Q419 Earnings Primer Investor Sentiment Survey January 17, 2020 | IF IT’S CORBIN, IT’S ACTIONABLE |
Inside The Buy-side® Q419 Earnings Primer
ISSUE: 41 DATE: JANUARY 17, 2020 Market Performance
For over a decade, we have surveyed global investors quarterly on the equity markets, world economies and business climate. At the start of every earnings season, we publish our leading-edge research, Inside The Buy-side®, which captures real-time Voice of Investor™ sentiment and trends.
DJIA
1
BY REGION 60%
7% 15%
23% Industrials Technology Healthcare Materials
8%
NASDAQ
12.2%
35.2%
S&P 500
8.5%
28.9%
Russell 2000
9.5%
23.7%
FTSE 100
1.8%
12.1%
Stoxx 600
5.8%
23.2%
Hang Seng
8.0%
9.1%
Shanghai
5.0%
22.3%
As of 9’30’19
BY INVESTMENT STYLE Core Value
22%
Core Growth
22% 19%
GARP
5%
70%
4% 3%
22.3%
Asia
Survey Timeframe: Nov. 21, 2019 – Jan. 7, 2020
Multi1
6.0%
Europe
Survey Scope: 82 participants globally, comprising 71% buy side and 29% sell side; assets under management total ~$1.2 trillion
Generalist
2019
U.S.
Leveraging our deep understanding of capital markets, proprietary research, cutting-edge technology and best practice knowledge, our research demonstrates the value we add by remaining at the forefront of global market trends, investor sentiment and effective communication strategies.
BY TYPE
Q419
17%
VC/Private Equity
13%
Hedge Fund North America
Inc. Value/Yield
5%
EMEA Other
1
5%
APAC
Deep Value
2%
Multi includes Cons. Disc, Cons. Staples, Energy, Financials, REIT, Telecom, Utilities CORBIN ADVISORS
2
Word Cloud: Frequency of Occurrence We developed a word cloud to visually demonstrate the investment community’s focus areas, trends in frequency of word occurrence, as well as the underlying tone
Investor Feedback Indicates a Positive Change in Sentiment amid a Strong Consumer and Priced-in Slowing Growth
Q119
Q219
Top 2019 Mentions
Q319
Q419
Q119
Q219
Q319
Q419
Q/Q
Trade War
27
44
62
38
24
U.S.
24
30
36
44
Growth
32
13
23
32
11
Economy
8
15
22
22
➔ -
China
10
31
22
20
2
Interest Rates
7
14
20
23
3
Recession
7
8
12
15
3
8
Key: Underlying Sentiment
⚫ ⚫ ⚫
Positive Neutral Negative
CORBIN ADVISORS
3
Survey Findings Reveal a Sea Change in Investor Sentiment – A Floor Has Been Reached as More Positive Views Abound and Expectations Rise #1
Following Q319 Results that Handily Beat Consensus, Most Expect Q4 to come In Line with Estimates and Nearly Three-Quarters Expect 2020 Outlooks to Be In Line or Better Than 2019
▪
~75% and 60% of S&P 500 companies reported positive Q319 EPS and revenue surprises, respectively
▪
For Q419, 41% expect In Line sequential EPS and 54% believe earnings will be consistent with consensus; only 24% predict Below consensus
▪
While most investors expect EPS and Organic Growth to be In Line with Q3 results, all key metrics – EPS, Organic Growth, Margins and FCF – registered increases in Better Than expectations and saw decreases in Worse Than views; notably, investors are expecting strong FCF and margin resiliency
▪
73% expect full-year 2020 guides to be In Line or Better Than 2019, compared to only 27% anticipating Worse Than outlooks
▪
36% anticipate capex levels will improve over the next six months, as negative views on most global economies ease across the board
#2
Investor Nervousness Recedes as the Strong Consumer, Low Unemployment, Low Interest Rate Environment and Strong Balance Sheets More than Offset Slowing Economic Growth and Geopolitical Uncertainty
▪
Investor sentiment is more optimistic; those whom are Bullish or Neutral to Bullish increased to 52% from 37% QoQ, while 43% describe executive tone as more upbeat, up from 31%
▪
2019 U.S. GDP expectations improve QoQ, with 60% expecting 2.5% growth, up from 54% last quarter; similar for 2020, only 15% anticipate a recession in the next 12 months, a marked improvement from 40% last quarter
▪
For the fourth consecutive quarter, trade war impact remains the most prominent investor concern, albeit at 44%, down from 55% QoQ
▪
Shrugging off U.S. political risk, 97% do not believe the impeachment hearings will lead to the removal of President Trump
#3
A Few “X Factors” Emerge as Investors are Decidedly Split on Outcomes
▪
While 45% believe a U.S./China tariff dispute resolution by the 2020 U.S. election is Likely, 55% are in the Not Going to Happen or only Somewhat Likely to Happen camp
▪
Investors are divided on interest rates; 51% expect the U.S. Fed to cut rates in 2020 while 49% foresee “no cut”, signaling confidence in the health of the economy
#4
Despite All-time Equity Market Highs, More Room to Run as Investors Jump Back In
▪
Only 55% of investors classify U.S. markets as Overvalued, while Europe and Asia markets are considered Under to Fairly Valued
▪
Only 22% report Increasing portfolio cash holdings this quarter, down from 35% last quarter, while 28% are Decreasing cash holdings
▪
31% of investors report they are Net Buyers, the highest level registered since December 2017 (32%)
▪
Technology and Healthcare claim top spot among bulls, while defensive plays – Consumer Staples, Utilities and REITs – were the only sectors to see higher levels of bearish sentiment, yet another sign that investors are more optimistic about economic prospects
CORBIN ADVISORS
4
Modest Economic Growth Baked into Expectations and Some Investors Calling 2019 “The Floor” 60% report Q3 earnings results were as expected – mixed to moderately weaker – and forecast Q4 will be In Line sequentially; nearly one-third anticipate sequential earnings growth, nearly double QoQ Q419 EARNINGS EXPECTATIONS VS. PRIOR QUARTER
34%
31%
Q419 EARNINGS EXPECTATIONS VS. CONSENSUS
41% 36% 41%
50%
41%
37%
28% 18% 20% 18%
16% 18% 17% Better Than
In Line Mar '19
Jun '19
Sep '19
54%
50%
47%
Worse Than
43% 32%
22%
Better Than
Dec '19
In Line Mar '19
Jun '19
Sep '19
43% 39%
Worse Than Dec '19
Better Than
In Line
Worse Than
“Improving productivity, better economic conditions.”
“Trade war has had an impact on many businesses. It seems China has borne the brunt of the damage but the U.S. was still affected.” Buy Side, Generalist, N. America
“Consensus is too high.” Buy Side, Generalist, Europe
Buy Side, Generalist, N. America
“Analysts try to lowball estimates.” Buy Side, Generalist, N. America
“Natural Language Processing (NLP) analysis.” Sell Side, Generalist, N. America
“Strong U.S. consumer.” Sell Side, Generalist, N. America “Seasonality, typically stronger Q4 vs Q3.” Sell Side, Healthcare, N. America
24%
“Macro headwinds, seasonality, GM strike and 737 Max.” Buy Side, Multi, N. America
“Low unemployment, high consumer sentiment and lowered expectations.” Buy Side, Generalist, N. America “Continued albeit modest economic growth coupled with sustained margins.” Buy Side, Generalist, N. America
“Uncertainty in U.S. leadership, trade war with China, increasing debt and geopolitical instability are contributing to negative sentiment and an expected slowdown in the global economy.” Buy Side, Multi, N. America
“Slowdown is built into the numbers and that is right for another quarter.” Buy Side, Generalist, N. America
“Weaker ISM and industrial production trend.” Buy Side,
“Slowing global economy but continued confidence in the U.S. consumer.” Buy Side, Generalist, N. America
“Worsening commodity prices.” Sell Side, Energy, N. America
Industrials, N. America
“Weak commodity prices.” Sell Side, Materials, N. America
“Low, steady global growth and low volatility in the stock markets.” Buy Side, Generalist, Europe “Management teams are not motivated to be optimistic but the market understands that.” Buy Side, Multi, N. America “Reasonable expectations.” Buy Side, Technology, N. America
“Phony accounting to justify government cash injections lifting the market.” Buy Side, Materials, N. America
CORBIN ADVISORS
5
Demand Improvement and Strong Consumer Drive More Upbeat 2020 Outlooks Nearly three-quarters expect 2020 guidance to be In Line or Better Than 2019 EXPECTATIONS FOR FULL-YEAR 2020 GUIDANCE OUTLOOKS RELATIVE TO 2019
LIKELIHOOD OF A FAVORABLE RESOLUTION TO THE U.S./CHINA TARIFF DISPUTE BY 2020 U.S. ELECTION
73%
38%
37%
35% 27%
25%
18%
15% 5% Stronger
In Line
Weaker
Will Happen
Very Likely
Likely
Somewhat Likely
Not Going to Happen
Stronger
In Line
Weaker
“Modestly stronger given a number of macro events (e.g., initial efforts to resolve trade conflicts, consumer sentiment coupled with expansion in wages). Apparent stability being evidenced in specific economic regions outside the U.S.”
“Although we may have a trade deal, we don’t understand what it is yet. The devil is in the details.” Buy Side, Generalist,
“High political, fiscal and monetary uncertainty will cause management to set a low bar.” Buy Side, Generalist, N. America
N. America
Buy Side, Generalist, N. America
“Growth deceleration has been well-documented throughout the year, resulting in an ‘easy comp’ situation for next year.”
“Anticipated improvements in economy and earnings.”
Buy Side, Generalist, N. America
“Slowing economy.” Buy Side, Generalist, N. America “Everyone guides below, so they can beat-and-raise through the year.” Buy Side, Generalist, N. America
Buy Side, Generalist, N. America
“Low beginning expectations.” Buy Side, Generalist, N. America
“Uncertainty will stay high (Brexit, U.S. election, trade war, China-Hong Kong).” Buy Side, Generalist, Europe
“Tariffs, slowing economy, political uncertainty.” Buy Side,
“Money is cheaper and the economy is still okay.” Buy Side,
“Too much uncertainty for guidance to be materially higher.”
Generalist, N. America
Buy Side, Multi, N. America
“Still strong U.S. consumer, recovery in business sentiment.”
“Economy to stabilize.” Buy Side, Healthcare, Europe
“Slowing global demand and consumer concerns about the election process and the possibility of higher taxes in a completely new Democratic-run government.” Buy Side,
Generalist, N. America
Generalist, N. America
Sell Side, Generalist, N. America
“Low interest wages.” Sell Side, Generalist, Europe “Growth in new products.” Sell Side, Healthcare, N. America “Improvement in demand and commodity prices.” Sell Side, Materials, N. America
“Current company projections / easy comps.” Sell Side,
“Trade war.” Buy Side, Generalist, Europe
Industrials, N. America
“Range bound commodity prices.” Sell Side, Energy, N. America
“Global slowdown.” Buy Side, Generalist, Europe “The trade war continues to dominate investor sentiment and affect CFO 2020 budgeting decisions amid a wide range of business environment outcomes.” Buy Side, Multi, N. America “Uncertainty in U.S. leadership, trade war with China, increasing debt and geopolitical instability are contributing to negative sentiment and an expected slowdown in the global economy.” Buy Side, Multi, N. America
CORBIN ADVISORS
6
Following Three Quarters of Deteriorating Investor Expectations, Views toward KPIs Improve Significantly On the heels of last quarter’s survey, which saw the most bearish sentiment on EPS and FCF in the past five years, all indicators are expected to Stay the Same, with notable upward moves in investors expecting improvement
ORGANIC GROWTH
FCF
51%53% 44%
38%34% 28%
28% 11%13% Improving
Staying the Same
Worsening
EPS
42%
46%44%42%
43% 33%
21% 13%
16%
Improving
Staying the Same
OPERATING MARGINS
Worsening Jun '19
35%
43% 43% 35%
49% 41%
16%16%
Sep '19
Staying the Same
53%
31% 22%
Improving
46%
Worsening
57% 46%
29%
18% 8% 12% Improving
Staying the Same
Worsening
Dec '19
Total Number of Mentions on Quarterly Earnings Calls by Companies Globally1 Tariffs
Cost Actions
2000
Headcount Reduction
4000
500 3420
1228 1500
3500
1000
3000
371
400 347 300
2959
200 2500
Change (∆)
1
0
Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Dec '18 Mar '19 Jun '19 Sep '19 Dec '19
2000
Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Dec '18 Mar '19 Jun '19 Sep '19 Dec '19
0
100
Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Dec '18 Mar '19 Jun '19 Sep '19 Dec '19
500 261
QoQ
YoY
QoQ
YoY
QoQ
YoY
25.2%
15.0%
5.5%
13.6%
15.9%
62.0%
Source: Corbin Advisors research CORBIN ADVISORS
7
Topics of Interest for Upcoming Earnings Calls 2020 Outlooks, Growth Prospects and Margin Resiliency
1
2020 outlooks
2
Growth prospects
3
Margin sustainability
4
Capital deployment strategy, including reinvestment
5
New product development
6
Inventory
Views from N. America
Views from EMEA
Views from APAC
“How are inventories in the channel being worked through and where are we in that process? Reinvestment and positioning of balance sheet.” Buy Side, Generalist
“Order intake / order book.” Buy Side, Generalist
“Company thematic.” Buy Side, Generalist
“Business environment, outlook.” Buy Side, Healthcare
“Stagflation.” Sell Side, Consumer Discretionary
“Balance sheet structure, cash utilization, strategic outlook and expectations, competitive environment.” Buy Side, Generalist
“Outlook for 2020.” Sell Side, Generalist
“Impact of global macro environment.” Sell Side, Technology
“Portfolio changes (dispositions vs. acquisitions).” Sell Side,
“How they are going to grow revenue.” Sell Side, Generalist
“Global outlook.” Buy Side, Generalist
REIT
“Inventory/capex plans.” Sell Side, Generalist “Penetration within their markets, efficacy of execution, sustainability of margins.” Buy Side, Generalist “Business investment.” Buy Side, Generalist “Capex and revenue outlook. If they are spending, then I assume they like their prospects.” Buy Side, Generalist “Trade and capital investment.” Buy Side, Generalist “Organic growth.” Buy Side, Generalist
“What they see in the pipeline and why.” Buy Side, Generalist “Organic growth trends, price vs. cost inflation spread, new product/service launches, outlook for 2020.” Buy Side, Generalist
“2020 guidance.” Buy Side, Generalist “Use of cash.” Buy Side, Generalist “New product development, margin outlook and organic growth.” Buy Side, Multi
CORBIN ADVISORS
8
Investor Sentiment and Perceived Management Tone Register at the Most Bullish Levels Since Sep. 2018 With Q3 earnings results generally surprising to the upside, slowing growth priced in, a more optimistic executive tone and expectations for easier YoY comps, investor sentiment rebounds INVESTOR SENTIMENT 3%
11%
37%
MANAGEMENT TONE
16%
26%
Bullish
52% 36%
31%
28%
Neutral to Bullish
38%
33%
Bearish 38%
24% 27%
30%
23% 12% Sep '19
43%
Neutral Neutral to Bearish
24%
5%
17%
1%
6% Dec '19
Sep '19
2% Dec '19
Bullish
Neutral to Bullish
Neutral
Neutral to Bearish
Bearish
“Faith in the consumer and companies to invest to meet demand at least through Q120.”
“Most smart managers talk down earnings allowing them to beat. Plus with some reduction in tariffs, there might be room for global growth.”
“This is an aging bull market and it is becoming increasingly skittish and volatile. The geopolitical environment isn’t helping. We have very poor leadership worldwide.”
“Declining organic earnings.”
Buy Side, Generalist, N. America
Buy Side, Generalist, Europe
“Uncertainty in U.S. leadership, trade war with China, increasing debt and geopolitical instability are contributing to negative sentiment and an expected slowdown in the global economy.” Buy Side, Multi,
“Strong consumer, removal of some risks, while other strong risks remain.” Buy Side, Generalist,
“Overextended.” Sell Side, Generalist,
Buy Side, Generalist, N. America
Buy Side, Generalist, N. America
“Data and trade war improvement.” Buy Side, Generalist, N. America
“Liquidity.” Buy Side, Generalist, N. America
“Recovery in investor confidence on 2020 global growth.” Sell Side,
“Similar to the prior quarter and throughout most of this year, management has been very deliberate in their presentations. Guidance has been muted to afford some degree of surprise.” Buy Side,
Buy Side, Generalist, N. America
“Lower capex, rhetoric to protect margins, still not at the bottom.”
N. America
N. America
N. America
Generalist, N. America
Generalist, N. America
“Management will err on the side of caution given consequences of downward revisions.” Buy Side, Generalist, N. America
“U.S. consumer plus election.” Buy Side, Generalist, N. America
“Global growth should improve in 2020 if there is a trade deal between U.S. and China by the end of 2019.” Buy Side, Generalist, Europe
CORBIN ADVISORS
9
Top Concerns from around the Globe For the fourth consecutive quarter, investor focus remains on trade war impact but at a moderated level; fewer than 20% are concerned about the global economy
44%
35%
27%
24%
18%
16%
Trade wars
Geopolitics
U.S. elections
Low interest rates
Global economy
China-Hong Kong
Views from N. America
Views from EMEA
Views from APAC
“Perpetual trade war, Democrat sweep of presidency and Senate in 2020, the Fed didn’t pivot in time.” Buy Side,
“Commercial wars.” Buy Side, Generalist
“Macro environment trumping company fundamentals.”
Generalist
“Global trade war, U.S. election, China-Hong Kong dispute.”
Buy Side, Generalist Buy Side, Generalist
“Labor availability, political risks, interest rate policy.” Buy Side,
“Political developments, low interest rates, deleveraging.” Buy Side, Generalist
Generalist
“Slowing U.S., trade war.” Buy Side, Generalist
“Economic growth, interest rates rising, regulation.” Buy Side,
Multi
Generalist
“Trade war, negative interest rates, equity valuations exbanking sector.” Buy Side, Generalist
“Trade, election uncertainty, Hong Kong.” Buy Side, Generalist
“Tariffs, policy.” Buy Side, Multi
Generalist
“Continuation of advancement in trade negotiations and resolution, U.S. political environment, geopolitical events within Asia (e.g., Hong Kong) and the Middle East; potential spillover or widening of events.” Buy Side, Generalist
“Political uncertainty, recession, Middle East.” Buy Side,
“Debt levels, inflation, trade.” Buy Side, Generalist
“Long-term interest rates, political changes, consumers purchase.” Sell Side, REIT
“U.S. election and political climate, deteriorating revenue and earnings growth, debt and deficits.” Buy Side, Generalist
Healthcare
“Economic slowdown, unemployment, high inflation.” Buy Side, “U.S./China trade, China economy, geopolitics.” Sell Side, “Trade tension, U.S. recession, war.” Sell Side, Consumer Discretionary
“U.S./China trade, valuations, negative rates.” Sell Side, Multi
“Trade wars being prolonged, interest rates.” Buy Side, Generalist
“The corrosive political environment and unfit leadership, U.S. debt and future obligations, low (and negative) interest rates.” Buy Side, Generalist
“Trade policies, asset bubble due to artificially low interest rates, slowdown in productivity.” Buy Side, Generalist “The tariff situation with China, consumer resilience as the economy slows, a complete democratic sweep in Congress and the White House, especially the progressive wing of the party.” Buy Side, Generalist
CORBIN ADVISORS
10
With 2019 U.S. GDP Predictions at 2.5%, a U.S. Recession is Not in the Cards Near-term While Manufacturing ISM® worsened slightly in December, a record-low unemployment rate and robust consumer drive optimism
U.S. RECESSION PREDICTION
2019 U.S. GDP PREDICTION Q11
Q21
Q31
Q4 Est.2
2019 Est.2
3.1%
2.0%
2.1%
2.2%
2.3%
55%
37% 30% 20%
60% 54% 41%
2.0% or Below
40% 30% 23%
17% 14%
2.5%
8%10%
3.0% Jun '19
4% 4% 1%
0% 0% 0%
3.5%
4.0%+
Sep '19
Dec '19
4% 3%
9%
20% 12%
3% Within 6 Months
I Do Not Pay Attention to GDP
Within 12 Months
Within 24 Months
Sep '19
I Do Not Think We Will
Dec '19
®
Manufacturing ISM Report on Business3 Proprietary Research: According to our survey (n = 110), investors most focused on the following economic indicators 1
Manufacturing ISM®
51%
2
Consumer Confidence
43%
3
Unemployment
40%
4
Yield Curve
26%
5
Interest Rates
18%
57.5
60
58.8 54.3
56.6
54.2
55.3
55
52.8
52.1
51.7
51.2
49.1
50
47.8
48.3
48.1
47.2
45 Oct '18 Nov '18 Dec '18 Jan '19 Feb '19 Mar '19 Apr '19 May 19 Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19
Consumer Confidence2 150
6
GDP
14%
130
7
Capex level
8%
110
8
Inflation
7%
9
Stock Market
4%
10
Housing Starts
6%
137.9
136.4 126.6
131.4 124.2
121.7
129.2
131.3
135.8
134.2 126.3
124.3
126.1
126.8
126.5
Oct '18 Nov '18 Dec '18 Jan '19 Feb '19 Mar '19 Apr '19 May 19 Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19
U.S. Unemployment Rate4
4.0%
3.8%
3.7%
3.9%
4.0%
3.8%
3.8%
3.6%
3.6%
3.7%
3.7%
3.7%
3.5%
3.6%
3.5%
3.5%
1 Source:
U.S. Bureau of Economic Analysis 2 Source: The Conference Board 3 Source: Institute for Supply Management 4 Source: U.S. Bureau of Labor Statistics CORBIN ADVISORS
2.0% Oct '18 Nov '18 Dec '18 Jan '19 Feb '19 Mar '19 Apr '19 May 19 Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19 11
Investors Continue to Reduce Cash Holdings QoQ and Report Supporting Valuations Despite all-time highs and U.S. equities being considered Overvalued, investors remain committed to equities, focusing on companies with balance sheet strength; views are divided on the Fed, which is expected to be the “X Factor” in 2020 GLOBAL EQUITY VALUATION CLASSIFICATION
U.S. 4%
41%
QoQ PORTFOLIO CASH HOLDING
46%
55%
43% 40% 43%
35% 22% Europe
38%
37%
22%
28%
25% 7%
4% Asia
34%
45%
Under
Fairly
21%
Increase
Remain Steady
Over
Jun '19
QoQ INVESTMENT TRENDS
Decrease
Sep '19
3%
7%
Do Not Hold Cash
Dec '19
51%
Believe the Fed Will Lower Interest Rates in 2020, Compared to 49% Who Do Not
86%
Do Not Believe Impeachment Hearings Will have an Impact on the Stock Market
97%
Do Not Believe Impeachment Will Lead to Removal of U.S. President Trump
37% 32%
31%
31%
27%
26%
24% 25%
20%
17% 17% 11%
1% 1% 0% Net Buyer
Net Seller
Holding Jun '19
Sep '19
Rotating
Liquidating
Dec '19
Top Measures to Evaluate Downside Risk (n = 93)
CORBIN ADVISORS
1
Balance Sheet Strength
70%
2
Multiple Compression
39%
3
Sensitivity Analyses
23%
4
Recurring Revenue
22%
5
Cash Flow Generation
18%
12
Views on Capital Allocation Remain Consistent, with Reinvestment and Debt Reduction Favored Ideal debt levels remain at 2.0x or below, but debt sensitivity levels ease somewhat given strong company balance sheets and improving views on the global economy; buybacks remain muted given all-time market highs
PREFERRED USES OF CASH In Descending Order of Top Two Preferences
58% 61% 45%
52% 50% 54% 34%
27%
32%
26%
26%
26%
30% 18%
15%
Reinvestment
Debt Paydown
Dividend Growth
10%
M&A
Jun '19
Sep '19
19% 19%
Buybacks
Dry Powder
Dec '19
IDEAL NET DEBT-TO-EBITDA LEVELS
47% 36%
37%
38% 36% 38% 30%
29% 18%
12%
13%
10% 11% 11%
11% 4%
<2.0x
2.0x
2.5x 2018
CORBIN ADVISORS
Jun '19
Sep '19
3.0x
11% 3% 5%
0%
>3.0x
Dec '19
13
Global Concerns Ease as Most Economies Are No Longer Expected to Worsen Over the Next Six Months For the sixth consecutive quarter, China sees the most downbeat outlook of all regions, though outright bearishness has noticeably declined; Latin America expected to struggle
GLOBAL ECONOMY EXPECTATIONS OVER THE NEXT SIX MONTHS
EUROZONE U.S. Improve
Worsen
36%
18%
+15 pts
-19 pts
MEXICO Worsen
Improve
Worsen
34%
26%
15%
31%
-15 pts
Worsen
42%
22%
+27 pts
-29 pts
-4 pts
Improve
Worsen
Improve
Worsen
34%
38%
20%
18%
+15 pts
-24 pts
UNCH
-1 pt
INDIA Improve
Worsen
37%
17%
Improve
Worsen
+6 pts
+1 pt
58%
10%
+22 pts
-14 pts
+10 pts
BRAZIL Improve
Worsen
37%
20%
-12 pts
+8 pts
58%
SE Asia
Eurozone
India
SOUTHEAST ASIA
TOP 3 – WORSENING
TOP 3– IMPROVING
CORBIN ADVISORS
JAPAN
CHINA
LATIN AMERICA
Improve
+6 pts
Improve
42%
37%
38%
China
Latin America
Mexico
31%
26%
14
Key Indicator Expectations Over the Next Six Months Significant positive shifts in sentiment identified across all key measures, particularly Global Capex, Global PMI, and Non-Resi. Construction GLOBAL CAPEX 17%
GLOBAL PMI 36%
26%
CONSUMER CONFIDENCE 12%
17%
39% 42%
39%
58%
38% 57% 26% Sep '19
Dec '19
43% 46%
44%
22%
18% Sep '19 Improving
“Staying the Same: Within the U.S., this may be adversely impacted given the uncertainty of the election and continuation (or termination, should the President not be re-elected) of deregulation.” Buy Side, Generalist, N. America
20%
Dec '19 Staying the Same
Sep '19
Dec '19
Worsening
“Improving: Easing moves are putting a floor in.” Buy Side,
“Improving: Strong labor market.” Buy Side, Generalist, Europe
Generalist, N. America
“Improving: Acceleration of global growth will lead to higher confidence.” Buy Side, Generalist, Europe
“Worsening: Weakening international economies and domestic uncertainty aren’t environments for increasing capex.”
“Staying the Same: The rise in consumer sentiment is anticipated to be sustained, barring any shocks to the economy or political landscape.” Buy Side, Generalist, N. America
“Staying the Same: The consumer is happy at this point.”
Buy Side, Generalist, N. America
Buy Side, Generalist, N. America
OIL & GAS MARKETS 29%
NON-RESI. CONSTRUCTION 10% 37%
RESI. CONSTRUCTION 27%
36%
50%
33%
23%
31%
Dec '19
Sep '19
39%
44% 49%
49% 46%
22%
14%
Sep '19
Dec '19
Sep '19 Improving
“Improving: Modest improvement.” Buy Side, Generalist, N. America
Staying the Same
43% 18%
Dec '19
Worsening
“Staying the Same: Unlikely to get better given economic uncertainty but also unlikely to be materially worse.” Buy Side,
“Improving: Demographic trends, affordability.” Buy Side, Generalist, N. America
Generalist, N. America
“Improving: Acceleration of global growth will lead to higher Oil & Gas consumption.” Buy Side, Generalist, Europe
“Improving: Low interest rates are positive for the housing markets.” Buy Side, Generalist, Europe “Staying the Same: Housing formation within the U.S. may be adversely impacted should interest rates rise.” Buy Side, Generalist, N. America
CORBIN ADVISORS
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With Sentiment Ticking Higher, All Sectors See Bears Recede QoQ Except Defensive Plays Stronger outlooks in general support Tech and Healthcare, which remain top sector bets for the sixth consecutive quarter; after seeing more optimism for six consecutive quarters, REIT bears emerge, while Cons. Staples sees the largest increase in negative sentiment
BULLS VS BEARS Bulls
Technology
Bears
100% 80% 60% 40% 20% 0%
+/- Represents Study-over-Study Delta
Technology Healthcare Financials
58%
-4 pts
16%
52%
+16 pts
15% 39%
+12 pts +11 pts
31%
Biotechnology
-4 pts
31%
Comm. Services
7%
Cons. Discretionary
+6 pts
19%
Cons. Staples
-1 pt
19%
Building Products
-1 pt
19%
UNCH
18%
-11 pts
-4 pts
23%
21%
-4 pts
Healthcare
-16 pts
36%
25%
+12 pts
-1 pt
23%
Energy
Industrials
-5 pts
100% 80% 60% 40% 20% 0%
-7 pts
16%
Materials
-9 pts
23%
-21 pts
36% 23%
+18 pts
100% 80% 60% 40% 20% 0%
-5 pts
REIT Utilities Materials
+7 pts
REIT
-7 pts
CORBIN ADVISORS
16% 13%
26% 23% 30%
+10 pts -14 pts
+12 pts
100% 80% 60% 40% 20% 0%
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If Itâ&#x20AC;&#x2122;s Actionable, Itâ&#x20AC;&#x2122;s Corbin Advisors Insights-driven Advice Resulting in Real Value Creation
Our proprietary approach combines stakeholder research, investor engagement and communication strategies to unlock embedded value. Leveraging deep experience across sectors, market-caps and various company situations, we engage with public companies on both high-level strategy and tactical execution. Our candid advice and actionable recommendations consistently result in value creation.
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1
CORBIN VALUE CREATION MODEL
Event-driven Consulting includes: Restructuring; Earnings; Large-Platform M&A; Transformations CORBIN ADVISORS
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