IR Monitor – 10 April 2024

In this week’s newsletter:

In this week’s newsletter:

• A proactive guide for companies facing short seller attacks: the main conclusion from FTI’s Bryan Armstrong is that while companies cannot control the markets, they are afforded a limited time to control their response to a short seller attack 
• Why aren’t earnings estimates higher? asks the FT. The pessimistic answer is that the bottom-up estimates are right because the top-down view is missing some unpleasant economic developments. Indeed, some companies are hinting at early signs of slowdown
• How Iger beat back Peltz: like any good Disney tale, the board fight there provides a series of lessons for the future — for companies and investors alike (New York Times)
• Mastering earnings season: insights and strategies from IR Magazine
• FTI published its quarterly Activism Vulnerability Report last week. Based on the results of our proprietary screener the most vulnerable industries are Utilities and Airlines & Aviation
• And finally … corporate bosses are forced to get creative to talk up price increases

This week’s news

FTI’s proactive guide to dealing with short-seller attacks

FTI’s very own Bryan Armstrong recently presented on short sellers at a NYSE event. The presentation received such interest from those in attendance that it inspired Bryan and several members of the FTI IR advisory team to author a piece entitled “Strategic Resilience: A Proactive Guide for Companies Facing Short Seller Attacks.” The main takeaway is that while companies cannot control the markets, they are afforded a limited time to control their response to a short seller attack — and in turn, win the support and loyalty of their investors. You can read the full piece, which includes a step-by-step preparation guide, here.

Why aren’t estimates higher? 

The long winter is over, and first-quarter earnings season has finally arrived to bless us with… mediocre earnings estimates. In contrast to the relatively robust US economy, the Financial Times notes that analyst consensus has S&P 500 EPS rising “just 3%” year-on-year in the first quarter, with cyclically sensitive industrials to rise by a scant 1% in what is meant to be a “manufacturing upturn.” Perhaps the winter hibernation has led us all to be too bearish? Deutsche Bank’s Binky Chadha has released a more optimistic forecast which predicts an overall increase of 9-10% in earnings for industrial cyclicals – however, with more and more companies hinting at early signs of consumer slowdown, perhaps we’d better all make like bears and return to hibernation for a bit longer…

How Iger beat back Peltz

Bob Iger’s recent victory against activist Nelson Peltz’s second attempt to win board seats is reminiscent of a proper Disney story, complete with ‘age-old nemeses’ and ‘moral learnings’ – but there were no sleeping beauties to be found in this boardroom. The industry dragons, however, were all present, with Peltz being backed by former Marvel chair Ike Perlmutter. The New York Times writes that Disney executives proactively “mapped out a series of bold initiatives” last autumn, partly to blunt Peltz’s calls for change, which were further weakened by the 20% increase in Disney’s stock in the past year. This increase helped to sway big investors, including BlackRock and Vanguard, to side with Disney. In addition, new SEC rules enabled shareholders to vote more easily for a mix of nominees from both sides of the field, and thus criticism focused on individuals as opposed to entire slates, with activist investor infighting and split opposition galore.

Mastering earnings season 

In a piece for IR Magazine, Giuseppe Montefinese discusses his experience on the IR Magazine “Think Tank – West Coast” 2024’s panel titled “Best-in-class earnings calls: Preparation, execution and measuring success.” With earnings season approaching, IR teams have an extensive list of tasks to tackle throughout earnings calls. Aligning as a team on briefing executives, internal performance expectations, management of outlier forecasts etc. will determine the success of the event. Furthermore, ensuring that logistical challenges do not hinder productivity or drain time, whilst putting the time in to understand the IR team’s company and competitors in order to maintain a competitive edge, can prove to be a tricky balance to reach. Montefinese highlights the importance of having solutions that seamlessly and efficiently integrate with workflows to run an earnings call smoothly. 

FTI’s quarterly report on activism vulnerability in the US is out

FTI’s Activism Vulnerability Report offers insight, analysis and commentary on high profile activist campaigns that took place in the US in the back end of 2023 and in 2024 so far. A resilient U.S. economy, with inflation cooling from 2023 levels and interest rates likely peaking, provides a favourable backdrop for activism and M&A in 2024. Activist activity was strong in 2023 and there are clear signs that this momentum has carried into 2024. In 2023, there were 396 new campaigns, a 13% increase over the prior year, representing the second-highest campaign total in the past five years. Much of the increase in activity took place in the final quarter of the year, when 103 new campaigns were launched, a 39% y-o-y increase. The most active sectors included Financials, TMT and Retail & Consumer Products, which all experienced heightened activist activity in 2023. This year is proving to be another active one, as the first 12 weeks of 2024 saw 111 new campaigns being launched, well above the average of 98 over the past five years. 

And finally… Corporate bosses are forced to get creative to talk up price increases

The rise of corporate buzzwords around pricing is becoming more and more creative as chief executives tiptoe around speaking directly on this sensitive topic. “Price pack architecture” – which essentially means the same thing as “shrinkflation,” i.e. products getting smaller, but prices staying the same – is one of the most recent phrases of choice, reports Louis Ashworth in an opinion piece for the Financial Times, reaching an all-time high in terms of mentions. As “shrinkflation” carries such negative connotations, companies such as Coca-Cola have instead added “price pack architecture” to their jargon. The word-crime “choiceful” has also been deployed by chief executives to describe customers who are consciously cutting down on spending but splashing out on certain products – essentially “not spending stupidly”. “Dynamic pricing”, coined by Ashworth as “the most controversial phrase at present,” refers to “surge” pricing and the author concludes that, whilst the public may dislike such tactics, investors will be happier with them as more money can be made. The trick for bosses is “to be honest with the latter without tipping the former off” and make up jargon to explain away any issues that arise.

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