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
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.
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.
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:
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:
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.