Outlook revisions provide a telling measurement of the health and outlook for US companies. Unsurprisingly, they traditionally occur during earnings season, when companies issue their own report cards. This quarter, it’s been all A’s — acquisitions, activists, America and avoidance of taxes. First, we’ve seen a dramatic surge in acquisition activity, as companies deploy low-cost capital and cash in highly accretive deals. Second, activists are out in full force, with no company immune to their influence, and they are successfully advocating for shareholder-friendly actions like dividends and buybacks. Third, the companies with the greatest exposure to North America had the most positive outlooks, as the US moves along the path of a durable recovery. Finally, one of the biggest stories of the quarter has been the avoidance of taxes, as several US firms employed tax inversions to their advantage. All of these factors are playing a role in driving earnings and shareholder value.
Brian Ferguson, senior portfolio manager, The Boston Company