Investors expect ‘muted’ earnings for fourth quarter

Shareholders to focus on 2013 growth expectations during earnings season, Corbin Perception report concludes

Investors generally expect companies to report ‘muted’ results from the fourth quarter of last year, according to a survey of global finance professionals carried out by investor relations advisory and research firm Corbin Perception.

‘As earnings season gets underway, most investors predict that Q4 2012 results should be in line with already muted expectations,’ say the authors of Corbin’s quarterly buy-side report aimed at gauging investor sentiment and expectations for company performance.

‘Focus will be on growth expectations for 2013 with several noting that while companies have been ruthless in cutting costs and expanding margins... the ability to trim excess fat in the next year will become more difficult, as much of the fat has already been cut.’

The study also shows that 86 percent of investors surveyed expect upcoming 2013 corporate guidance to be ‘conservative’ because of political uncertainty and questions surrounding economic growth, among other issues, and will be looking for clarification from companies’ leadership.

‘Management insight into the spending environment, cost-cutting initiatives and 2013 guidance is sought,’ the report says, basing its conclusions on interviews in December with 38 financial professionals with more than $1.8 tn in assets under management. ‘Looking forward, top-line growth is of keen interest, along with quality of earnings.’

The survey states that 60 percent of respondents are ‘cautiously optimistic’ about Q4 results, which matches how investors felt about Q3 results in Corbin’s previous survey. At the same time, the number of ‘bearish’ respondents stands at 20 percent for Q4, compared with 40 percent in Q3, showing an uptick in sentiment among the most negative investors.

That slight improvement contrasts with the results of Bank of America Merrill Lynch’s fund manager survey for January, which shows a sharp increase in investor sentiment thanks to the diminishing threats of the US fiscal cliff and eurozone debt crisis.

Corbin’s results, however, indicate greater negativity: 74 percent of those interviewed say management’s tone is ‘more negative’ for Q4 than the previous quarter, while 18 percent say management’s tone is about the same and 9 percent say it is ‘more uncertain’.


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