This analysis is by Bloomberg Intelligence Director of Equity Strategy, Chief Equity Strategist Gina Martin Adams and Bloomberg Intelligence . It appeared first on the Bloomberg Terminal.
Stress about recession, inflation and labor remains higher than it was in 2021, but our analysis of the sentiment in earnings-call transcripts finds mentions of those topics falling and management making a remarkable shift toward optimism in the past two quarters. In contrast, the attitude toward buybacks has soured.
Inflation, recession, FX remain top of mind
Earnings-call mentions of all of 2022’s hottest topics are declining from peaks, but some — like inflation, recession and foreign-exchange rates — are still being discussed more than in 2021. At its peak in 1Q22, inflation was mentioned about 3.7 times on each call. It was mentioned just 1.7 times per call in 1Q this year, but is still above the 1.1 in 1Q21. Mentions of recession are also down from their peak, to 0.3 in 2Q from 0.7 in 2Q22, but this is still well above 2021’s rate, when it was rarely discussed.
FX rates are also getting less attention than during 3Q22’s peak, as the dollar’s strength has normalized in 2023, but are still discussed more than in 2021. Mentions of supply chain and labor have normalized to 2021 levels.
Management sentiment souring on payouts
The overall management tone has improved from its 3Q low, but opinions on buybacks and dividends have turned negative. Buyback sentiment took a sharp decline in 1Q from the quarter prior, reaching its lowest level since 2020. This is consistent with buyback programs slowing so far in 2023. Sentiment regarding dividends has also declined slightly from its high last quarter but remains on par with 2021.
Management is still mostly positive on most hot topics except foreign exchange, where sentiment has improved to neutral. Sentiment regarding inflation and labor has continued to improve since since its 3Q lows, with labor back to its 1Q21 level, suggesting that imbalances may be resolving.
Inflation, labor less worrisome for management
The sentiment of management’s answers to analysts questions is broadly improving from 3Q lows on all major issues we track except buybacks. Answers to questions surroundings buybacks took a sharp negative turn in 1Q, as management likely had to temper analyst expectations on repurchase programs for the year. However, sentiment of answers to questions on inflation has improved materially and is back to 2021 levels, while foreign-exchange sentiment has taken a decisively positive turn. Sentiment on labor questions has reached a new high, implying a brighter outlook toward imbalances that appeared problematic in 2022.
Bloomberg
Source link