Market trends

Pent-up demand reaches an all-time high

AlphaSense

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May 13, 2020


Increasing data arrows.
Increasing data arrows.

Demand for goods and services has shuttered across many industries. Executive teams and equity research analysts say shelter in place orders, border closures, and economic slowdowns are contributing factors in the buildup of pent-up demand–a rapid increase in demand after a period of decreased spending. Now, corporate transcripts and equity research reports that mention “pent-up demand” are at an all-time high.

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Comparing mentions of pent-up demand in transcripts from 2008 to now, we see the count of mentions now far exceed those from similar recessionary periods in the late 2000s, indicating that this period of uncertainty is significantly different from the past.

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In the last 90 days, 482 companies have talked about pent up demand. Though, the breakdown of industries focused on it varies greatly. Healthcare equipment & supplies and providers & services companies account for 35% of mentions, as many of them expect a sharp increase in elective procedures and utilization once shelter in place orders are lifted, however, capacity constraints will limit the pace at which that demand can return (see below).

 

Q1 2020 Molina Healthcare Earnings call (5/01)

“I remind everyone, when we’re talking about the rebound factor is there’s a capacity limitation on how fast things can rebound. There are only so many beds. There are only so many doctors, and there’s only so many hours in a day. And when you have 3, 4, 5 or even 6 months of pent-up demand, it cannot race through the pipe that quickly. There’s a capacity limitation on how fast it rebounds, which adds another variable into forecasting how quickly this could rebound. So I hope that helps, but that’s sort of a view of what March and April look like from an elective and discretionary procedure outlook.”

Q2 2021 Mettler-Toledo Earnings call (7/29)

Similar to my comments on laboratory, we will face tougher comparisons for the second half of the year, but our outlook and our confidence in gaining market share remains positive for this business. Product Inspection had increased momentum and solid sales growth of 9% in the quarterWe saw good growth in all regions. We expect good growth in product inspection for the remainder of the year as we are gaining better access to our customer facilities and believe we will benefit from some pent-up demand in the business.

Q2 2021 Hamilton Thorne Ltd. Earnings call (8/18)

We just — we also did a comparison versus 2019 numbers to show you a sense of what our progression was, and we were up 56% for Q2 versus 2019, which is obviously well above-market growth and well above our historical averages. That does include some period of the Planer acquisition. On an organic basis, we were up over 30%So again, very strong, much — again, spread over 2 years, but very strong, more than what we had historically seen as typical growth. So again, I think we’re going to have to go through a few more quarters, whether we see this, in fact, a new growth trend for us, or as I said earlier, perhaps a little bit of the pent-up demand leaking through the market. 

Q2 2021 Centene Corporation Earnings call (7/29)

“In Medicare, we delivered another quarter of healthy growth with membership growing approximately 25% since the beginning of the year. In addition, preparations are well underway for open enrollment beginning this fall. In Marketplace, we added a net 110,000 lives since the beginning of the year while typically, we would have lost members during this period. This represents 6% growthTo this point, Medicaid and Medicare are performing very well and are continuing to normalize in line with our expectations. We talked last month about the dynamics in the Marketplace business where we are witnessing continuing COVID-related costs and increased non-COVID utilization, which we believe is still largely driven by some pent-up demand.

Pent-up-Demand-EquityResearch-Document-trendThe same phenomenon is captured in equity research. Mentions of pent up demand are at an all-time high for the past two years. However, the industries attributed to it vary greatly from what we see in corporate transcripts.

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For the last 90 days, machinery has become the most frequently mentioned industry related to pent-up demand in equity research, with analysts attributing it to backlogs of orders, OEMs reopening in China, and increased interest in consumer machinery tools. Moreover, hotels restaurants & leisure comes close to machinery in the percentage of mentions. Analysts predict that as travel restrictions are lifted and consumers reacclimate to traveling, we should expect to see a significant release of pent-up demand within the industry. In fact, Disney is already experiencing this; Shanghai Disneyland put tickets on sale for this week and they sold out within hours.

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