Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2020.

As seen in page 3 of the report, there were 147 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 5:

Findings at a glance

Perceptions

How do you regard the status of the North American, European, and Chinese economies? Perceptions of North America fell drastically, with just 1% of CFOs rating current conditions as good (80% last quarter), but 58% expecting better conditions in a year (up from 35%). Europe’s numbers were also down sharply, coming in at 1% and 33%. Perceptions of China’s current conditions held at 9%, and expectations for a year from now rose sharply to 51%. Page 7.

What is your perception of the capital markets? Sixty-three percent of CFOs say debt financing is attractive (down from 90%) following major drawdowns on credit facilities. Equity financing is considered attractive by 25% (down from 46%) of public company CFOs and 13% (down from 37%) of private company CFOs. Fifty-five percent still say US equity markets are overvalued (down from 83%) despite very sharp market declines. Page 8.

Sentiment

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell drastically from last quarter’s +24 to an historic survey low of -54. Just 11% of CFOs expressed rising optimism (38% last quarter), and 65% (a historic survey high) expressed declining optimism (14% last quarter). Page 9.

Expectations

What is your company’s business focus for the next year? Companies shifted toward their first collective cost reduction (over revenue growth) focus in survey history, and they doubled down on current geographies (over new ones) and organic growth. Page 10.

How will your key operating metrics change over the next 12 months? YOY growth expectations fell drastically, with each metric hitting a new low and turning negative for the first time in survey history. Revenue growth slid from 3.9% to -8.6%; earnings growth fell from 6.0% to -18.7%. Capital spending slid sharply from an already-low 2.3% to -12.3%. Domestic hiring fell from 1.2% to -6.0%, and dividend growth slid from 3.7% to -4.8%. Page 11.

from page 10:

Expectations

Business focus for next year

Companies shifted toward their first collective cost reduction (over revenue growth) focus in survey history, and they doubled down on current geographies (over new ones) and organic growth.

For the first time in survey history, CFOs indicated a net focus on cost reduction over revenue growth (43% vs. 32%, for a net of -11%). The bias toward investing cash over returning it accelerated (62% vs. 8%, for a net of +54%).

The focus on current offerings over new ones continued to rise (47% vs. 31%, for a net of -16%), with the highest current offering biases in the last four years. The recent focus on current geographies over new ones accelerated markedly (86% vs. 4%, for a net of -82%), with by far the highest focus on current geographies in seven years.

The bias toward organic over inorganic growth rose to its highest level in seven years (70% vs. 7%, for a net of -63%).

Please see the full report for industry-specific charts.

from page 11:

Expectations

Growth in key metrics, year-over-year

All growth expectations declined drastically, and turned negative for the first time in survey history.

Revenue growth fell sharply from 3.9% to -8.6%—negative for the first time, and by far the lowest in survey history. The US, Canada, and Mexico all hit new lows by wide margins. Healthcare/Pharma and Technology are positive  and lead from an industry standpoint; Retail/ Wholesale and Services trail by a wide margin.

Earnings growth fell drastically from 6.0% to -18.7%—a new low by a wide margin, and a very sharp decline even among the other metrics’ strong declines this quarter. The US, Canada, and Mexico all hit new lows by wide margins. Only Technology is above zero; Retail/Wholesale and Services are by far the lowest.

Capital spending growth slid sharply from 2.3% to -12.3%, by far a new survey low, and the first-ever negative reading. The US and Mexico hit new lows by wide margins; Canada was better, but still negative. Only Healthcare/Pharma is above zero; Retail/Wholesale is lowest by a wide margin.

Domestic hiring growth fell markedly from 1.2% to -6.0%, another new survey low. The US and Mexico hit new lows by wide margins; Canada was the only country with positive growth. All industries are negative; Retail/Wholesale is lowest by far.

Dividend growth slid from 3.7% to -4.8%, the lowest-ever level and first-ever negative reading.

Please see the full report for industry-specific charts.

–

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.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 4th Quarter of 2019.

As seen in page 3 of the report, there were 147 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 5:

Perceptions

How do you regard the status of the North American, European, and Chinese economies? Perceptions of North America leveled off, with 69% of CFOs rating current conditions as good (68% last quarter), and 23% expecting better conditions in a year (up from 15%). Perceptions of Europe rose, but only to 7% and 6%; China fell to 18% and 11%. Page 7.

What is your perception of the capital markets? Eighty-six percent of CFOs say debt financing is attractive. Equity financing is considered attractive by 43% of public company CFOs and 26% of private company CFOs. Seventy-seven percent say US equity markets are overvalued, up from 63%. Page 8.

Sentiment

What external/internal risks worry you the most? CFOs express ongoing trade policy worries, with growing concern about political turmoil, competition, consumer demand, and upcoming US elections. Internally, talent concerns continued, while concerns around change, costs, and growth rose. Page 9.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index rose from last quarter’s -5 to +11 this quarter, but remains among the lowest levels in three years. Thirty percent of CFOs express rising optimism (26% last quarter), and 19% express declining optimism (31% last quarter). Page 10.

Expectations

What is your company’s business focus for the next year? Although companies continue to focus mostly on growth and investment, their growing focus on cost reduction and returning cash (multi-year highs) may suggest growing defensiveness in anticipation of a downturn. Page 11.

How will your key operating metrics change over the next 12 months? YOY revenue growth expectations slid from 4.3% to 3.7% (three-year low). Earnings rose from 5.6% to 6.0% (but still second-lowest in nine years); capital spending edged up from 3.6% to 3.7% (still near its three-year low). Hiring fell from 1.6% to 1.1% (second-lowest in six years). Dividend growth rose from 3.9% to 4.3%. Page 12.

Special topic: 2020 economic, market, and company expectations

What are your economic expectations? A minority of CFOs expect improvement in the US, Canadian, and Mexican economies; expectations for consumer and business spending declined sharply, and those for labor costs rose. Page 13.

What are the prospects for a US downturn and has your company taken defensive action? Ninety-seven percent of CFOs say a downturn has already begun or will next year; compared to 1Q19, companies appear to be taking more defensive action—especially around spending and headcount. Page 14-15.

What are your expectations for the capital markets? Contrary to this time last year, CFOs expect very low interest rates and 10-year bond yields for the next calendar year; they again expect a strong US dollar. Page 16.

What are your expectations for your company? CFOs are less likely than last year to expect industry revenue and prices to rise; they are mostly unlikely to make major changes to their strategy due to a downturn or upcoming elections. Page 17.

Compared to three years ago, how has your company adjusted its geographic focus? CFOs cite a higher focus on US, European, Chinese, and other Asian markets, and expansion of capacity in the latter three regions. Page 18.

Special topic: Response to climate change

Are you getting pressure from stakeholders to act on climate change? More than 70% of CFOs say their company is under at least moderate pressure to act on climate change from at least one stakeholder group. Page 19.

Is your company taking action in response to climate change? More than 90% of CFOs say their company has taken at least one action in response to climate change, with the average CFO reporting nearly four. Page 20.

Does your company have greenhouse gas reduction targets? Overall, 44% of all responding CFOs (52% of those who know their status) say their company already has or is working on greenhouse gas reduction targets. Page 21.

from page 10:

Sentiment

Optimism regarding own-companies’ prospects

Own-company optimism rebounded from last quarter’s nearly seven-year low, but remains muted. Canada is highest at +27, with the US and Mexico lower at +11 and -33, respectively.

Net optimism peaked in 1Q18 at +54, then declined sharply through the rest of the year. Although it rebounded somewhat in the first part of 2019, it turned negative last quarter for the first time in nearly seven years.

This quarter’s net optimism bounced back from last quarter’s -5 to a better (but still low) +11. Thirty percent of CFOs expressed rising optimism (up from 26%), while 19% cited declining optimism (down from 31%).

Net optimism for the US rebounded from last quarter’s -4 to +11. Likely fueled by its strong second quarter growth (see “Key developments” box on page 4), Canada rose sharply from last quarter’s +10 to +27. Mexico rose from last quarter’s dismal -50 to a still-dismal -33.

Manufacturing is the most pessimistic at -6, with Retail/Wholesale and Healthcare/Pharma also relatively pessimistic at zero. Energy/ Resources and Financial Services both showed marked increases (to +30 and +28, respectively). Technology and Services were also relatively high.

from page 12:

Expectations

Growth in key metrics, year-over-year

All growth expectations sit at or near multiyear lows, with the US showing considerable weakness. Technology, Retail/Wholesale, and Healthcare/Pharma were relative bright spots; Manufacturing and Energy/Resources trailed for most metrics.

Revenue growth fell from 4.3% to 3.7%, a three-year low. The US fell to a three-year low. Canada fell below its two-year average. Mexico fell to a new low. Technology and Healthcare/Pharma lead; Energy/Resources and Manufacturing trail.

Earnings growth rose from 5.6% to 6.0%, but sits at its second-lowest level in survey history. The US rose slightly, but sits at its second-lowest level in nine years. Canada rose again to well above its two-year average. Mexico rose, but sits near its two-year low. Technology and Retail/ Wholesale lead; Energy/Resources and Manufacturing trail.

Capital spending growth rose slightly from 3.6% to 3.7%, remaining near its three-year low. The US slid to a three-year low. Canada fell to well  below its two-year average. Mexico rose sharply, but is still below the two-year average. Technology and Financial Services lead; Manufacturing trails.

Domestic hiring growth slid sharply from 1.6% to 1.1%, the second-lowest level in nearly six years. The US fell to a three-year low. Canada rose, but is well below its two-year average. Mexico fell to a six-year low. Technology leads; Energy/ Resources and Manufacturing trail.

Dividend growth rose from 3.9% to 4.3%, but remains well below the two-year average.

Please see the appendix for industry-specific charts. Note that industry sample sizes vary and that results are volatile for the smallest. Due to a small sample size, T/M/E was not used as a comparison point.

–

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 10 and “Economic Optimism” found on page 7.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 3rd Quarter of 2019.

As seen in page 2 of the report, there were 172 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the status of the North American, European, and Chinese economies? Perceptions of North America fell to a six-year low, with 68% of CFOs rating current conditions as good (down from 79% last quarter), and 15% expecting better conditions in a year (down from 24%). Perceptions of Europe slid to just 5% and 2%; China sits at 20% and 11%. Page 6.

What is your perception of the capital markets? Eighty-seven percent of CFOs say debt financing is attractive (up from 77%). Equity financing attractiveness fell for both public (from 40% to 31%) and private (35% to 34%) company CFOs. Sixty-three percent say US equity markets are overvalued, about even with last quarter. Page 7.

Sentiment

What external/internal risks worry you the most? CFOs express even stronger concerns about the impact of US trade policy on global growth, and rising concerns about Brexit, the broader European economy, and the 2020 US elections. Talent is again the dominant internal concern, and there are rising concerns about data security and the need to adapt and innovate. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index declined from last quarter’s +9 to -5 this quarter—the first negative reading in nearly seven years. Twenty-six percent of CFOs express rising optimism (30% last quarter), and 31% express declining optimism (21% last quarter). Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a bias toward revenue growth over cost reduction (51% vs. 22%), investing cash over returning it (48% vs. 18%), current offerings over new ones (44% vs. 35%), and current geographies over new ones (62% vs. 22%). Page 10.

How do you expect your key operating metrics to change over the next 12 months? YOY revenue growth expectations rose from 3.8% to 4.3%. Earnings growth slid from 6.1% to 5.6% (a new survey low), while capital spending fell from 7.7% to 3.6%, and hiring fell from 1.9% to 1.6% (both sit at three-year lows). Dividend growth rose from 3.7% to 3.9%. Page 11.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

Own-company optimism turned negative for the first time in nearly seven years. Canada is highest at just +10, with the US and Mexico overwhelmingly negative at -4 and -50, respectively.

Net optimism peaked in 1Q18 at +54, then declined sharply through the rest of the year. It rebounded somewhat in the first part of 2019, but remained among the lowest levels from the prior three years.

Last quarter, it retreated to just +9, and this quarter it slid sharply to -5, the first negative reading since the fourth quarter of 2012. Twenty-six percent of CFOs expressed rising optimism (down from 30%), while 31% cited declining optimism (up from 21%).

Net optimism for the US declined sharply from last quarter’s +15 to just -4, the lowest level in nearly seven years. Canada rose from last quarter’s -25 to +10. Mexico declined from last quarter’s dismal -43 to -50, the second lowest level in the last two years.

Healthcare/Pharma, Manufacturing, Financial Services, and Services were all overwhelmingly pessimistic (-36, -31, -12, and -7, respectively). Technology was again most optimistic at +53; Retail/Wholesale and Energy/Resources were only mildly positive.

Please see the full report for industry-specific charts. Note that industry sample sizes vary and that results are volatile for the smallest. Due to a small sample size, T/M/E was not used as a comparison point.

from page 11:

Expectations

Growth in key metrics, year-over-year

Earnings expectations slid to a new survey low, and capital spending and hiring declined to three-year lows; Manufacturing led most declines, but Retail/Wholesale and Technology were relative bright spots.

Revenue growth rose from 3.8% to 4.3%, but sits at its second-lowest level since 4Q16. The US rose, but is near its two-year low. Canada rose to just above its two-year average. Mexico rose, but remains below its two-year average. Technology leads; Manufacturing and Healthcare/Pharma trail.

Earnings growth declined from 6.1% to 5.6%, the lowest level in survey history. The US fell to a survey low. Canada rose to well above its two-year average. Mexico dipped to a four-year low. Technology and Retail/Wholesale lead; Manufacturing and Healthcare/Pharma trail.

Capital spending growth fell from 7.7% to just 3.6%, tying the three-year low. The US slid to a two-year low. Canada rose, but remains below its two-year average. Mexico slid to a six-year low. Financial Services, Healthcare/Pharma, and Retail/Wholesale are highest; Energy/Resources and Manufacturing are lowest.

Domestic personnel growth slid from 1.9% to 1.6%, the lowest level since 3Q16. The US fell to its lowest level in nearly three years. Canada slid to well below its two-year average. Mexico rose to just above its two-year average. Technology and Retail/Wholesale lead; Energy/Resources trails.

Dividend growth rose from 3.7% to 3.9%, but remains well below the two-year average.

Please see the full report for industry-specific charts. Note that industry sample sizes vary and that results are volatile for the smallest. Due to a small sample size, T/M/E was not used as a comparison point.

–

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 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2019.

As seen in page 2 of the report, there were 159 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the status of the North American, European, and Chinese economies? Perceptions of North America declined slightly, with 79% of CFOs rating current conditions as good (down from 80% last quarter), and 24% expecting better conditions in a year (down from 28%). Perceptions of Europe slid to just 10% and 4%; China sits at 26% and 10%. Page 6.

What is your perception of the capital markets? Seventy-seven percent of CFOs say debt financing is attractive (up from 70%). Equity financing attractiveness rose for both public (from 25% to 40%) and private (27% to 35%) company CFOs. Sixty-four percent say US equity markets are overvalued, up from 46% and similar to the levels from 2018. Page 7.

Sentiment

What external/internal risks worry you the most? CFOs express strong concerns about the impact of US trade policy on global growth and about US political turmoil. Talent is the dominant internal concern, with newly emerging concerns about rising labor costs. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index declined from last quarter’s +16 to just +9 this quarter—the second-lowest reading in three years. Thirty percent of CFOs express rising optimism (32% last quarter), and 21% express declining optimism (16% last quarter). Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a bias toward revenue growth over cost reduction (48% vs. 29%), investing cash over returning it (51% vs. 18%), current offerings over new ones (47% vs. 32%), and current geographies over new ones (66% vs. 13%). Page 10.

How do you expect your key operating metrics to change over the next 12 months? YOY revenue growth expectations fell from 4.8% to 3.8%, earnings growth slid from 7.1% to 6.1%, and hiring fell from 2.1% to 1.9% (all sit at twoyear lows). Dividend growth declined from 3.9% to 3.7%, the lowest level in two years. Capital spending rose substantially from 5.9% to 7.7%. Page 11.

Special topic: Company growth, profitability, and investment

If the US experiences a pullback, what type of pullback do you expect? About 80% expect a downturn to be mild, and they are split on whether that downturn will be short or prolonged. Pages 12.

What industry and company factors are affecting your business planning? All industries expected rising industry revenue over declining, with Manufacturing lowest and Healthcare/Pharma highest. All industries except Technology and Retail/Wholesale claimed to be in profitability mode over growth mode; all except Financial Services were biased toward market expansion over consolidation. Overall, companies claimed substantial talent constraints, but not capital constraints or shareholder pressure to use/return cash. Page 13.

What are your company’s top uses of cash this year? Top uses revolve around investment for growth and productivity improvement. There are substantial public/private and industry differences when it comes to returning cash, paying down debt, and investing for growth versus for productivity. Page 14.

Which markets will be important to your company’s growth over the next five years? Predictably, CFOs ranked their home markets most important. The US ranked universally high, but the importance of Canada and Mexico to US CFOs seems to have declined since we last asked in 4Q15; China is the most important market outside North America on the whole. Page 15.

What is your approach to growth investments over the next three years? The vast majority of CFOs say they are making focused growth investments instead of spreading investments across multiple opportunities; capital-constrained companies are the most likely to be avoiding major investment. Page 16.

On which areas will you personally focus for the next year? Three areas comprise the top tier for CFOs’ personal focus: profitability, corporate strategy, and growth. Other focus areas were substantial for particular industries. Page 17.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

Own-company optimism continues to sit among its lowest levels in the last three years. The US is highest at just +15; Canada and Mexico are both  overwhelmingly negative.

Last quarter’s net optimism rebounded somewhat from the prior quarter’s three-year low of +3 to a modest +16. This quarter it retreated to +9 and sits at the second-lowest reading in three years. Thirty percent of CFOs expressed rising optimism (down from 32%), and 21% cited declining optimism (up from 16%).

Net optimism for the US declined from last quarter’s +19 to +15, the second-lowest level in the last three years. Canada fell sharply from last quarter’s +25 to -25. Mexico rose from last quarter’s dismal -60 to a still-poor 43, tying the second lowest point in the last two years.

Manufacturing, Retail/Wholesale, and Healthcare/Pharma were comparatively pessimistic (+2, +6, and -27, respectively). Technology was strongest at +20, with Financial Services and Energy/Resources slightly behind at +15.

Please see the full 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.

from page 11:

Expectations

Growth in key metrics, year-over-year

Expectations for revenue, earnings, dividends, hiring, and wages all declined to their lowest levels in the last two years; capital spending rose but remains below the two-year average.

Revenue growth declined from 4.8% to 3.8%, its lowest level since 4Q16. The US slid to a twoyear low. Canada dipped slightly, and remained below its two-year average. Mexico declined to a two-year low. Technology and Energy/Resources again lead; Healthcare/Pharma trails.

Earnings growth declined from 7.1% to 6.1%, the lowest level since 3Q16. The US fell to a twoyear low. Canada fell and remains below its twoyear average. Mexico dipped and remained below its two-year average. Retail/Wholesale is highest; Manufacturing and Healthcare/Pharma are lowest.

Capital spending growth rose substantially from 5.9% to 7.7%, just below the two-year average. The US rose to just above its two-year average. Canada and Mexico declined and sit below their two-year averages. Healthcare/Pharma and Retail/Wholesale are again highest; Services is lowest.

Domestic personnel growth slid from 2.1% to 1.9%, the lowest level since 3Q16. The US fell to its lowest level in more than two years. Canada slid below its two-year average. Mexico rose, but remains below its two-year average. Services and Technology lead; Energy/Resources trails.

Dividend growth declined from 3.9% to 3.7, the lowest level in two years.

Please see the full 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 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 1st Quarter of 2019.

As seen in page 2 of the report, there were 158 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the status of the North American, European, and Chinese economies? Perceptions of North America declined, with 80% of CFOs rating current conditions as good (down from 88% last quarter), and 28% expecting better conditions in a year (even with last quarter). Perceptions of Europe declined to just 16% and 8%; China slid to 20% and 16%. Page 6.

What is your perception of the capital markets? Seventy percent of CFOs say debt financing is attractive (up from 62%). Equity financing attractiveness fell for both public (from 35% to 25%) and private (37% to 27%) company CFOs. Just 46% now say US equities are overvalued—a three-year low. Page 7.

Sentiment

Overall, what external/internal risks worry you the most? CFOs express even stronger concerns about trade policies/tariffs, economic risks/slowdowns, and US political turmoil. Talent is again the dominant internal concern. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index rebounded from last quarter’s dismal +3 to +16 this quarter—better, but still the third-lowest reading in three years. Thirty-two percent of CFOs express rising optimism (26% last quarter), and 16% express declining optimism (23% last quarter). Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a bias toward revenue growth over cost reduction (51% vs. 25%); investing cash over returning it (46% vs. 19%); current offerings over new ones (40% vs. 36%); and current geographies over new ones (64% vs. 12%). Page 10.

How do you expect your key operating metrics to change over the next 12 months? YOY revenue growth expectations fell from 5.5% to 4.8%, earnings growth slid from 7.3% to 7.1%, capital spending rose from 5.0% to 5.9%, and hiring fell from 3.2% to 2.1% (all sit below their two-year averages). Dividend growth declined from 4.5% to 3.9%, the lowest level since 4Q17. Page 11.

Special topic: Downturn planning and Washington policy focus

Where does your company stand with respect to downturn planning? Nearly 85% of CFOs say they expect a US downturn by the end of 2020, and they overwhelmingly expect a slowdown rather than a recession. A minority say they have detailed defensive or opportunistic plans. Pages 12-13.

If you believe a downturn will occur, what is driving your belief? CFOs were most likely to cite US trade policy, business and credit cycles, and the impacts of slowing growth in China and Europe on the US economy. Page 12.

What defensive actions will your company take? The most common actions involve reducing spending and limiting or reducing headcount. Page 14.

In which policy areas would your company like to see Washington provide clarity/change first? CFOs overwhelmingly rate trade policy the most important policy area, with infrastructure investment a distant second. Page 15.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

Own-company optimism rebounded from last quarter’s 10-quarter low, but it remains at one of its lowest levels in three years. The proportion citing “no change” reached a new survey high— likely a negative sign given last quarter’s strong pessimism. 

Last quarter’s net optimism declined sharply to just +3—the lowest reading since 1Q16. This quarter it rose to +16, but it still represents the third-lowest reading in three years. Thirty-two percent of CFOs expressed rising optimism (up from 26%), and 16% cited declining optimism (down from 23%).

Net optimism for the US improved from last quarter’s +9 to +19—still its second-lowest level in more than two years. Canada rebounded from last quarter’s dismal -36 to +25. Mexico fell again and is at its lowest point since 1Q17 at -60.

Manufacturing, Retail/Wholesale, and Healthcare/Pharma were comparatively pessimistic (all at zero). Financial Services and Services were much stronger, with both above +30.

Please see the full 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.

from page 11:

Expectations

Growth in key metrics, year-over-year

Expectations for revenue, earnings, dividends, hiring, and wages all declined (only capital spending rose), and all metrics sit below their two-year averages.

Revenue growth declined from 5.5% to 4.8%, one of its lowest levels in two years. The US fell to a two-year low. Canada rose, but is below its two year average. Mexico declined and is below its two-year average. Technology and Energy/Resources lead; Manufacturing and Retail/Wholesale trail.

Earnings growth declined from 7.3% to 7.1%, a two-year low. The US fell to a two-year low. Canada improved, but sits at its second-lowest level in three years. Mexico remained near its two-year average. Retail/Wholesale and Healthcare/ Pharma are highest; Manufacturing is lowest.

Capital spending growth rose from 5.0% to 5.9%, but is still the second lowest level in two years. The US rose, but sits at its second-lowest level in two years. Mexico rose sharply but remains below its two-year average. Canada rose above its two-year average. Healthcare/Pharma and Retail/ Wholesale are highest; Manufacturing is lowest.

Domestic personnel growth fell from 3.2% to 2.1%, the second-lowest level in two years. The US fell to its lowest level in more than a year. Canada declined to near its two-year average; Mexico fell to a five-year low. Services and Technology lead; Energy/Resources trails.

Dividend growth declined from 4.5% to 3.9%, the lowest level since 4Q17.

Please see the full 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 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 4th Quarter of 2018.

As seen in page 2 of the report, there were 147 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the status of the North American, European, and Chinese economies? Perceptions of North America declined, with 88% of CFOs rating current conditions as good (down from 89% last quarter), and 28% expecting better conditions in a year (down from 45%, and a five-year low). Perceptions of Europe declined markedly to 23% and 7% (from 32% and 23%), and China also declined sharply to 24% and 12% (from 37% and 27%). Page 6.

What is your perception of the capital markets? A four-year-low 62% of CFOs say debt financing is attractive (73% last quarter). Attractiveness of equity financing fell for public company CFOs (from 42% to 35%) and also for private company CFOs (53% to 37%). Sixty-five percent of CFOs now say US equities are overvalued—down from last quarter’s 71%. Page 7.

Sentiment

Overall, what risks worry you the most? Following the US midterm elections, external risks have become an even stronger focus. CFOs express concerns about trade policy and political turmoil, and rising worries about economic growth. Talent is again the top internal concern. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell drastically from last quarter’s +36 to just +3 this quarter—the lowest reading in nearly three years. Just 26% of CFOs express rising optimism (48% last quarter), and 23% express declining optimism (12% last quarter). Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a smaller bias toward growth over cost reduction (50% vs. 21%) and a lower bias toward investing cash over returning it (48% vs. 18%). The bias toward current offerings over new ones shifted toward new (43% vs. 40%), and the bias toward current geographies over new ones decreased (60% vs. 17%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations declined from 6.1% to 5.5%, and earnings growth declined from 8.1% to 7.3% (their lowest levels in one and two years, respectively). Capital investment slid from 9.4% to just 5.0% (the lowest level in two years). Domestic hiring rose from 2.7% to 3.2% (matching its survey high). Dividend growth fell from last quarter’s very high 7.4% back to 4.5% (the two-year average). Page 11.

Special topic: Economic, capital markets, and company expectations

What are your expectations for the macroeconomy in 2019? The vast majority of CFOs do not expect the US, Canadian, or Mexican economies to improve, and 55% expect a US recession by 2020. Expectations for business spending declined sharply, and those for labor costs rose. Page 12.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

Optimism plummeted to its lowest level in nearly three years, with all countries registering some of their lowest-ever readings. CFOs citing declining optimism nearly matched the proportion citing rising optimism.

Net optimism declined very sharply, from last quarter’s +36 to just +3—the lowest reading since 1Q16, and the third straight decline. Just 26% of CFOs expressed rising optimism (down from 48%), and 23% cited declining optimism (up from 12%).

Net optimism for the US reached its lowest point since 1Q16 at +9. Canada fell to a new survey low at -36, and Mexico fell to its lowest point since 1Q17 at -43. 

Sentiment declined for nearly all industries. The strongest gains were in Technology, which rose from +17 to +25 following last quarter’s sharp decline. Sentiment fell most sharply in Manufacturing (to a 7-year low), Healthcare/Pharma, and Services.

Please see the full report for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

Expectations for sales, earnings, and capital spending declined and are at or below their two-year averages. Expectations for hiring and wages rose. Retail/Wholesale and Technology are the relative bright spots.

Revenue growth declined from 6.1% to 5.5%, even with its two-year average. All three countries declined to their lowest levels in a year, with the US and Mexico still above their two-year averages and Canada below. Technology and Energy/Resources lead; Manufacturing and Healthcare/Pharma trail.

Earnings growth declined from 8.1% to 7.3%, its lowest level since 4Q16. The US fell below its two-year average. Canada fell to its lowest level since 3Q15, and Mexico rose slightly. T/M/E and Technology are highest; Financial Services and Healthcare/Pharma are lowest.

Capital spending growth declined sharply from 9.4% to 5.0%, a two-year low. The US and Mexico fell to their lowest levels since 4Q16; Canada declined sharply to its lowest level in a year. Retail/Wholesale and Services are highest; Energy/Resources and Manufacturing are lowest.

Domestic personnel growth rose from 2.7% to 3.2%, again above its two-year average. The US rose to just below its survey high. Canada rose to well above its two-year average; Mexico rose to an eight-year high. Retail/Wholesale and Technology lead; Financial Services and T/M/E trail.

Dividend growth declined sharply from 7.4% to 4.5%, erasing last quarter’s marked uptick.

Please see the full report for charts specific to individual industries and countries.

–

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 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 3rd Quarter of 2018.

As seen in page 2 of the report, there were 137 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, European, and Chinese economies? Perceptions of North America declined, with 89% of CFOs rating current conditions as good (down from the survey high of 94% last quarter), and 45% expecting better conditions in a year (down from 52% and lowest in two years). Perceptions of Europe declined significantly to 32% and 23%, from 47% and 36%, respectively, and China declined to 37% and 27% from 55% and 31%. Page 6.

What is your perception of the capital markets? Seventy-three percent of CFOs say debt financing is attractive (same as last quarter). Attractiveness of equity financing increased for public company CFOs (from 36% to 42%) and for private company CFOs (from 45% to 53%). Seventy-one percent of CFOs now say US equities are overvalued—up from last quarter’s 63%. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs express strong external concerns about geopolitical and economic events (especially around trade policy and interest rates). Similar to last quarter, they cite pressures to execute on their growth plans, voicing growing internal concerns about driving initiatives, and finding talent. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell from last quarter’s +39 to +36 this quarter. Forty-eight percent of CFOs express rising optimism (same as last quarter), and 12% express declining optimism. Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a declining bias toward revenue growth over cost reduction (59% vs. 20%) and a slightly lower bias toward investing cash over returning it (56% vs. 19%). The bias toward current offerings over new ones shifted back to current offerings this quarter (43% vs. 37%), and the bias toward current geographies over new ones increased somewhat (67% vs. 16%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations declined from 6.3% to 6.1%. Earnings growth declined from 10.3% to 8.1%. Capital investment slid from 10.4% to 9.4%. Domestic hiring fell from 3.2% to 2.7%. Dividend growth rose sharply from 4.8% to 7.4% (highest level in eight years). Page 11.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

After hitting a new survey high in 1Q18, net optimism fell for the second consecutive quarter—despite a sharp increase in optimism in Mexico; Services and Healthcare/Pharma improved, and Technology declined sharply.

Own-company optimism

Net optimism declined for the second straight quarter after hitting a new high in 1Q18. This quarter’s net optimism declined to +36 from +39, reaching its lowest level since 3Q17. CFOs expressing rising optimism remained unchanged from last quarter (48%), while CFOs citing pessimism increased to 12% (up from 9%).

Net optimism for the US declined from +42 last quarter to +35 this quarter, below the two-year average. Canada declined from +33 to +27, while Mexico rose sharply from zero to +67—the highest level in four years.

Sentiment was particularly strong in Services (+75, a new high) and T/M/E (+50).

Healthcare/Pharma rose sharply from -33 to +33, while Technology declined sharply from +52 to +17.

Please see the full report for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

Coming off multi-year highs, most key growth metrics declined, but remained strong. Mexico led growth expectations (similar to last quarter), and Canada lagged. Dividends rose sharply, driven largely by Retail/Wholesale and Energy/Resources.

Revenue growth declined from 6.3% to 6.1%, but remains at one of the highest levels in the last four years.

Earnings growth declined from 10.3% to 8.1%, the lowest level this year. The US declined, falling below its two-year average. Canada fell sharply to its lowest this year; Mexico also fell sharply, in line with its three-year average. Technology and Retail/Wholesale are highest; Energy/Resources and Services are lowest.

Capital investment declined from 10.4% to 9.4%, the second consecutive decline, but remains above the two-year average. The US fell from recent highs, but remains above its two-year average. Canada rose sharply and is above its twoyear average; Mexico rose sharply to its third highest level in the last six years. Energy/Resources and Retail/Wholesale are highest, Healthcare/Pharma and T/M/E are lowest.

Domestic personnel growth fell from 3.2% to 2.7%, but remains above its two-year average.

Dividend growth rose sharply from 4.8% to 7.4%, the highest level in eight years. The US rose to an eight-year high; Mexico rose to a four-year high; and Canada remained the same. Retail/Wholesale and Energy/Resources lead; Technology and T/M/E trail.

Please see the full report for charts specific to individual industries and countries.

–

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 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2018.

As seen in page 2 of the report, there were 172 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, European, and Chinese economies? Perceptions of North America improved, with 94% of CFOs rating current conditions as good (up from 90% last quarter and a new survey high), and 52% expecting better conditions in a year (down from 59%). Perceptions of Europe declined to 47% and 36%, respectively (both metrics remain near their survey highs), and China rose to 55% (a new high) and 31%. Page 6.

What is your perception of the capital markets? Seventy-three percent of CFOs say debt financing is attractive (down from 77%). Attractiveness of equity financing decreased for public company CFOs (from 43% to 36%) and increased for private company CFOs (from 35% to 45%). Sixty-three percent of CFOs now say US equities are overvalued—the lowest level in two years. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs express strong external concerns about US politics (especially around trade policy), while concerns about economic risks, which had subsided over the last few quarters, began to rise. They again cite pressure to execute on their growth plans, voicing growing internal concerns about driving initiatives and finding talent. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell from last quarter’s survey-high +54 to +39 (still quite strong). Forty-eight percent of CFOs express rising optimism (down from 59%), and 9% express declining optimism. Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a survey-high bias toward revenue growth over cost reduction (67% vs. 17%) and a somewhat lower bias toward investing cash over returning it (56% vs. 18%).

The bias toward new offerings over current ones grew this quarter (40% vs. 35%), and the bias toward current geographies over new ones increased slightly (59% vs. 16%). Page 10.

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 from 5.9% to 6.3% (the highest level in nearly four years). Earnings growth rose from 9.8% to 10.3% (a three-year high). Capital investment slid from 11.0% to 10.4% (still among its six-year highs). Domestic hiring rose from 3.1% to 3.2% (a new high). Technology and Retail/Wholesale showed substantial improvement. Page 11.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

After hitting a new high last quarter, net optimism declined this quarter, but remains relatively strong—despite substantial weakness in Mexico and Healthcare/Pharma.

Net optimism hit a survey-high +50 in 1Q17, then another new high last quarter at +54. This quarter’s net optimism declined to +39— significantly down, but still quite strong by historical standards. Forty-eight percent of CFOs expressed rising optimism (down from 59%), and 9% cited declining optimism (up from 6%).

Net optimism for the US declined from +55 last quarter to +42 this quarter. Canada declined from +47 to +33, while optimism in Mexico fell sharply from +38 to zero.

Sentiment was particularly strong in Services and Technology—both of which came in above +50. Retail/Wholesale and Manufacturing both declined sharply from last quarter’s highs (both were above +60). Healthcare/Pharma declined sharply to -33.

Please see the full report for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

After hitting multi-year highs last quarter, key growth metrics continued to climb this quarter. Capital spending remained strong in the US, but weakened in Canada and Mexico. Technology, and Retail/Wholesale showed substantial improvement.

Revenue growth rose from 5.9% to 6.3%, its highest level in nearly four years. The US rose to a two-year high. Canada rose above its two-year average, and Mexico rose to a three-year high. Technology leads; Services and Manufacturing trail.

Earnings growth rose from 9.8% to 10.3%, its highest level in three years. The US declined slightly, but remains near its three-year high. Canada rose to its highest level in nearly four years, while Mexico rose to its five-year high. Technology* leads; Healthcare/Pharma trails.

Capital investment declined from 11.0% to 10.4%, but remains at one of the highest levels in the last six years. The US remained near its five-year high. Canada declined and is below its two-year average; Mexico declined sharply to near its two-year average. Manufacturing and Retail/Wholesale are again highest; Healthcare/Pharma and Technology are lowest.

Domestic personnel growth rose from 3.1% to 3.2%, a new survey high. The US remained at last quarter’s high; Canada rose to its second-highest level in five years; Mexico rose to its second highest level in three years. Technology and Retail/Wholesale lead; T/M/E* trails.

Please see the full report for charts specific to individual industries and countries.

* Please note that, due to a very small sample size,

T/M/E was not used as an industry comparison point.

–

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 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 1st Quarter of 2018.

As seen in page 2 of the report, there were 155 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, European, and Chinese economies? Perceptions of North America improved, with 90% of CFOs rating current conditions as good (up sharply from 74% last quarter and a new survey high), and 59% expecting better conditions in a year (up from 56%). Perceptions of Europe rose to 55% and 51%, respectively (both new highs), and China rose sharply to 50% (new high) and 37%. Page 6.

What is your perception of the capital markets? Seventy-seven percent of CFOs say debt financing is attractive (down from 85%). Attractiveness of equity financing decreased for public company CFOs (from 46% to 43%) and also for private company CFOs (from 47% to 35%). Seventy-six percent of CFOs now say US equities are overvalued—down from last quarter’s survey-high 84%. Page 7.

Sentiment

Overall, what risks worry you the most? Anticipating higher post-tax-reform investment, CFOs voice very strong internal concerns about securing the talent they need. They again cite external worries about politics and policy (especially trade policy) and also new concerns about rising government debt. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index rose from last quarter’s +47 to +54 this quarter—a new survey high. Nearly 60% of CFOs express rising optimism (up from 52%), and just 6% express declining optimism. Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a strong bias toward revenue growth over cost reduction (64% vs. 18%) and investing cash over returning it (57% vs. 14%). The bias toward current offerings over new ones held steady this quarter (40% vs. 37%), and the bias toward current geographies over new ones declined slightly (61% vs. 20%). Page 10.

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 from 4.7% to 5.9% (a two-year high). Earnings growth rose from 8.4% to 9.8% (the highest level in nearly three years). Capital investment rose sharply from 6.5% to 11.0% (a five-year high). Domestic hiring rose from 2.0% to 3.1% (a new high). Manufacturing and Retail/Wholesale led for most metrics. Page 11.

Special topic: Companies’ response to US tax law changes

What will be the impact of new US corporate tax laws on your company? Many CFOs expect tax reform to raise their domestic investment, hiring, and wages; many also expect accelerated earnings repatriation and challenges for their tax function. Page 12.

What will you do with your repatriated cash? Investment (in both core and new businesses and also in R&D) is far and away CFOs’ top expected use for repatriated cash. Many expect some use for hiring and pay, but more extensive use appears focused on debt repayment, buybacks, and dividends. Page 13.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

After bouncing back last quarter to the high levels we saw early in 2017, net optimism rose again to another survey high this quarter—on strength in all three geographies and most industries.

Net optimism hit a survey-high +50% in 1Q17. Then, after declining in the second and third quarters, it bounced back in the fourth to a very strong +47. This quarter’s net optimism continued the positive trend, reaching another survey high at +54. Nearly 60% of CFOs expressed rising optimism (up from 52%), and just 6% cited declining optimism (near the historic low).

Net optimism for the US rose from last quarter’s already-high +50 to +55 this quarter. Canada rose slightly from +46 to +47, while optimism in Mexico rose sharply from zero to +38.

Sentiment was particularly strong in Services, Manufacturing, Technology, and Retail/ Wholesale—all of which came in above +62. Financial Services and T/M/E* were lowest at +25.

Please see the appendix for charts specific to individual industries and countries.

* Please note the very small sample size for T/M/E.

from page 11:

Expectations

Growth in key metrics, year-over-year

All key metrics rose to multi-year highs— largely on skyrocketing optimism in the US, but also on strength in Canada and Mexico. The Manufacturing and Retail/Wholesale sectors powered much of the improvement.

Revenue growth rose from 4.7% to 5.9% and sits at its two-year high. The US rose to its twoyear high. Canada rose substantially, but is still below its two-year average; Mexico rose above its two-year average. Retail/Wholesale and Technology lead; T/M/E* trails.

Earnings growth rose from 8.4% to 9.8% and sits at its highest level in nearly three years. The US rose sharply to its three-year high. Canada rose, but remains below its two-year average; Mexico rose above its two-year average. Manufacturing and Retail/Wholesale lead; T/M/E* and Healthcare/Pharma trail.

Capital investment rose sharply from 6.5% to 11% (a five-year high). The US rose to its five- year high. Canada rose sharply, but remains below its two-year average. Mexico rose sharply to its fourth-highest-ever level. Manufacturing and Retail/Wholesale are highest; T/M/E* and Technology are lowest.

Domestic personnel growth rose from 2.0% to 3.1%, a new survey high. The US and Canada both rose sharply—the US to its new survey high, and Canada to its second-highest level in nearly five years. Mexico rose, but sits below its two-year average. Services and Technology lead; T/M/E* and Energy/Resources trail.

Please see the appendix for charts specific to individual industries and countries.

* Please note the very small sample size for T/M/E.

–

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 6.

_____

RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 4th Quarter of 2017.

As seen in page 2 of the report, there were 147 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 [email protected].”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, Chinese, and European economies? Perceptions of North America improved markedly with 74% of CFOs rating current conditions as good (up from 64% last quarter), and 56% expecting better conditions in a year (up from 45%). Perceptions of Europe rose to 35% and 33%, respectively, and China rose sharply to 49% and 41% (their highest levels in nearly five years). Page 6.

What is your perception of the capital markets? Eighty-five percent of CFOs say debt financing is attractive (up slightly from 83%). Attractiveness of equity financing decreased for public company CFOs (from 48% to 46%) and rose for private company CFOs (from 35% to 47%). Eighty-four percent of CFOs now say US equities are overvalued—another new survey high. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs say constraints to their companies’ performance are mostly external, voicing strong concerns about political turmoil, policy uncertainty, and geopolitics. Talent challenges, strategy execution, and achieving growth are the top internal worries. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index rose sharply from last quarter’s +29 to +47 this quarter. About 52% of CFOs express rising optimism (up from 45%), and 5% express declining optimism (down from 16%). Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a strong bias toward revenue growth over cost reduction (61% vs. 18%) and investing cash over returning it (56% vs. 18%). They shifted back to a bias toward existing offerings over new ones (45% vs. 35%), and indicated a bias toward current geographies over new ones (65% vs. 11%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations declined from last quarter’s 5.7% to 4.7% (still above the two-year average). Earnings growth rose from 7.9% to 8.4% (well above the two-year average). Capital spending growth slid from 7.3% to 6.5%; domestic hiring growth fell from 2.6% to 2.0%. Canadian expectations trailed for almost all metrics. Page 11.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

Several industries rose sharply, but Healthcare/Pharma declined sharply.

After declining to +29 last quarter, net optimism rose sharply to +47 this quarter. About 52% of CFOs expressed rising optimism (up from 45%), and just 5% cited declining optimism (down from 16%).

Net optimism for the US rose sharply from last quarter’s +28 to +50 this quarter. Canada rose from +31 to +46, while optimism in Mexico declined sharply from +39 to zero.

Sentiment rose sharply in Manufacturing, Technology, Energy/Resources, and

Services—all of which came in above +45. Retail/Wholesale rose, but trailed the average at +29, and Healthcare/Pharma fell sharply to just +8.

Please see the appendix for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

Earnings growth rose on strength in the US.
Revenue, capital spending, and domestic
hiring growth all declined, largely on
pessimism in Canada.

Revenue growth declined from 5.7% to 4.7%,
but remains above its two-year average of 4.4%.
The US declined, but remains near its two-year
highs. Canada declined to well below its two-year
average; Mexico declined, but is still relatively
strong. Healthcare/Pharma and Technology lead;
T/M/E and Services trail.

Earnings growth rose to 8.4% from 7.9%. The
US leads and is well above its two-year average.
Canada declined to well below its two-year
average; Mexico declined, but is still above its
average. Retail/Wholesale, Manufacturing, and
Technology lead; T/M/E and Services trail.

Capital investment growth fell for the third
straight quarter, from 7.3% to 6.5%, but is still
among its five-year highs. The US and Mexico
rose and are well above their two-year averages.
Canada declined to well below its average.
Energy/Resources and Manufacturing are the
highest; T/M/E and Healthcare/Pharma are
lowest.

Domestic hiring growth slid from 2.6% to
2.0%. The US remains at its highest level in two
years, but Canada slid to its lowest level in a
year, and Mexico slid sharply to its lowest level
in two years. Healthcare/Pharma and Services
lead; Energy/Resources and T/M/E trail. Wage
pressures are again evident in Mexico.

Please see the full report for charts specific to
individual industries and countries.

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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 6.

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RevSD, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

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RevSD, LLC (revsd.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future weak(ening) economic conditions, and offers businesses and other entities advice, strategies, and actionable methods on how to optimally adapt to such challenging, complex conditions.