Investment reports

Companies face tough earnings season as bearish sentiment rises, survey finds

Companies will struggle to impress investors this earnings season as investors become increasingly negative about the macro outlook, according to new research from Corbin Advisors.

The survey finds investors have been the most pessimistic for almost two years, with 43% describing their view as neutral to bearish or bearish. Only 26% are neutral to bullish or bullish, down from 52% last quarter.

Nearly nine in 10 investors (89%) say they are more or always concerned about inflation, up from 86% in the last survey. Other major concerns include the war in Ukraine, labor availability and supply chain disruption.

The whirlwind of macroeconomic headwinds has created a “perception wall” where companies will struggle to impress, Corbin says. The advisory firm coined the term in 2015, referring to times of macroeconomic uncertainty when investors become increasingly bearish and “perception is often ahead of current performance or operating trends”.

Worsening of expectations

The study reveals that expectations for key financial indicators have dropped significantly: around four in 10 respondents (41%) believe earnings per share will deteriorate this quarter, compared to 17% in the last earnings season.

Also, only a quarter say free cash flow and margins will improve sequentially, down from around 50% three months ago.

“I’m becoming more cautious,” commented one respondent to the study, a buy-side generalist based in North America. “During this earnings season, people will generally do their math but provide more cautious advice. Management teams are leaning more to the bullish side but are more uncertain than I have heard in a long time.

The survey polled the views of 83 capital market participants, with 78% on the buy side and 22% on the sell side. Investors surveyed collectively manage approximately $7.3 billion in assets under management. Responses were collected between March 8 and April 7.