“CFO Signals” Report – Excerpts

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:


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.


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.


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:


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:


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.