Corbin Advisors Releases Q3’22 Inside The Buy-Side® Industrial Sentiment Survey

October 20, 2022 at 14:06 PM EDT

Industrial Investor Sentiment Increasingly Downbeat But Not Draconian Amid Mixed Views on 2022 Performance and Expectations for a Broad-based Slowdown in 2023

Despite nearly half of participants, 49%, describing executive tone as Neutral to Bullish or Bullish, in line with last quarter, a greater number, 53%, describe their own view as Neutral to Bearish or Bearish, up from 38% QoQ
56% expect Worse Than sequential earnings, up from 31% last survey, while the majority, 69%, anticipate organic growth to be flat to better QoQ; views on margin and FCF performance are mixed
Fewer than 15% expect companies to raise 2022 guidance; more expect margins and EPS to be maintained and FCF lowered
77% expect 2023 top-lines to be lower than 2022 actuals, compared to ~50% anticipating the same for margins and EPS
46% point to slowing economic growth and a recession as the leading concern, overcoming inflation, and more than double QoQ
On average, expectations are for 1.4% industrial organic growth in 2023, versus an anticipated 6.6% for 2022
76% now cite North America exposure as most compelling, compared to 12% for China and 0% for Europe

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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^® flagship publication, is based on responses from 41 institutional investors and sell side analysts globally who actively cover the industrial sector. Buy side firms manage more than $2.6 trillion in assets and have ~$465 billion invested in industrials.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20221020005985/en/

Our Industrial Sentiment Survey this quarter finds the most bears since the onset of COVID-19 and in line with our Q3’19 survey, a time when there were broad-based concerns over slowing global industrial growth and continued earnings deceleration, as well as U.S./China tariff disputes. Investors describing their sentiment today as Neutral to Bearish or Bearish register at 53%, up from 38% last quarter, mainly driven by persistent inflation and slowing demand. Notably, management tone is largely characterized as Neutral to Bullish or Bullish, in line with last quarter.

As Q3’22 earnings season begins, 56% expect Worsening sequential earnings results, up from 31% last survey, while views are divided on industrial performance versus consensus, with nearly one-quarter expecting beats, up from 0%.

Derek Spronck, Sr. Associate Portfolio Manager at British Columbia Investment commented, “I expect Q3 industrial earnings to come in worse than consensus expectations. Top-line growth is likely to remain well supported across most industrial subsectors. However, margin compression could be significant on persistent inflation and lower productivity, which we believe have yet to be fully factored into consensus estimates.”

Turning to 2023, 68% expect industrials will experience broad-based weakness, with the majority forecasting Q1. To that end, 77% expect 2023 organic growth guides to be lower than 2022 actuals with just under half anticipating the same for margins and EPS. Organic growth is expected to average 1.4% in 2023, compared to anticipated growth of 6.6% in 2022.

Despite increasingly downbeat views, industrial investors and analysts continue to favor reinvestment as the top use of cash, and nearly 30% encourage companies to increase capex, up from 0% QoQ. Not far behind, however, is debt paydown, which saw the largest increase in support this survey at 55%, up from 36%, with the majority, 70%, preferring 2.0% or lower Net Debt-to-EBITDA levels. Notably, views on M&A suggest continued support at this time in the cycle.

“Industrial investors and analysts, while more downbeat quarter-over-quarter, are proving to be fairly balanced in their views, accepting of the impending growth deceleration while also recognizing that 2022 still has some tailwinds from record backlogs and pricing strength,” said Rebecca Corbin, Founder and CEO of Corbin Advisors. “Our survey finds decidedly divided views on expected Q3 company results and full year 2022 guidance updates, further underscoring the increasing variation in company performances after nearly two years of lockstep execution. Amid guidance raises, which fewer than 15% expect, growth oases will become more evident. Focus has already shifted to 2023 with the vast majority expecting broad-based industrial weakness, though top-line growth is anticipated, albeit at an anemic 1.4%, on average. A telling sign that the austerity mindset has yet to set in, reinvestment remains the preferred use of cash, with greater support for growth capex amid appreciation for well understood long-term secular growth trends, something that is notably different than previous cycles.”

North America remains the most compelling region, favored by 76% of investors and analysts, representing a significant margin compared to China at 12% and Europe at 0%. To that end, 60% are ascribing a high level of risk in the short-term and 41% over the long-term, to companies with exposure to China.

Regarding industry sentiment, Defense, Agriculture, and Auto are the biggest bull benefactors, while Building Products, Chemicals, and Transportation see the greatest influx of bears.

Since 2007, 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.

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