Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 3rd Quarter of 2015.
As seen in page 2 of the report, "One hundred fourteen CFOs responded during the two-week period ending August 21. Seventy-one percent of respondents are from public companies, and 84% are from companies with more than $1B in annual revenue. For more information, please see the “About the survey” section of this report."
Here are some of the excerpts that I found notable:
from page 3:
How do you regard the current and future status of the North American, Chinese, and European economies? Fifty-nine percent of surveyed CFOs describe North American conditions as good (even with last quarter), and 55% expect better conditions in a year (about even with last quarter). Just 4% percent regard China’s economy as good (down sharply from 23% last quarter), and only 10% expect improvement (down from 16%). Five percent describe Europe as good, and 30% see it improving in a year (both are about even with last quarter). Page 8.
What is your perception of the capital markets? Sixty percent of CFOs say US markets are overvalued (down from 65% last quarter). Eighty percent say debt is currently an attractive financing option, and 36% of public company CFOs view equity financing favorably (up slightly from 34% last quarter). Page 9.
Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months?* Revenue growth expectations rose to 4.4% from last quarter’s survey-low 3.1%, but are still among the lowest in the five-year history of this survey. Earnings growth expectations held at last quarter’s survey-low 6.5%. Capital spending expectations fell from last quarter’s 5.4% to just 4.3%—only slightly above the survey low of 4.2% from 4Q12. Domestic hiring growth expectations are again sluggish, rising only slightly to 1.4% from last quarter’s 1.2%. Pages 11-13.
Overall, what external and internal risks worry you the most? Economic worries escalated again, with rapidly growing concerns about the impact of Europe and China on North American growth. Concerns about unemployment, housing, and wages declined somewhat, but concerns about oil prices, interest rates, and exchange rates rose. Internal concerns around acquiring and keeping key talent reached the highest level in the history of this survey. Cyber security concerns rose markedly. Page 15.
*Averages are means that have been adjusted to eliminate the effects of stark outliers
from page 11:
Revenue and earnings
What are CFOs’ expectations for their companies’ year-over-year revenue and earnings?
Revenue[1]
Expectations rebounded from last quarter’s record low, but reveal significant weakness in Energy/Resources and Manufacturing:
- Revenue growth expectations rose to 4.4%, recovering somewhat from last quarter’s survey low of 3.05%. The median fell to 4.5% from 5.0% last quarter, and 79% of CFOs expect year-over-year gains (about even with last quarter’s record low). Variability of responses is lower than last quarter, but still high relative to the survey average.
- Country-specific expectations are 5.1% for the US (up from 3.0% last quarter), -0.7% for Canada (up from -2.1%), and 6.1% for Mexico (down from 7.9%).
- Industry expectations vary considerably, with Retail/Wholesale, Financial Services, Healthcare/Pharma, and T/M/E strongest (all at or above 6.8%). Manufacturing expects just 2.5% growth, and Energy/Resources trails the pack at just -3.5%, down from last quarter’s -2.5%.
Earnings1
Expectations holding at last quarter’s record low, but possible signs of future improvement: • Earnings expectations held at 6.5%, matching last quarter’s survey low. There are possible signs of improvement, however, with the median rebounding from last quarter’s survey-low 5.0% to 8.0% this quarter, and 79% of CFOs still expecting year-over-year gains. Variability of responses is about the same as last quarter, and it is still among the highest levels in the last three years.
- Country-specific expectations are 7.6% for the US (up from 6.9% last quarter), -2.7% for Canada (up from -3.6%), and 7.9% for Mexico (down from 13.2%).
- Retail/Wholesale and Technology improved to 11.6% and 11.0%, respectively (up from 7.3% and 8.8% last quarter, respectively). Energy/Resources continued to pull down the average, falling to -8.9% from -5.8%.
[1] All averages have been adjusted to eliminate the effects of stark outliers.
from page 13:
Employment
What are CFOs’ expectations for their companies’ year-over-year hiring?
Domestic hiring[1]
Expectations better, but not indicative of large-scale job creation:
- Domestic hiring expectations rose to 1.4%, up slightly from last quarter’s 1.2%. The median rose from 0.0% to 1.5%, and 57% of CFOs expect year-over-year gains (up from last quarter's 49%). Variability of responses rose again this quarter and is now above the five-year survey average.
- Country-specific expectations are 1.2% for the US (up from last quarter’s 1.0%, but still among the lowest levels in the past two years), -0.9% for Canada (up from -1.0% last quarter), and 5.0% for Mexico (up from 4.2% last quarter).
- Energy/Resources indicates the lowest average expectation at -2.1%, with Manufacturing and Healthcare/Pharma also low at 0.0%. Services and Financial Services are the highest at 3.9% and 3.6%, respectively.
Offshore hiring1
Expectations rose, but are still in line with recent ranges: • Offshore hiring growth rose to 2.7%, up from last quarter’s 2.0%. The median remains 0.0%, and 46% of CFOs expect year-over-year gains (up from last quarter’s 39%).
- Country-specific expectations are 3.1% for the US (up from 2.2% last quarter), 2.0% for Canada (up from 1.8%), and 1.7% for Mexico (up from 1.1%).
- T/M/E indicates the highest expectations at 10.7%, with Energy/Resources the lowest at -0.1%.
[1] All averages have been adjusted to eliminate the effects of stark outliers.
Please see full report for industry-specific findings.
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Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” and “Economic Optimism” found on page 6.
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I post various business and economic surveys because I believe they should be carefully monitored. However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these surveys.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 1918.02 as this post is written
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