Thursday, December 10, 2020

Deloitte “CFO Signals” Report Q4 2020 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 4th Quarter of 2020.

As seen in page 3 of the report, there were 148 survey respondents.  As stated:

“Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies.

All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact”

Here are some of the excerpts that I found notable:

from page 5:

Findings at a glance


How do you regard the North American, European, and Chinese economies? Eighteen percent of CFOs rate the North American economy as good, and 26% rate it is bad (much better than last quarter’s 60%); those expecting better conditions in a year rose from 43% to 59%. Europe was flat at 5% and 37%, and China improved markedly to 47% and 60%. Page 7.

What is your perception of the capital markets? With continuing low interest rates, 87% of CFOs again say debt financing is attractive. With equities continuing to climb, equity financing attractiveness rose to 44% (39% to 46% for public company CFOs, and 38% to 41% for private company CFOs). Eighty percent now say US equity markets are overvalued (down from 84%), again among the highest levels in survey history. Page 8.


Compared to three months ago, how do you feel about your company’s financial prospects? The proportion of CFOs saying they are more optimistic rose slightly from +43 to +46. Fifty-seven percent expressed rising optimism, and just 11% cited falling optimism. Page 9.


What is your company’s business focus for the next year?

Following the first-ever shift toward cost reduction over revenue growth in 2Q20, companies continued to expand their revenue focus this quarter; the bias toward current geographies and organic growth continues. Page 10.

How will your key operating metrics change over the next 12 months? Consistent with strong growth out of pandemic-driven lows, expectations for most metrics (and for most industries) rose substantially—several to multi-year highs. Revenue growth rose from 1.0% to 7.7%, and earnings growth rose sharply from 3.7% to 13.8% (both are now at 9-year highs). Capital spending rose sharply from 0.2% to 8.0% (2-year high). Domestic hiring climbed from 0.2% to1.7%, and dividend growth rose from 1.1% to 2.5%. Page 11.

Special topic: Company-level recovery

How do you expect your final 2020 revenue to compare to your pre-pandemic expectations? Just over 40% of CFOs say they expect 95% or more of their budgeted revenue, with the average at 88%. Healthcare/Pharma, Technology, and Financial Services are the most optimistic; Retail/Wholesale is by far the least. Page 12.

When do you expect your company to return to a near-normal operating level? Just 18% say they are already at/above their precrisis operating level or will be by the end of 2020 (down from May and August); 64% say 3Q21 or later, and 26% say 1Q22 or later (mostly Retail/Wholesale, Manufacturing, and Services). Page 13.

Special topic: 2021 expectations

What are your expectations for your company? There are industry differences, but there is a general trend toward M&A, broader offerings, a smaller real estate footprint, and diversified supply chains. Other expectations vary greatly by industry. Page 14.

What are your expectations for the macroeconomic environment? About 75% of CFOs expect the US economy to improve, with outlooks for Canada and Mexico also positive. Few expect economies to grow faster over the next five years than pre-pandemic. Page 15.

What are your expectations for the capital markets environment? CFOs mostly expect rates to stay low (but are fairly split) and expect bond yields below 2%. They expect the renminbi to gain on the US dollar and for its use as a trading currency to rise substantially; expectations for the euro and digital currencies rose as well. Page 16.

Special topic: Government policy views

What are your views on US government policy over the next four years? CFOs overwhelmingly support a second stimulus package, infrastructure investment, de-escalating US-China trade tensions, less protectionist trade, and the federal government leading a COVID-19 response. Industry differences are substantial. Page 17.

What are your hopes for Washington over the next four years? CFOs’ hopes center largely on bipartisanship and cooperating to get important things done; they also expressed hopes to unify the country with “moderation,” “transparency,” and “decency.” Page 18.

from page 11:


Growth in key metrics, year-over-year

Consistent with strong growth out of pandemic-driven lows, expectations for all metrics except dividends accelerated substantially—several to multi-year highs.

Revenue growth rose sharply from last quarter’s 1.0% to 7.7%—the highest reading in a decade. The US trailed Canada and Mexico. Retail/ Wholesale continued to bounce back, reaching a whopping 15.5%. Services, Energy/Resources, and Financial Services turned positive, but trailed.

Earnings growth skyrocketed from last quarter’s 3.7% to 13.8%—the highest level in nine years. Canada and Mexico turned positive and led the US. Retail/Wholesale led at a remarkable 26.8%, with Manufacturing, Healthcare/Pharma, and Services all above 15%. Energy/Resources trailed.

Capital spending growth rose sharply from last quarter’s 0.2% to 8.0%—the highest level since 2018. Canada was relatively strong. Services and Healthcare/Pharma were both above 17%, with  Retail/Wholesale also strong at about 12%. Energy/Resources and Technology trailed.

Domestic hiring growth bounced back from last quarter’s 0.2% to 1.7%, closer to the levels from 2019. Canada led, with Mexico weakest. Industries were split, and either in the 1.3%-1.5% range or above 2% (led by Technology at 2.5%).

Dividend growth rose from last quarter’s 1.1% to 2.5%—better, but still well below the long-term survey average of about 4%.

Please see the full-detail report for industry-specific charts. Note that industry sample sizes vary markedly and that the means are most volatile for the least-represented. Due to a very small sample size, T/M/E was not used as a comparison point this quarter.

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 7.


I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these surveys.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 3672.82 as this post is written

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