Deloitte's CFO Signals Survey: Large Company Optimism Rises Even as Performance Expectations Moderate

NEW YORK, Jan. 20, 2011 /PRNewswire/ -- Citing an improving business environment, chief financial officers (CFOs) at large companies are more optimistic toward the outlook for their companies — even as their expectations on revenue and earnings growth moderate —  according to key findings of the Deloitte CFO Signals quarterly survey for the fourth quarter of 2010. Overall, 53 percent of surveyed CFOs at North America's largest companies are more optimistic than they were in the previous quarter, and CFOs are expecting an average 8 percent rise in capital spending over last year.

The survey, which tracks the thinking and actions of chief financial officers representing many of North America's largest and most influential companies, also found that CFOs believe high unemployment levels are largely the result of structural shifts that are making it harder to find the highly-skilled staff they need.

"While large company CFOs are still concerned about conditions within their home markets, many appear to be seeing and acting on opportunities to strengthen their businesses for the long term — and spending some of the cash they have accumulated over the past few years," said Sanford Cockrell III, national managing partner, CFO Program, Deloitte LLP.  "The results of the Congressional mid-term elections appear to be contributing to this rising optimism. Polling of more than 150 CFOs at our mid-November 2010 CFO conference, 'CFO Vision 2010 — Staying Agile,' showed nearly 60 percent believed election results would have a positive impact on their industries, and only 7 percent expected a negative impact."

Cockrell also explained that although more than half of the CFOs surveyed are more optimistic about their company's prospects this quarter and only 21 percent are less optimistic (compared with 36 percent last quarter), year-over-year performance expectations declined this quarter.  Expected future annual sales gains dropped from 11 percent on the whole last quarter to 6.5 percent this quarter, and projected earnings gains fell from 20 percent to 12 percent.  "While large company CFOs appear buoyed by strong results in 2010, they also see competition heating up and seem to believe the fastest revenue and earnings improvements are behind them," he added.

Survey results also reveal very high variability in CFO perceptions and expectations – both across and within sectors.  "While the reasons for the diversity are certainly many, our findings from this and previous surveys point to two dynamics in particular," explains Greg Dickinson, who leads the Deloitte CFO Signals survey. "First, uncertainty around the state of the economy, unemployment and government policy drives uneven interpretations of what the future holds; second, major differences in industry dynamics, market/geographic reach and available resources are having an enormous impact on companies' respective risks and opportunities – and, consequently, their relative focus on growth versus holding tight."

The Deloitte CFO Signals survey for the fourth quarter also revealed the following (estimates are adjusted averages to reduce the effect of outliers):

• All surveyed industries (excluding public sector) project revenue and earnings growth.  The average year over-year growth projections for companies across all industries are 6.5 percent for revenues (as compared to 11 percent the previous quarter) and 12 percent for earnings (as compared to 20 percent the previous quarter).
• Domestic hiring expectations are essentially unchanged this quarter with an expected 1.8 percent year-over-year gain – again modest relative to current unemployment levels.  On the plus side, no industries are projecting decreases and some are projecting significant increases.  CFOs project an average 3.6 percent increase in offshore personnel and 2.8 percent in outsourced staffing.
• More than 60 percent of CFOs believe structural shifts are at least somewhat responsible for high unemployment. Supporting this view, nearly half of all surveyed CFOs said that, despite high unemployment, they are finding it harder to find sufficiently skilled staff than they did five years ago — equally citing changed staffing needs and regular staffing profiles that are now harder to find. Only 20 percent report easier hiring.
• Consistent with their view that economic growth will not fix unemployment, CFOs shun further government spending.  More than 90 percent of CFOs surveyed say Congress should not wait for a less fragile economy to begin addressing the deficit.
• Health care policy is top-of-mind, with half of surveyed CFOs rating it a top lobbying focus.  CFOs expect health care reform to substantially impact their resourcing and costs, with more than 90 percent expecting benefit cost per employee to rise and half expecting the quality and/or breadth of offered benefits to decline.  Despite concerns about health care reform, 80 percent of the CFOs surveyed are not projecting major changes in their human resources strategies or approaches to employer-sponsored coverage.

"Our findings around health care reform may suggest many companies are in a tactical or 'wait and see' mode. They also face significant challenges in benefits design strategies that are both compliant with the regulations and cost effective," said Cockrell.

The Deloitte CFO Signals survey was conducted for the fourth quarter of 2010. A total of 80 percent of the CFO respondents are from companies with more than $1 billion in annual revenues; 75 percent are from publicly-traded companies.  The findings were collected from 92 CFOs who responded to the survey during the last two weeks in November 2010.

Each forthcoming quarterly report will analyze CFOs' opinions in five areas:  CFO career, finance organization, company, industry, and economy. For more information about CFO Signals, or to participate in the survey, please contact [email protected].

Deloitte's CFO Program harnesses the breadth of Deloitte's capabilities to deliver forward-thinking perspectives and fresh insights to help CFOs manage the complexities of their role, drive more value in their organization, and adapt to the changing strategic shifts in the market. For more information about Deloitte's CFO Program, please contact [email protected] or visit www.deloitte.com/us/cfocenter.

As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

SOURCE Deloitte