Investors are ‘cautiously optimistic’, executives are ‘less negative’ and earnings announcements will meet or beat expectations, according to a Corbin Perception survey released just ahead of the new proxy season.
Half (50 percent) of investors surveyed predict upcoming earnings announcements will beat expectations, while 36 percent say they will meet their forecasts, the quarterly ‘Inside the buy side’ study shows. Only 14 percent predict earnings will be worse than expectations. The sentiment for quarterly announcements shows marked improvement from the third-quarter survey, when 44 percent predicted earnings would beat expectations, a third said they would meet them and 23 percent expected disappointment.
‘As companies prepare for earnings season, it is important to note that surveyed investors largely anticipate strong fourth quarter results,’ the report authors write. ‘Their favorable outlook is rooted in signs of economic improvement and a more positive management tone versus last quarter.’
The percentage of investors who consider themselves bullish as we head into the new year stands at 20 percent, twice the percentage of the previous quarter, while the ‘cautiously optimistic’ crowd now accounts for 75 percent, up from 39 percent the previous quarter. No respondents describe themselves as outright bearish while 8 percent say they are ‘neutral’ and another 8 percent ‘neutral to bearish’.
Additionally, 90 percent of investors predict free cash flow, organic growth and earnings per share will meet or beat expectations in the upcoming round of announcements. But 75 percent of investors surveyed say they expect companies to remain ‘acutely’ focused on cost cutting.
The latest survey shows that 46 percent of investors are detecting a ‘less negative’ tone among executives they deal with, while 48 percent detect no change and 6 percent are more negative. The numbers are significantly better than in the third quarter, when 25 percent of executives appeared more negative.
In answers to a supplementary question, all 52 of the surveyed investors, which between them manage a combined total of more than $500 bn, say they pay attention to corporate governance issues while 39 percent say they are paying even more attention now than in the past.
Executive compensation is the top hot-button issue, with 74 percent of investors citing it as a concern. Political spending is second at 50 percent, followed by board declassification at 49 percent, environmental issues at 43 percent and separation of the roles of chairman and chief executive officer at 36 percent.
