interest rates, which were identified as a top concern in 4Q18,
    are no longer a worry for nearly 80% of respondents; more than half Do
    Not Believe
    the Fed will hike rates in 2019
  • 50% expect earnings to Decrease sequentially, up from 41% last
    quarter and significantly higher than in Sep. 2018, when only 17%
    called for deceleration
  • Organic Growth, EPS and Margins are expected to Stay the Same
    or Worsen following the most pessimistic levels registered last
    quarter since Dec. 2015; general views are for “positive, albeit
    slowing” performance

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HARTFORD, Conn.–(BUSINESS WIRE)–lt;a href="https://twitter.com/hashtag/earnings?src=hash" target="_blank"gt;#earningslt;/agt;–Corbin Advisors, a research and advisory firm specializing in investor
relations (IR), today released its quarterly Inside
The Buy-side
®
Earnings Primer report,
which captures trends in institutional investor sentiment. The survey
was conducted March 13 to April 3, 2019 and is based on responses from
76 institutional investors and sell-side analysts globally, representing
more than $768 billion in equity assets under management.

Following the freefall in investor sentiment during 4Q18 earnings
season, analysts and investors have landed on slightly firmer ground. Neutral
to Bearish
or Bearish sentiment, which climbed to 49% last
quarter, dropped to 33% in 1Q19. Accompanying the improvement in
sentiment was a slightly more optimistic perceived management tone, as
45% describe executives as Neutral to Bullish or Bullish,
up from 37% last quarter.

This reflects fewer concerns with market pressures that peaked last
quarter. Rising interest rates, which were identified as a top concern
in our last survey, are no longer a worry for nearly 80% of respondents,
as 54% Do Not Believe the Fed will raise rates in 2019. As well,
those expressing Continued or More Concern with a
recession fell to 43% from 59% last quarter.

“I am less concerned about a recession versus last quarter due to the
resiliency of the U.S. economy and the nimbleness of U.S. corporations
in their ability to innovate and capture market share outside of the
U.S.,” noted Mark Mandziara, Senior Managing Director at BTC Capital
Management.

Still, growth is expected to slow, with 82% anticipating 2019 U.S. GDP
at or below 2.5%, compared with 77% the previous quarter. Nearly 60%
also report that 2019 outlooks were In Line with expectations,
which were for more conservative guides relative to 2018.

“After the first quarter rally nearly erased December’s selloff,
investors are bracing for what is expected to be the first in a sequence
of contracting corporate earnings announcements,” said Rebecca Corbin,
Founder and CEO of Corbin Advisors. “Economic softening is priced into
expectations and any deviation from that, positively or negatively, will
be a catalyst for market performance this quarter. Amid the strong start
to 2019, our survey finds that U.S. equities are considered Fairly
Valued
and the majority of respondents expect flat performance in
the first half of 2019.”

Executive Tone Will Be a Key Focus in the Upcoming Earnings Season

Concerns over tariffs, rising input costs, interest rates, a recession
and the December stock swoon have receded and given way to a more stable
investing environment. Investors generally report taking a wait-and-see
approach and are looking at broad trends across industries to see how
companies fare in a slowing growth environment.

“Amid anticipation of gradually decelerating growth, margin preservation
is a key focus for investors this earnings season,” said Ms. Corbin.
“It’s important that executives proactively address capital deployment
strategies, including balance sheet strength or continued plans to
delever, and be prepared for questions on the second half. To that end,
guidance strategies, specifically managing investor expectations amid
still heightened uncertainty, will be key. As we move into a new market
phase, the stakes are higher and competition for investor capital will
be fiercer.”

Reflecting the changing times, 70% of survey respondents note they are
placing More Emphasis on balance sheet strength versus a year
ago; ideal Net Debt-to-EBITDA targets for nearly all sectors (ex. REITs)
is 2.0x, down from 2.5x in 2016.

Among sectors, Technology and Industrials registered the most
significant increases in bullish sentiment, while Building Products,
Financials and Consumer Discretionary remain the most out-of-favor.
REITs warded off bears for the second consecutive quarter, receiving the
least negative sentiment in three years.

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 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 CorbinAdvisors.com.

Contacts

Corbin Advisors
Bronwyn Swanson, 203-283-7997
bronwyn.swanson@corbinadvisors.com

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