Buy/Sell

Inside The Buy-Side

Taking the pulse of institutional investors in the industrial sector

Corbin Advisors, a strategic consultancy, has published its quarterly Industrial Sentiment survey, reveling a more bullish outlook for supply-chain issues and inflation fears. Access the full survey at corbinadvisors.com/survey.

HARTFORD, Conn.–(BUSINESS WIRE)–Corbin Advisors, a strategic consultancy accelerating value realization globally, today released its quarterly Industrial Sentiment Survey. The survey, part of Corbin Advisors’ Inside The Buy-side® publication, is based on responses from 28 institutional investors and sell side analysts globally who actively cover the industrial sector. Buy side firms manage more than $2.3 trillion in assets and have ~$168 billion invested in industrials.

Following more cautious industrial sentiment last quarter after four consecutive quarters of increasingly bullish views as companies began to grapple with the impact of supply chain disruption and inflation concerns, our survey this quarter finds sentiment has bounced back favorably to be more in line with upbeat June views. Those describing their own sentiment as Neutral to Bullish or Bullish registers at 71%, up from 54% last quarter, while those now describing management tone as Neutral to Bullish or Bullish, increased to 84%, up from 32% last quarter, though this is below the record 96% registered in our June survey.

As industrial earnings season gets underway, 83% expect revenue growth to improve sequentially. Similarly, free cash flow expectations meaningfully improved, with 53% now anticipating sequential growth, up from less than 25% last quarter. Continuing, 47% expect earnings consensus beats, up from just 17% last quarter. For 2022, guides are also expected to be Better Than 2021 results.

Driving optimistic views is the belief that strong demand trends will continue in 2022. Indeed, 90% of investors and analysts expect this strength to continue, up from 68% last quarter, with industrial organic growth anticipated to be 6.0% on average in 2022, down only slightly from an expected average rate of 7.5% for 2021.

Key points from the survey:

  • 84% of surveyed investors and analysts describe management tone as Neutral to Bullish or Bullish, a significant increase from 32% last quarter, pointing to demand, backlog, orders and pricing
  • 71% report upbeat sentiment, up from 54% last quarter, with outright bulls increasing more than four-fold
  • 90% believe strong demand levels will continue in 2022, an increase from 68% last quarter
  • 83% expect revenues to Improve sequentially, as well as EPS and FCF; margins are largely expected to Stay the Same QoQ
  • 56% report Buying or Holding within Industrials, with Net Buyers increasing to the highest level (33%) since Mar. 2021
  • 80% report More Concern (aided) or a continued High Level of Concern with labor availability, up from 56%; inflation and supply chain round out worries
  • Digitalization is the most compelling investment theme, followed by Cost-cutting Initiatives and Pure Plays; North America and Small Caps are in favor

Inflation Is Still A Concern

While expectations are upbeat, more than 8 in every 10 investors still express concern with inflation, which surpassed supply chain disruption as the most significant challenge this quarter (unaided), and investors report being increasingly concerned with labor availability. Despite these known pressures, margin guides for industrials are expected to come in stronger than 2021 results, as investors point to volume demand and pricing actions.

With an ever-more dynamic and unpredictable environment, we are anticipating a greater level of negative surprises than what the Street is telling us they expect...

“The bar is set high for industrials heading into earnings season. While demand remains robust, inflationary pressures continue to mount, supply chain constraints persist and labor shortages have been further exacerbated by the spike in COVID-19 variants, which will have some impact in the fourth quarter of 2021 and first quarter of 2022. With an ever-more dynamic and unpredictable environment, we are anticipating a greater level of negative surprises than what the Street is telling us they expect,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “Views on capital deployment further support a growth cycle mentality, with M&A topping the list of best uses, followed by reinvestment. Still, comfort around levering up has ebbed somewhat as the likelihood of a rate hike rises, while cost cutting remains in focus as an investment theme, as investors encourage executives to remain disciplined and expect margin expansion this year. With investors forecasting strong 2022 guides across all key performance indicators – growth, earnings, margins and free cash flow – it will be important for executives to set the tone in a realistic and conservative manner.”

Industrial Stocks & Digitization

Given more favorable views, 29% believe industrial stocks are undervalued, the highest level since September 2020, with 56% of surveyed investors reporting Rotating or Buying within industrials, with Net Buyers increasing more than five times to 33% this quarter, also the highest level registered since March 2021.

Digitalization, cost-cutting initiatives and pure plays remain the most compelling investment themes, while North America and small caps remain in favor. China and large-caps are the two most notable areas seeing concerns.

Inside The Buy-Side

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 is a strategic consultancy accelerating value realization globally. We engage deeply with our clients to assess, architect, activate, and accelerate value realization, delivering research-based insights and execution excellence through a cultivated and caring team of experts with deep sector and situational experience, a best practice approach, and an outperformance mindset.
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.