cfo signalstm what north america’s top finance executives are …€¦ · findings at a glance 3...
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CFO SignalsTM
What North America’s top finance executives are thinking – and doing
4th Quarter 2014
Full Report
CFO Signals™
2 CFO Signals
About the CFO Signals survey
Each quarter, CFO Signals™ tracks the thinking and actions of CFOs
representing many of North America’s largest and most influential
companies. This is the fourth quarter report for 2014.
For more information about the survey, please see the methodology section
at the end of this document or contact [email protected].
Who participated this quarter?
One hundred and two CFOs responded during the two-week period ending
November 21. Seventy-two percent of respondents are from public
companies, and 82% are from companies with more than $1B in annual
revenue. For more information, please see the “About the survey” section of
this report.
Findings at a glance 3
Summary 4
Key charts 6
Topical highlights 9
Appendix
• Detailed findings 24
• Longitudinal data tables 35
• Industry trends 38
• Country trends 47
• About the survey 51
IMPORTANT NOTES ABOUT THIS SURVEY REPORT:
All participating CFOs have agreed to have their responses aggregated
and presented.
Please note that this is a “pulse survey” intended to provide CFOs with
quarterly information regarding their CFO peers’ thinking across a variety
of topics. It is not, nor is it intended to be, scientific in any way, including
in its number of respondents, selection of respondents, or response rate,
especially within individual industries. Accordingly, this report summarizes
findings for the surveyed population but does not necessarily indicate
economy- or industry-wide perceptions or trends. Except where noted, we
do not comment on findings for segments with fewer than 5 respondents.
Please see the Appendix for more information about survey methodology.
This publication contains general information only, and Deloitte is not, by
means of this publication, rendering accounting, business, financial,
investment, tax, legal, or other professional advice or services. This
publication is not a substitute for such professional advice or services, nor
should it be used as a basis for any decision or action that may affect
your business. Before making any decisions that may impact your
business, you should consult a qualified professional advisor.
Participation by country
25 23
13 13
8 6 5 5 4
Participation by industry
US 77.4%
Canada 16.7%
Mexico 5.9%
Findings at a Glance
3 CFO Signals
Perceptions
How do you regard the current and future status of the North American, Chinese,
and European economies? Views of North America are again strongest, with a very
high 63% of CFOs describing conditions as good (up from 44% last quarter), and the
same proportion expecting better conditions in a year (up from 55% last quarter). Thirty-
four percent regard China’s economy as good (up from 27% last quarter), and 25%
expect improvement (down from 29% last quarter). Just 2% describe Europe as good,
and only 13% see it improving over the next year. Page 9.
What is your perception of the capital markets? Forty-nine percent of CFOs say
external financial and economic risks are higher than normal, and 61% believe US
markets are overvalued (both numbers are about the same as last quarter). An
overwhelming 88% say debt is currently an attractive financing option, and 48% of public
company CFOs view equity financing favorably (up sharply from 30%). Page 10.
Priorities
What is your company’s business focus for the next year? CFOs again indicate a
substantial bias toward growing revenue and investing cash over lowering costs and
returning cash—despite the fact that their capital spending expectations remain muted
(see below). They are biased toward growth in current geographies over new
geographies and toward organic over inorganic growth. Page 11.
Expectations
Compared to the past 12 months, how do you expect your key operating metrics
to change over the next 12 months? Revenue growth expectations, which reached
their three-year high last quarter, receded from 6.8%* to 6.0%* but are still
comparatively strong. Earnings expectations, coming off their highest level in more than
a year, declined from 10.9%* to a still-strong 9.7%*. Capital spending rose from 5.0%* to
5.5%*—mostly because US CFOs’ estimates bounced back from last quarter’s survey-
low 3.5%* to 5.8%* this quarter. Pages 12-14.
Sentiment
Compared to three months ago, how do you feel now about the financial
prospects for your company? Continuing a string of seven straight quarters of positive
net optimism, net optimism rose to a very strong +33.3. Forty-nine percent of CFOs
express rising optimism (44% last quarter), and just 16% express declining optimism.
Net optimism is lowest for Manufacturing, Energy/Resources, and Services. Page 15.
Overall, what external or internal risk worries you the most? CFOs’ most worrisome
risks largely focus on the degree to which troubles in Europe, Asia, and Latin America
will ultimately impact performance at home. And many relay worries that policymakers
will struggle in trying to spur growth. Page 16.
*These averages are means that have been adjusted to eliminate the effects of stark outliers.
Special Topic: Uncertainty
Which sources of uncertainty are most impacting your business planning?
CFOs’ answers are diverse and largely industry-dependent. Where most sectors
agree, however, is around uncertainty related to North American economies,
geopolitical events, and industry-specific regulation. Also common are concerns about
monetary policy (and related interest rates) and input prices. Page 17.
What is the most important thing you have done as CFO to help your company
manage uncertainty? Tactics vary considerably, but most revolve around one of
three themes: ensuring business performance (increasing focus on strategies,
efficiencies, and key decisions); managing operating risk (strengthening risk
management priorities, risk awareness, and risk management approaches); and
managing balance sheet risk (strengthening balance sheets, ensuring liquidity, and
managing exposure to interest and FX rates). Page 18.
Special Topic: Rates and Prices
How are you approaching the current environment of low interest rates and low
energy prices? About three-quarters of CFOs expect higher interest rates over the
next year, but only about one-third say this expectation is affecting their pricing plans.
Higher energy prices are generally not expected and are mostly not built into pricing
plans either. CFOs say prices are largely back to pre-recession levels—and headed
higher. Just under half say their prices are higher now than pre-recession, and well
over half say their prices will be higher in a year. Page 19.
Special Topic: Retirement Risk
How aggressive have you been in de-risking your pension/retirement
obligations? Compared to 3Q13, companies appear more likely to have utilized
aggressive risk reduction tactics. Use of voluntary lump-sum pay-outs for both retirees
and former employees has risen, as have outright plan terminations. Page 20.
Assuming adoption of new mortality tables that increase your GAAP pension
liability, what “premium” would you pay to settle all/part of your plan(s)?
Forty-three percent of CFOs said they are willing to pay a premium above their GAAP
liability, with Healthcare/Pharma, Retail/Wholesale, and Manufacturing most likely to
express interest. Few are willing to pay a premium above 5%, and nearly half say they
do not know what premium they would pay or would not terminate their plans. Page 21.
4 CFO Signals
* Net optimism is calculated as the difference between the proportions of those expressing rising and falling optimism. Accordingly, this metric does not explicitly
account for the level of “no change” responses.
Summary Despite global concerns, strong optimism heading into 2015
Last quarter, CFOs’ sentiment built on positive
momentum that had emerged in the second quarter of
this year. And their much-improved year-over-year
performance expectations made a compelling case for
sustained economic acceleration going forward.
Since then, further strengthening of economic
indicators suggests the US economy is finally on a
strong, self-sustaining growth path. But are large-
company CFOs buying it?
The short answer, based on this quarter’s survey
findings, is yes. Despite lingering concerns about the
potential frailty of the global economic recovery,
growing worries about geopolitical disruptors, and
uncertainty in the aftermath of US mid-term elections,
the tenor of CFOs this quarter is clearly one of rising
optimism and confidence.
Confidence despite concerns
Many important macroeconomic events have
transpired since our last survey, and most seem to
add uncertainty, raise the likelihood of future
disruptive events, or both. Performance of several
major economic regions has gotten decidedly worse,
geopolitical issues have not subsided, and US equity
markets have been rattled. And, not surprisingly,
CFOs’ outlooks for European and Chinese economies
have faltered.
Still, performance of the US economy has been
strong—enough so that the US Federal Reserve
ended its bond-buying program on schedule and is
considering dates for raising interest rates.
Accordingly, CFOs’ confidence in North American
economies remains high, and that appears to be
fueling confidence in their own companies’ prospects.
Net optimism* rose from a very strong +32.0 last
quarter to +33.3 this quarter, extending an already-
long positive streak. Moreover, just 16% of CFOs
express declining optimism—again one the lowest
proportions in the history of this survey.
Behind this sentiment are performance expectations
that remain near recent highs. Revenue growth
expectations, which reached their three-year high last
quarter, receded slightly but are still comparatively
strong. Earnings expectations, coming off their
highest level in more than a year, declined but are
also relatively strong. Domestic hiring expectations
declined but are still near their four-year high, and
60% of CFOs again expect gains (matching the
highest proportion in three years).
Emerging patterns in capital investment?
So what are companies doing in response to these
positive outlooks? For several quarters (including this
one), CFOs have indicated a bias toward growing
revenue over reducing costs and toward investing
cash over returning it. But capex expectations have
not followed suit, and last quarter’s US expectation hit
its lowest level in the survey’s history. This quarter’s
expectations are only marginally higher, even though
the expected dividend growth rate is also near its
survey low.
Last quarter we posited that already-established
capacity, rising use of cheap-to-scale digital
technologies, and the exchange of company-owned
assets for outsourced cloud-based services provided at
least part of the explanation, and this quarter’s findings
appear to further support this hypothesis.
Sources of uncertainty
This quarter we asked CFOs about the sources of
uncertainty that are most affecting their business
planning, and the answers were diverse and largely
industry-dependent. Where most sectors agree,
however, is around uncertainty related to geopolitical
events, industry-specific regulation and (if cracks
materialize) North American economies. Also common
were concerns about monetary policy (and related
interest rates) and input prices.
CFOs’ most worrisome risks mirror these findings, with
strong concerns about the degree to which troubles in
Europe, Asia, and Latin America will ultimately impact
performance at home. And they remain worried that
policymakers will struggle in trying to spur growth.
.
Own-company optimism (Net optimism)
Economy optimism – North America*
Economy optimism – Europe*
Economy optimism – China*
Revenue growth
Earnings growth
Capital investment growth
Domestic employment growth
Summary of sentiment and expectations (Optimism is measured relative to prior quarter, and growth numbers are expectations for next 12 months)
Developments since 3Q14 survey
• US economy accelerated; labor market improved; Fed ended bond buying.
• Eurozone recovery stalled; ECB increased stimulus efforts.
• China economy slowed; government loosened monetary policy.
• Russia and Japan in/near recession.
• US mid-term elections yield Republican majority in House and Senate.
• Ebola outbreak spread.
• Middle East tensions escalated.
• US equities tumbled, but S&P 500 rebounded to 4.3% above last quarter.
• Oil prices declined sharply.
Well below
5-year average
Well above
5 yr. average
Well above
last quarter
Well below
last quarter
*Newer metrics assessed relative to 7-quarter average
5 CFO Signals
How CFOs are combatting uncertainty
Obviously, such uncertainties make planning difficult,
so this quarter we asked CFOs for the most important
things they have personally done to help their
companies navigate in the current business
environment.
Tactics vary considerably, but most revolve around
one of three themes: ensuring business performance
(increasing focus on strategies, efficiencies, and key
decisions); managing operating risk (strengthening
risk management priorities, risk awareness, and risk
management approaches); and managing balance
sheet risk (strengthening balance sheets, ensuring
liquidity, and managing exposure to interest and FX
rates. Please see page 18 for specific examples.
Interplay of interest rates, energy costs, and
company prices
Most companies have also been planning around
uncertain futures for interest rates and energy costs.
Accordingly, this quarter we asked about CFOs’
expectations for both and their impacts on their own
companies’ pricing.
About three-quarters of CFOs expect higher interest
rates over the next year. But well under one-quarter
express high confidence, and only about one-third say
their interest rate expectations are actually affecting
their pricing plans—possibly a reflection of lingering
doubts. Higher energy prices, on the other hand, are
generally not expected and are mostly not built into
pricing plans.
Whatever the case, it appears prices are largely back
to pre-recession levels—and headed higher. Just
under half of CFOs say their prices are higher now
than pre-recession, and 21% say they are lower.
Moreover, well over half say their prices will be higher
in a year, and just 18% say they will be lower.
Summary (cont.)
Reducing exposure to retirement risks
With new Society of Actuaries (SOA) mortality tables
coming into play that will increase pension liabilities for
many companies, we asked CFOs about their efforts to
reduce retirement plan risks and their willingness to buy
out of their GAAP pension liabilities.
Compared to results from our 3Q13 survey, companies
appear increasingly likely to have utilized relatively
aggressive risk reduction tactics. Use of voluntary
lump-sum pay-outs for both retirees and former
employees has risen, as have outright plan
terminations. Moreover, 43% of CFOs expressed
willingness to settle their pension plans at a premium
above their GAAP liability.
What’s next?
As we enter 2015, “quantitative easing” has ended,
corporate performance is generally strong, US equity
markets are near historic highs, the US government
appears funded (at least for now), and both interest
rates and oil prices are near record lows.
This quarter, CFOs added an eighth-straight quarter to
their streak of positive sentiment—a streak that has
largely proved to be on the mark. But the relative health
and resiliency of North American economies again
underlies a good portion of their sentiment. And this
begs important questions about how long North
America can continue to accelerate if the rest of the
global economy continues to struggle.
On the horizon are important decisions within several
major economies about monetary and fiscal policy, the
continuation of several geopolitical conflicts, and the
emergence of new agendas within the US Congress.
Continued performance will require navigating these
challenges and surely several others not yet apparent.
Accordingly, CFOs’ streak of optimism seems likely to
be tested over the next calendar year.
How do CFOs’ expectations compare
to those of Deloitte’s lead partners?*
This quarter we surveyed more than 170 of the
lead client service partners (LCSPs) serving
many of our largest clients. Here is what we
found:
• Like the CFOs, they are bullish on the
North American economies—even a bit
more bullish.
• They are overwhelmingly negative in their
perceptions of Europe’s economy, but not
as negative as their CFO counterparts.
• They are mixed on China (similar to the
CFOs) but mostly optimistic, with higher
expectations for next year.
• Like the CFOs, most think equity markets
are overvalued, and very few think they
are undervalued.
• About half see higher-than-normal risk in
the business environment—about the
same as the CFOs.
• They have a positive outlook for all major
sectors, especially for Technology.
As you read through this report, please
watch for “participant-only insights”
(orange text) containing LCSP survey
results, particularly on pages 7 and 9. In
addition, see the individual industry
summaries (starting on page 38) for the key
forces LCSPs say are affecting each sector.
* Statements reflect consolidated opinions
expressed by surveyed individual LCSPs and do
not necessarily reflect the opinions of Deloitte.
To
tal
U.S
.
Canada
Mexic
o
Manufa
ctu
ring
Reta
il /
Whole
sale
Technolo
gy
Energ
y /
Resourc
es
Fin
ancia
l S
erv
ices
Healthcare
/ P
harm
a
T/M
/E
Serv
ices
(n=102*) (n=79) (n=17) (n=6) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)
Revenue growth 6.0% 5.9% 5.0% 9.8% 5.3% 4.6% 6.8% 4.0% 6.8% 12.1% 8.4% 5.0%
Earnings growth 9.7% 10.8% 4.5% 10.5% 13.5% 6.7% 9.6% 3.4% 5.9% 24.5% 23.0% 7.2%
Capital spending growth 5.5% 5.8% 2.7% 8.3% 4.2% 5.7% 16.0% 5.7% 9.6% -1.3% 0.8% -5.0%
Domestic personnel growth 2.1% 1.7% 2.2% 6.1% 2.9% 1.8% 1.8% 1.7% 1.9% -0.5% 2.4% 1.8%
Breakdown by
country and industry
Consolidated expectations CFOs’ expected year-over-year growth in key metrics (compared to the value of the S&P 500 index at the survey midpoint)
0
500
1,000
1,500
2,000
2,500
0%
5%
10%
15%
20%
25%
Revenue growth
Earnings growth
Capital spendinggrowth
Domestic personnelgrowth
S&P 500 price atsurvey periodmidpoint
* Sample sizes may not sum to total due to responses from “other” categories.
Key Charts: Expectations CFOs’ expected year-over-year increases in key metrics
6 CFO Signals
Highest two industry expectations
Lowest two industry expectations
US equitymarkets
Externalfinancial /
economic risk
CFOs Deloitte LCSPsParticipant-only insight*
Key Charts: Sentiment Sentiment regarding the health of major economic zones, industries, and capital markets
7 CFO Signals
Economic optimism Average rating based on five-point scales for current state (“very bad” to “very good”) and expected
state one year from now (“much worse” to “much better”)
Very
good
Much
better
Neutral Same
CFOs - Current Status CFOs - One Year From Now Deloitte LCSPs - Current Status Deloitte LCSPs - One Year From Now
Very
bad
Much
worse
Very
good
Much
better
Neutral Same
Very
bad
Much
worse
Very
good
Much
better
Neutral Same
Very
bad
Much
worse
North America Europe China
Industry optimism Participant-only insight*
Average Deloitte Partner rating based on five-point
scales for expected state of each industry one year
from now (“much worse” to “much better”)
Capital market sentiment Average rating based on five-point scales for US equity markets
(“undervalued” to “overvalued”) and external financial/economic
risk (“lower than normal” to “higher than normal”)
Much
better
Much
worse
Same
Overvalued
Undervalued
Neutral
Higher
than normal
Lower
than normal
Neutral
Man
ufa
ctu
ring
Re
tail/
Wh
ole
sale
Tech
no
log
y
Ene
rgy/R
esou
rce
s
Fin
ancia
l S
erv
ices
He
alth
care
/Ph
arm
a
Tele
com
/Media
/Ente
rtain
mt.
Serv
ice
s
Participant-only insights* Participant-only insights*
See appendix for industry-by-
industry breakdown of sentiment.
Own-company optimism Difference between the percent of CFOs citing higher and lower optimism
regarding their company’s prospects compared to the previous quarter
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
= Fourth quarters of calendar years
* Participant-only insights are provided to current and frequent survey
participants. Statements reflect consolidated opinions expressed by
surveyed individual lead client service partners (LCSPs) from North
America and do not necessarily reflect the opinions of Deloitte.
Topical highlights
8 CFO Signals
Perceptions
CFO Signals
How do you regard the current and future status of the
North American, Chinese, and European economies?
CFOs’ assessment based on five-point Likert scales: “very bad”
to “very good” and “much worse” to “much better” (n=102)
Much better in a year
Much worse in a year
Very bad
now Very good
now
3 4 5 1 2
3
4
1
2
Good and
getting better
Bad but
getting better
Bad and
getting worse
Good but
getting worse
North America
China
Europe
4Q 1Q 3Q 2Q
2013
3Q
CH
Assessment of economies How do CFOs regard the current and future health of some of the world’s
major economic zones?
North America remains the bright spot—by a widening margin:
North America
Current conditions hit a new high; expectations for the next year
remain strong.
• A very high 63% of CFOs describe the North American economy as
good or very good (up from 44% last quarter), and just 4% describe it
as bad (3% last quarter).
• Sixty-three percent believe conditions will be better a year from now
(up from 55% last quarter, and about even with the first two quarters of
this year). Just 3% expect conditions to be worse (equal to last
quarter), and 34% expect them to stay the same.
Europe
Perceptions of Europe’s position and trajectory declined sharply.
• Just 2% (5% last quarter) of CFOs describe Europe’s economy as
good or very good. Seventy-three percent describe the economy as
bad, far above last quarter’s 47% and an abrupt reversion to the low
confidence indicated in our surveys at the end of last year.
• Just 13% of CFOs expect the economy to be better a year from now
(down from 23%, 27%, and 32% over the last three quarters), and
37% expect it to be worse (up from 26%, 23%, and 14% over the last
three quarters).
China
Perceptions of China’s economy remain mediocre.
• Thirty-four percent of CFOs say China’s economy is good, up from
27% last quarter and about even with the levels from the end of last
year. Twenty percent now regard the economy as bad (up from 13%
last quarter and about even with levels earlier in the year).
• Twenty-five percent of CFOs believe the economy will be better a year
from now (down from 29% last quarter and well below the levels from
the end of last year), and 17% believe it will be worse (15% last
quarter).
2Q
9
2014
NA
EU
CH
4Q
NA
EU
CH
Deloitte LCSPs
Participant-only insight*
* Participant-only insights are provided to current and frequent survey
participants. Statements reflect consolidated opinions expressed by
surveyed individual lead client service partners (LCSPs) from North
America and do not necessarily reflect the opinions of Deloitte.
Perceptions
10 CFO Signals
What is your perception of the capital markets?
CFOs’ assessments based on five-point semantic differential scale
with opposing choices as noted (n=102)
Please see appendix for industry-specific findings.
Assessment of markets How do CFOs perceive pricing and risk within the financial markets?
Risk perceived as high, but financing availability is good and
improving:
• Risk is higher than normal: Forty-nine percent of CFOs say
external financial and economic risks are higher than normal (47%
last quarter); 17% say they are lower (14% last quarter). Financial
Services CFOs are again most likely to see higher risk (68%), and
Technology CFOs are lowest (20%). Nearly 60% of Canadian CFOs
see higher risk, while the US and Mexico are at 47% and 50%,
respectively.
• US markets are overvalued: Only 5% say US equity markets are
undervalued, and 61% say they are overvalued (7% and 63% last
quarter, respectively). More than 80% of CFOs from Financial
Services and Technology say markets are overvalued, while
Healthcare/Pharma CFOs are most likely to see them as correctly
valued.
• Debt financing is very attractive: An overwhelming 88% say debt
is currently an attractive financing option (86% last quarter), and
nearly two-thirds of all CFOs say it is a very attractive option (same
as last quarter). All industries are 75% or higher; Mexico is lowest
among the countries at 50%.
• Equity financing’s attractiveness is mixed: Forty-eight percent of
public company CFOs say equity is attractive (30% last quarter), and
22% say it isn’t (36% last quarter). About 40% of private company
CFOs say it is attractive (up from just 20%), and just 21% say it isn’t.
Technology and Energy/Resources are most likely to say equity is
attractive (both about 61%), and Healthcare/Pharma is the outlier at
0%. Canada is the highest among the countries by a wide margin at
59% (The US and Mexico are at 43% and 33%, respectively).
Market valuation
and risk
1
2
3
4
5
1 2 3 4 5
US equity
markets are
undervalued
US equity
markets are
overvalued
External financial/economic risk is
lower than normal
External financial/economic risk is
higher than normal
1
2
3
4
5
1 2 3 4 5
Debt
financing is
unattractive
Debt
financing is
attractive
Equity financing is
unattractive
Equity financing is
attractive
Debt
and equity
4Q14 3Q14
Priorities
11 CFO Signals
What is your company’s business focus for the next year?
CFOs’ assessments based on five-point semantic differential scale
with opposing choices as noted (n=102)
Business focus Where do CFOs say their companies are focusing their efforts?
Growth remains the clear focus:
• Revenue over cost: There is still a significant bias toward growing
revenue over reducing costs, but sector differences became more
notable this quarter. Overall, about 54% of CFOs say they are
biased toward revenue growth, and 25% claim a focus on cost
reduction. Financial Services and Manufacturing are the most
growth-oriented (both above 65%), and Energy/Resources is lowest
at just 23%.
• Investing cash over returning it: There is again a focus on
investing cash over returning it to shareholders (43% vs. 26%), but
sector differences became more notable in this area as well.
Retail/Wholesale is the most biased toward investing cash at 62%,
with Manufacturing second at 52%. On the other hand, 60% of
Technology CFOs say they are biased toward giving cash back.
• A mix of new and old products: Overall, 47% of CFOs say their
companies are focused on new offerings over old ones, and 38%
claim the reverse. The real story is at the industry level, however.
Manufacturing, Energy/Resources, and Services CFOs are focused
predominantly on current offerings, while the rest are focused on
new offerings (Technology and Healthcare/Pharma are highest at
about 80%).
• Mostly current geographies: Overall, 58% of CFOs say their
companies are predominantly focused on current geographies
versus 28% who cite new geographies. Only Retail/Wholesale and
T/M/E are mostly focused on new geographies.
• Organic growth over inorganic growth: The bias is again firmly
toward organic growth over inorganic (53% versus 26%), with
Energy/Resources the most biased toward inorganic growth at 39%.
1 2 3 4 5
1
2
3
4
5
1 2 3 4 5
Grow revenue
Reduce costs
Invest
cash
Return
cash
New
geographies
Current
geographies
New offerings
Current offerings
Please see appendix for industry-specific findings.
1
2
3
4
5
1 2 3 4 5
Offense vs.
defense
New business vs.
current
Organic Inorganic
Inorganic vs.
organic
2Q14 1Q14 4Q13 4Q14 3Q14
0%
5%
10%
15%
20%
25%
Expectations
12 CFO Signals
*All averages have been adjusted to eliminate the effects of stark outliers.
Please see appendix for industry-specific findings.
Earnings(mean)
Earnings (median)
Revenue (mean)
Revenue (median)
Compared to the past 12 months, how do you
expect your revenue and earnings to change
over the next 12 months?
CFOs’ expected change year-over-year*
(n=96)
Revenue and earnings What are CFOs’ expectations for their companies’ year-over-year revenue
and earnings?
Revenue*
Revenue growth expectations declined, but are still among the highest
in the last three years:
• Revenue growth expectations fell to 6.0% from 6.8% last quarter. The
median is again 5.0%, with 90% of CFOs expecting year-over-year gains.
Variability of responses is near the survey low for this metric.
• Country-specific expectations are 5.9% for the US (down from 6.2%),
5.0% for Canada (down from 9.3%), and 9.8% for Mexico (up from 8.8%).
• Healthcare/Pharma and T/M/E have the highest expectations at 12.1%
and 8.4%, respectively, while Energy/Resources and Retail/Wholesale
CFOs have lowest expectations at 4.0 and 4.6%, respectively.
Earnings*
Earnings growth expectations declined, but are still relatively strong—
bolstered mostly by the Healthcare/Pharma and T/M/E sectors:
• Earnings expectations fell to 9.7% from 10.9% last quarter. The median
remained at 8.0%, and 86% of CFOs expect year-over-year gains.
Variability of responses is again comparatively low.
• Country-specific expectations are 10.8% for the US (11.6% last quarter),
4.5% for Canada (10.2% last quarter), and 10.5% for Mexico (7.2% last
quarter).
• Healthcare/Pharma and T/M/E CFOs have the highest expectations at
24.5% and 23.0%, respectively; Energy/Resources and Financial
Services are lowest at 3.4% and 5.9%, respectively.
(n=95)
Expectations
13 CFO Signals
Capital spending (median)
Dividends
(median)**
* All averages have been adjusted to eliminate the effects of stark outliers.
** Dividend averages include only public companies; the median has been
zero for all quarters.
Please see appendix for industry-specific findings.
Compared to the past 12 months, how do you
expect your dividends and capital spending to
change over the next 12 months?
CFOs’ expected change year-over-year*
Dividends (mean)
(n=91)
Capital spending (mean) (n=94)
Dividends and investment What are CFOs’ expectations for their companies’ year-over-year dividends
and capital investment?
Dividends*
Dividend growth expectations continued to decline:
• Dividend growth expectations declined to 3.0% from last quarter’s 4.1%.
The median is again 0%, and 44% expect year-over-year gains.
• Country-specific expectations are 3.1% for the US (down from 3.8% last
quarter), 3.1% for Canada (up from 2.6% last quarter), and 1.8% for
Mexico (drastically down from 12.4% last quarter).
• Energy/Resources reported 3.9%; Services reported 0.4%.
Capital investment*
US expectations rebounded substantially from last quarter’s lowest-
ever levels, but Canada fell substantially:
• Capital spending expectations rose to 5.5%, up from last quarter’s
5.0%. The median remained the same at 5.0%. Sixty-two percent of
CFOs expect year-over-year gains, up slightly from last quarter's 60%.
Variability of expectations increased significantly, but is still in-line with
most quarters.
• Country-specific expectations are 5.8% for the US (above the survey
low of 3.5% last quarter), 2.7% for Canada (9.7% last quarter), and
8.3% for Mexico (9.9% last quarter).
• Technology reported the highest expectations at 16.0%.
Healthcare/Pharma and Services both expect a contraction in capital
expenditures compared to the previous 12 months.
0%
2%
4%
6%
8%
10%
12%
14%
Expectations
14 CFO Signals
Domestic staffing (median)
Offshore personnel
(median)
Compared to the past 12 months, how do you expect
your domestic and offshore hiring to change over the
next 12 months?
CFOs’ expected change year-over-year*
Offshore personnel
(mean) (n=86)
Domestic staffing
(mean) (n=99)
Employment What are CFOs’ expectations for their companies’ year-over-year hiring?
Domestic hiring*
Hiring expectations declined, but are again near their four-year high:
• Domestic hiring expectations fell to 2.1%, down from last quarter’s 2.3%.
The median remained at 1.0%, and 60% of CFOs expect year-over-year
gains, consistent with last quarter's level.
• Country-specific expectations are 1.7% for the US (same as last quarter),
2.2% for Canada (3.5% last quarter), and 6.1% for Mexico (6.5% last
quarter).
Offshore hiring*
Offshore hiring expectations declined, but are still relatively high:
• Offshore hiring decreased to 2.0% from last quarter’s 2.6%. The median
remained at 0.0%.
• Country-specific expectations are 2.1% for the US, 1.3% for Canada, and
2.0% for Mexico.
• T/M/E CFOs have the highest expectations at 3.8%. Retail/Wholesale,
and Services reported less than 1.0%. Forty-four percent of CFOs expect
year-over-year gains.
*All averages have been adjusted to eliminate the effects of stark outliers.
Please see appendix for industry-specific findings.
0%
1%
2%
3%
4%
5%
6%
Sentiment
15 CFO Signals
How does your optimism regarding your
company’s prospects compare to last quarter?
Percent of CFOs selecting each sentiment/reason combination (n=102)
Own-company optimism How do CFOs feel about their company’s prospects compared to last
quarter?
Sentiment still improving; Manufacturing CFOs again among least
optimistic (three quarters in a row):
• Optimism holding: After seven straight quarters of positive net
optimism, CFOs’ outlooks are still improving. Forty-nine percent of
CFOs express rising optimism (above last quarter’s 44%), and just
16% express declining optimism—up a bit since last quarter’s all-
time low, but still one of the lowest levels in the 19-quarter history of
this survey.
• More signs of stabilization: When sentiment hits a low, it is usually
in the third or fourth quarter of a calendar year. This year is different,
with optimism remaining strong (and even rising) going into the end
of this year.
• US and Canada very upbeat: Net optimism for Canada is highest
at +41, down slightly from +44. The US rose from +29 last quarter to
+34 this quarter, and Mexico fell from +71 to zero.
• Manufacturing, Energy/Resources, and Services again
significantly pessimistic: About 20% of Manufacturing and
Energy/Resources CFOs report declining optimism, as do 38% of
Services CFOs. Net optimism is lowest for Manufacturing and
Energy/Resources at +13 and +15, respectively.
• Healthcare/Pharma, Financial Services, Technology, and T/M/E
very optimistic: All four sectors indicate net optimism at or above
+44.
-40%
-20%
0%
20%
40%
60%
80%
100%More optimistic primarily due to external factors(e.g., economy, industry, and market trends)
More optimistic primarily due to internal/company-specific factors (e.g.,products/services, operations, financing)
No notable change
Less optimistic primarily due to internal/company-specific factors (e.g.,products/services, operations, financing)
Less optimistic primarily due to external factors(e.g., economy, industry, and market trends)
Net optimism(% more optimistic minus % less optimistic)
Please see appendix for industry-specific findings.
35.3%
2.9%
12.7%
33.3%
18.6%
30.4%
Sentiment
16 CFO Signals
Overall, what external or internal risk worries you the most?
Consolidation and paraphrasing of CFOs’ free-form comments* (n=92)
Competition
Demand • Unemployment
• Consumer confidence/spending
Internal execution
• Cyber security (2)
Economy
• Frailty of global economic recovery (14)
• European economy (11)
• China economy (6)
• US economy
• Market bubbles/corrections
• Conditions in Latin America
• Housing recovery
Capital / Currency • Interest rate increases/decreases (13)
• Exchange rates/volatility (5)
• Inflation
Macro / Economy
* Arrows indicate notable movements since last quarter’s
survey. Category movements are indicated by block
bullets. Strong movements are indicated by multiple
arrows.
This chart presents a summary of CFOs’ free-form
responses. CFO comments have been consolidated and
paraphrased, and parentheses denote counts for
particular response themes. For a more detailed summary
of comments by industry, please see the appendix.
Industry / Company
• Federal regulation – new/burdensome (16)
• State-level regulation
• Lack of clarity around regulations
• Mexican energy reform
• Complexity of regulation
• Emerging and uncertain accounting/capital rules
• Risk that regulators’ actions will inhibit growth
• Environmental regulation
• Slowing permitting
• Government regulation of health care
Regulation
Security
Talent • Succession planning
• Hiring good senior talent
• General talent availability
• Tax policy/reform (4)
• Pace of political decision-making/gridlock (3)
• Government spending/fiscal policy (2)
• Government ability to spur growth
• Inability of US Government to pass meaningful reforms
Policy
Government
Most worrisome risks Which internal and external risks do CFOs regard as most
worrisome?
Economic worries returned, and geopolitical worries continued
to escalate:
• Economic worries: After declining last quarter, worries about
the global economy—specifically about the durability of the
global economic recovery—rose across nearly all industries.
Concerns about the US continued to decline, but those around
Europe and China escalated.
• Interest rates and FX: Worries about interest rate movements
and shocks rose sharply (especially within Financial Services),
as did concerns about exchange rates (especially within
Manufacturing).
• Geopolitical events: Geopolitical risk concerns rose again this
quarter, with continuing concern about the Ukraine crisis and the
Middle East across most industries.
• Competition: Concerns earlier in the year about hyper-
competition, irrational competitor behavior, poor margins,
industry headwinds, and pricing pressures continued to decline
this quarter.
• Policy and regulation: Concerns about new regulation, heavy-
handedness, and costs of compliance declined again this
quarter, but concerns about tax reform continued to rise, as did
worries about governments’ ability to pass reforms and spur
growth.
• Execution: Execution concerns, which hit a high last quarter,
largely continued this quarter. The concerns are diverse,
ranging from executing against strategies to managing operating
risks to being second-guessed by activist investors.
• Cyber security: Concerns about data security stayed about the
same.
• Irrational competitor behavior
• Price competition at retail
• Online competition
• Competitive forces
• Brand perception
Margins
• Oil/gas prices (7)
• Cost control (3)
• Input prices
• Construction costs
• Industry pricing
• Cost of providing benefits to employees
Geopolitics • Geopolitical risk (11)
• Wars in Ukraine (2)
• Wars in Middle East (3)
• Latin American conflict
• Pension obligations
• Slowing growth of our largest business unit
• Acquisition integration risk
• Managing operations
• Strategy execution
• Product performance
• Being second-guessed by (short-term-oriented)
activist investors
• Operating risks
17 CFO Signals
To what degree is uncertainty around the following areas
affecting business planning?
Percent of CFOs citing the degree of uncertainty regarding the following areas (n=102)
Impact of uncertainty To what degree is uncertainty affecting business planning?
North America is the key source of economic uncertainty:
• North American economies a very strong factor: Nearly fifty-
five percent of CFOs say economic uncertainty is significantly
affecting their planning, with nearly 20% citing very high impact.
Energy/Resources and Retail/Wholesale are highest.
• Geopolitical events a major factor: Nearly half of CFOs say
uncertainty in this area is having a substantial impact. Technology
and Healthcare/Pharma are more likely to cite higher impact.
• Chinese and European economies relatively minor: Only 26%
of CFOs say uncertainty around the European economy is
significantly affecting their planning, and only 25% say the same
for the Chinese economy. Services is highest for both economies.
Policy uncertainty is strongly impacting business planning:
• Industry-specific regulation a strong impediment to business
planning: Nearly 70% of CFOs say uncertainty is affecting their
planning (40% say to a high degree). Healthcare/Pharma and
Energy/Resources are highest at more than 92%.
• Monetary policy also an important factor: Nearly 55% of CFOs
say uncertainty is affecting their planning (20% say to a high
degree). Financial Services is highest at 96%.
• Fiscal policy impacting planning: Nearly 40% say uncertainty
in this area is affecting their planning (7% say to a high degree).
Financial Services is again highest at 68%.
• Health care policy and post-election politics relatively minor:
About 32% say health care policy uncertainty is significantly
affecting their business planning (Healthcare/Pharma is at 100%),
and 25% say post-mid-term election politics are doing so.
Capital and commodity markets are having moderate impact:
• Commodity/input prices a substantial factor: Forty-six percent
say uncertainty is a factor (17% claim high impact). Manufacturing
and Energy/Resources are highest at 74% and 69%, respectively.
• Capital markets a significant factor: Both debt and equity
markets are a significant factor for about one-third of CFOs.
Financial Services is highest at more than 70%.
5.0%
30.4%
30.4%
5.9%
6.9%
22.8%
4.0%
13.9%
9.8%
5.9%
12.7%
6.9%
14.9%
17.6%
18.6%
9.8%
5.9%
14.9%
7.9%
18.8%
11.8%
17.6%
11.8%
10.8%
25.7%
26.5%
26.5%
30.4%
48.0%
30.7%
18.8%
42.6%
42.2%
41.2%
29.4%
33.3%
35.6%
21.6%
20.6%
34.3%
32.4%
22.8%
29.7%
23.8%
30.4%
24.5%
29.4%
46.1%
18.8%
3.9%
3.9%
19.6%
6.9%
8.9%
39.5%
1.0%
5.9%
10.8%
16.7%
2.9%
North American economy
European economy
Chinese economy
Monetary policy/interest rates
Fiscal policy
Health care policy
Industry-specific regulation
Post mid-term election politics
Equity markets
Debt markets
Commodity/input prices
Geopolitical events
Very little impact Little impact Neutral Moderate impact Very high impact
0% 40% 60% 80% 100% 20%
Special topic: Uncertainty
CFOs’ write-in responses:
• Latin American economies
• Environmental regulations
• Tax policy/environment
• Cyber security
• Security and stability
Please see appendix for industry-specific findings.
18 CFO Signals
Special topic: Uncertainty
Ensure Performance
GENERAL BALANCE SHEET
• Enhancing balance sheet
• Ensure strong balance sheet
• Strengthening balance sheet
• Bullet-proof the balance sheet
• Protect the balance sheet
• Conservative capital management
• Maintain financial strength and flexibility
• Provide a conservative balance sheet and
have strong relationships with banks
• Ensure strong balance sheet; hedge revenue
• Use financial derivatives to reduce exposure
and volatility
DEBT / LEVERAGE
• Extend debt maturities
• Extended debt maturity profile across
portfolio
• Extend debt maturity profile
• Deleverage
• Manage financial risks
• Restructure
• Reduce leverage
• Lower cost of capital
• Access new channels of financing -
investment grade and unsecured bond
market
LIQUIDITY
• Increase liquidity to allowed continued risk
taking
• Put greater liquidity onto balance sheet
• Improve liquidity
• Maintain strong liquidity
• Manage cash
• Conservative cash position
• Own asset-liability management to ensure
company is taking appropriate risk without
putting company at risk of big interest rate
movements
• Introduce cash flow planning
• Focus on cash flow
INTEREST RATES
• Locked in 90% of interest rate exposure for
the next 10 years
• Hedge interest rates and commodities
CURRENCY/FX
• Currency hedging
• Locked in foreign exchange for next 24
months for most exposed currencies
* This chart presents a categorized summary of CFOs’ free-form responses. Most responses are
completely or nearly verbatim, but some have been paraphrased or edited for clarity. Parentheses
denote counts for a particular response theme. The number of responses does not match the
number of respondents because some CFOs provided more than one response.
BUSINESS STRATEGY
• Provide clearer roadmap to future
• Comprehensive strategic planning
• Drive focus
• Improve governance
• Put stronger emphasis on 3 year strategic plan
• Align multi-year strategy/plan with current plan
• Pace investment spend with top line trends
• Align changing revenue trend, cost base, cash flow
• Focus on efficiency and increasing gross margins
• Drive efficiencies and productivity
• Create optionality in operations
• Emphasize profitable growth
• Focus on innovative growth
• Invest in competitive differentiation
• Eliminate underperforming assets
• License out most operations of losing segment
COST / EFFICIENCY MANAGEMENT
• Reduce costs (4)
• Reduce fixed cost base
• Reduce overhead costs
• Focus on cost, cycle time, and quality of processes
• Make cost structure more variable where possible
• Support work to reduce cost with rate base approaches
• More centralized approach to management of spend
Manage Operating Risk Manage Balance Sheet Risk
PLANNING
• Ensure action plans for downside/upside scenarios
• Prepare for downside scenarios and communicate
• Tail-scenario modeling and action plans
• Scenario planning
• Single enterprise-wide ERP and forecast/planning tool to
enable scenario planning
• Attempt to “guarantee” returns on specific projects
• Increase visibility around forecasting
• Doing better forecasts
ANALYSIS
• Increase capability around analysis / cash modeling
• Report expense drivers to help decide to cease/outsource
activities and determine volume needed for scale
• Critical thinking discipline and analytical rigor
• Better internal understanding of leverage in units
• Rigorous, company-wide monthly reporting and
reforecasting process - forces organization (not just
Finance) to consider trends emerging in businesses
• Provide information to assess risks and opportunities
• Explain tradeoffs around investment, risk, and cash
REPORTING / COMMUNICATION
• Communicate reality to senior management group
• Transparency and visibility into the financials
• Good accounting and strict principles
• Facilitate better communication among business leaders to
drive sharing of best market intelligence
RISK STRATEGY
• Develop risk mitigating strategies
• Reduce overall company/market risks
• Reduce risk in supply chain
• Take risk off of the table opportunistically
• Diversify product and revenue base
• Maintained disciplined allocation of capital and
risk/return hurdles
• Hedge interest rates and commodities
• Look at M&A opportunities to expand our scope
of business and hedge our bets
RISK AWARENESS
• Improve dialogue on risks
• Greater assessment of risk on projects
• Invest more time in ensuring we fully
understand/ integrate risks and enhance
strategies to mitigate
• Raise awareness of risks and force prioritization
conversations
• Increased awareness of risks and risk mitigation
plans, focus on what we can control (continuous
improvement)
• Provide analysis and support to quantify risks
associated with our business drivers
• Ensure businesses understand own risks - often
overlooked or under-appreciated
RISK PREPAREDNESS / MANAGEMENT
• Implement ERM (3)
• Developed more robust ERM process
• Implemented compliance function
• Improved implementation of enterprise risk
management regimen
• Put in place contingency operating plans
• Establish formal contingency planning process
• Introduce contingency planning
• Highlight areas of risk and involve SBUs in
mitigation activities - communication and
resolution
• Forecast scenarios to drive discipline on
managing risk
REGULATORY / RISK
• Aggressively manage regulatory relationships
• Clarify regulatory implications
• Contingency planning around regulatory
uncertainty
What is the most important thing CFOs have done to help their companies manage uncertainty?*
(n=93)
CFOs’ response to uncertainty What have CFOs done to help their
organizations manage in uncertain times?
CFOs’ actions vary, but most revolve
around the following:
• Ensuring business performance:
Establishing new strategies, focus, cost
efficiency, financial plans, and analytical
approaches.
• Managing operating risk: Establishing
comprehensive risk management
strategies, general risk awareness, and risk
management approaches/systems.
• Managing balance sheet risk:
Strengthening balance sheets, ensuring
liquidity and flexibility, and managing
exposure to interest and FX rates.
19 CFO Signals
How are companies approaching low interest rates
and low energy prices?
CFOs’ selections based on five-point semantic differential scale
with opposing choices as noted (n=102)
Views on interest rates and energy prices How are companies viewing and approaching current low interest
rates and low energy prices?
Higher interest rates are anticipated, higher energy prices are
not—and neither is strongly affecting pricing plans yet:
• Higher interest rates expected, but not strongly affecting
pricing plans: Overall, 72% of CFOs believe interest rates will
be higher in a year. Only 16% express high confidence, so
there still appears to be some doubt. This may explain why
only about one-third of CFOs say interest rates are affecting
their pricing. Among Financial Services CFOs, however, 64%
expect higher rates, and 72% say their expectations are
affecting their pricing.
• Higher energy prices not expected, and mostly not built
into pricing plans: Only 27% of CFOs believe energy prices
will be higher in a year, and very few express high confidence.
CFOs from Energy/Resources are the most likely to expect
higher energy prices (31%), and more than 60% of these say
their energy prices expectations are affecting their own
companies’ pricing plans (in other industries, only
Manufacturing is above 25%).
Even with low interest rates and low energy prices,
companies’ pricing is high—and headed higher:
• Prices are largely back to pre-recession levels: About half
of CFOs say their prices are higher now than pre-recession,
with all industries more likely to say their prices are higher
now, and just 21% overall saying they are lower.
Retail/Wholesale, Technology, and Healthcare/Pharma CFOs
are highest at about 60%, and Financial Services and
Energy/Resources are lowest at about 45%.
• Enough confidence to plan for higher prices: About 55% of
CFOs say their prices will be higher next year, and just 18%
say they will be lower. All industries are more likely to expect
higher prices, led by Manufacturing at 65%, and both
Retail/Wholesale and Technology next at roughly 61%.
Healthcare/Pharma and T/M/E are lowest at 40% and 33%,
respectively.
2.0%
14.7%
1.0%
19.0%
2.9%
7.8%
2.0%
15.7%
16.8%
18.0%
14.7%
12.7%
24.5%
38.2%
55.5%
36.0%
26.5%
30.5%
55.8%
21.6%
25.7%
16.0%
37.3%
26.5%
15.7%
9.8%
1.0%
11.0%
18.6%
22.5%
Special topic: Rates and prices
Interest rates will be higher
in a year
Interest rate expectations are
affecting our pricing plans
Energy prices will be higher
in a year
Energy price expectations are not
affecting our pricing plans
Our prices will be higher
in a year
Interest rates will be lower
in a year
Interest rate expectations are not
affecting our pricing plans
Energy price expectations are
affecting our pricing plans
Our prices will be lower
in a year
Energy prices will be lower
in a year
Our prices are higher now
than pre-recession
Our prices are lower now
than pre-recession
INTEREST
RATES
ENERGY
PRICES
COMPANY
PRICES
Neutral Agree much more
with left statement
Agree more
with left statement
Agree more
with right statement
Agree much more
with right statement
Please see appendix for industry-specific findings.
20 CFO Signals
20
Retirement risk How are companies managing their retirement risk?
Companies appear increasingly likely to have utilized more
aggressive tactics for managing their retirement risk:
• Approximately 75% of respondents have pension plans: (This is
deduced from the fact that 75% of CFOs considered this question
relevant to them.) Manufacturing, Energy/Resources, and
Healthcare/Pharma appear most likely to have plans; Technology
and Services appear least likely.
• Nearly 45% of those who have (or have had) pensions plans
have utilized at least one “aggressive” de-risking tactic: There
are substantial differences across industries. At the high end are
Manufacturing, Energy/Resources, and Healthcare/Pharma (all at or
above 60%). On the low end are Technology, TME, and Services (all
at or below 27%). These patterns are similar to those in our previous
surveys and are likely due to a substantial difference in industries’
respective use of retirement plans.
• Use of several aggressive risk management tactics has
increased: The attractiveness of eliminating (or greatly reducing)
retirement risks has led to accelerated use of voluntary lump-sum
pay-outs for both retirees (25% of CFOs) and terminated employees
(42% of CFOs). Outright plan terminations, a component of which is
annuity buy-outs, have risen as well (to 17%).
• Liability-driven investment (LDI) is still popular as a less-
aggressive risk management strategy: In our 3Q13 survey, about
55% of CFOs indicated some degree of LDI use, and just under half
of those were doing so with 50% or more of their plan assets. While
we did not ask about LDI in this survey, our recent experience with
clients indicates rising LDI usage with a trend toward moving higher
proportions of assets into fixed income investments (although this
trend has been tempered somewhat by expected increases in
interest rates).
No risk
management
How aggressive have you been in de-risking
your pension/retirement obligations?
Percent of CFOs citing past use or intended use (within a year) of each strategy (n=77)*
Risk
elimination Active Risk Management
50%
10%
20%
30%
40%
60%
Less than 50% of plan
assets in fixed income
4Q
11
2Q
13
Number of strategies
employed already or
within year
Proportion of respondents
claiming use of strategies
At least one 44%
1 29%
2 16%
3 10%
4 1%
5 1%
Please see appendix for industry-specific findings.
Form
er em
plo
yees
Retire
es
Retire
es
Form
er em
plo
yees
4Q
14
* Those without current or past plans were asked to skip this question
More than 50% of plan
assets in fixed income
Special topic: Retirement obligations
21 CFO Signals
21
Value of settling pension plans With new mortality tables coming out that are likely to increase many
companies’ pension liabilities, what are companies willing to pay to
settle their pension plans once and for all?
About half of companies are willing to settle their pensions, and
about half are not:
• Forty-three percent willing to pay a premium above their GAAP
liability: Healthcare/Pharma, Retail/Wholesale, and Manufacturing
are most likely to express interest at 80%, 67%, and 53%,
respectively.
• Few willing to pay a premium above 5%: Only 3% of CFOs
indicate willingness to settle at above 5% of their GAAP liability—
sentiment that may have been influenced by other organizations’
recent settlement of their plans at par. Our recent client experience
suggests retiree buyouts can likely be done at or near par once the
impact of new mortality tables has been incorporated—suggesting
buyouts will gain traction as the new tables are adopted.
• Many unlikely to terminate their plans—at least in the near term:
Nearly half of CFOs say they do not know what premium they would
pay or would not terminate their plans (consistent with our previous
question regarding pension risk, where about two-thirds of
companies had not considered plan terminations or had considered
them but decided against them). Energy/Resources appears most
reluctant to terminate their plans, with 64% of CFOs in the “don’t
know or won’t terminate” camp, and 27% in the “only below our
GAAP liability” camp.
0%
10%
20%
30%
40%
50%
60%
Only below ournew/higher
GAAP liability
Equal to ournew/higher
GAAP liability
Up to 5%above ournew/higher
GAAP liability
More than 5%above ournew/higher
GAAP liability
Don't know orwon't terminate
Assuming new mortality tables increase your GAAP pension liability,
what “premium” would you pay to settle all/part of your plan(s)?
Percent of respondents citing each level of premium they would be willing to pay (n=72)*
Special topic: Retirement obligations
Please see appendix for industry-specific findings.
Appendix
22 CFO Signals
Detailed findings
23 CFO Signals
Perceptions How do CFOs perceive pricing and risk within the capital markets?
24 CFO Signals
* Sample sizes for industries may not sum to total due to responses from “other” industries.
Markets and risk
1
2
3
4
5
1 2 3 4 5
US equity
markets are
undervalued
US equity
markets are
overvalued
External financial/economic risk is
lower than normal
External financial/economic risk is
higher than normal
Manufacturing (n=23)
Retail /
Wholesale (n=13)
Technology (n=5)
Energy /
Resources (n=13)
Financial
Services (n=25)
Healthcare /
Pharma (n=5)
Telecom /
Media / Ent. (n=6)
Services (n=8)
Total
(n=102*)
1
2
3
4
5
1 2 3 4 5
Debt
financing is
unattractive
Debt
financing is
attractive
Equity Financing is
unattractive
Equity financing is
attractive
Debt and equity
Five-point semantic differential scale.
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5
Priorities What is your company’s business focus for the next year?
Grow revenue
Grow via new offerings
Grow in new geographies
Grow organically
Invest cash
25 CFO Signals
Reduce costs
Grow via current offerings
Grow via acquisition
Return Cash
Grow in current geographies
* Sample sizes for industries may not sum to total due to responses from “other” industries.
Five-point semantic differential scale.
Total (n=102*)
Manufacturing (n=23)
Retail /
Wholesale (n=13)
Technology (n=5)
Energy /
Resources (n=13)
Financial
Services (n=25)
Healthcare /
Pharma (n=5)
Telecom /
Media / Ent. (n=6)
Services (n=8)
3Q14 4Q14 2Q14 1Q14 Cross-industry
-15%
-10%
-5%
0%
5%
10%
15%
20%
Dividends - 1Q14 Dividends - 2Q14 Dividends - 3Q14 Dividends - 4Q14 Capital spending - 1Q14 Capital spending - 2Q14 Capital spending - 3Q14 Capital spending - 4Q14
Expectations Compared to the past 12 months, how do you expect your company’s operating results and investments to change over the next 12 months?
26 CFO Signals
Operating Results*
* Averages have been adjusted to eliminate the effects of stark outliers. Sample sizes for industries may not sum to total due to responses from “other” industries.
Investments*
(n=102*) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)
Open-ended entry of percentages.
-5%
0%
5%
10%
15%
20%
25%
30%
Revenue - 1Q14 Revenue - 2Q14 Revenue - 3Q14 Revenue - 4Q14 Earnings - 1Q14 Earnings - 2Q14 Earnings - 3Q14 Earnings - 4Q14
(n=102*) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)
-2%
0%
2%
4%
6%
8%
10%
Domestic - 1Q14 Domestic - 2Q14 Domestic - 3Q14 Domestic - 4Q14
Offshore (company-owned) - 1Q14 Offshore (company-owned) - 2Q14 Offshore (company-owned) - 3Q14 Offshore (company-owned) - 4Q14
Expectations Compared to the past 12 months, how do you expect your company’s employment to change over the next 12 months?
27 CFO Signals
Employment*
* Averages have been adjusted to eliminate the effects of stark outliers. Sample sizes for industries may not sum to total due to responses from “other” industries.
Open-ended entry of percentages.
(n=102*) (n=23) (n=13) (n=5) (n=13) (n=25) (n=5) (n=6) (n=8)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Less optimistic primarily due to external factors (e.g., economy, industry, and market trends)
Less optimistic primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)
No notable change
More optimistic primarily due to internal/company-specific factors (e.g., products/services, operations, financing, assets)
More optimistic primarily due to external factors (e.g., economy, industry, and market trends)
Sentiment How does your optimism regarding your company’s prospects compare to last quarter?
28 CFO Signals
Total (n=102*)
Manufacturing (n=23)
Retail /
Wholesale (n=13)
Technology (n=5)
Energy /
Resources (n=13)
Financial
Services (n=25)
Healthcare /
Pharma (n=5)
Services (n=8)
Telecom /
Media / Ent. (n=6)
* Sample sizes for industries may not sum to total due to responses from “other” industries.
Single select.
Sentiment Overall, what external or internal risk worries you the most?
29 CFO Signals
* While we have attempted to display CFOs’ verbatim answers wherever possible, we have consolidated and reworded some answers in the interest of
economy and participant confidentiality. Sample sizes for industries may not sum to total due to responses from “other” industries.
Total
(n=92)*
Manufacturing
(n=20)
Retail /
Wholesale
(n=10)
Technology
(n=5)
Energy /
Resources
(n=11)
Financial
Services
(n=24)
Healthcare /
Pharma
(n=5)
Telecom /
Media / Ent.
(n=6)
Services
(n=7)
External
MACRO/ECONOMY
Currency/FX rates (5)
Geopolitical risks/instability
(5)
European economy (3)
Chinese economy (2)
Global economic
recession/volatility (2)
Latin American economy
Middle East unrest
Unemployment
Consumer confidence
Inflation risk
Impact of commodity prices
on demand
US housing market and
mortgage interest rates
Oil prices
GOVERNMENT
Federal regulation – risk of
new/burdensome
Government ability to spur
growth
Inability of US Government to
pass meaningful reforms
MACRO/ECONOMY
Frailty of economic recovery
around the world (2)
European economy
Chinese economy
Demand shocks
War in Ukraine
Chinese economy
Oil/gas prices
Geopolitical risks/instability
Terrorist attacks (domestic)
Interest rates
Equity markets
GOVERNMENT
Congressional stalemate
continues
Rule of law
Risk that regulators will
inhibit growth through ill-
conceived actions
MACRO/ECONOMY
Chinese economy (2)
Geopolitical risks / global
stability (2)
War in Ukraine
War in Middle East
Global economy
Rising interest rates
GOVERNMENT
Regulation – risk of
new/burdensome (2)
Political risks
MACRO/ECONOMY
Oil/gas price weakness (5)
Slow/no global growth
Slack demand
War / terrorism
Interest rates
Equity market volatility
GOVERNMENT
Market regulation in the
energy sector (2)
EPA regulation
State regulation
Mexican energy reform
MACRO/ECONOMY
Frailty of economic recovery
around the world (7)
Rising interest rates (5)
European economy (4)
Geo-political events that
could hurt economies (2)
Crisis in Middle East (2)
Low interest rates continuing
(2)
Interest rate shocks (2)
Low quality of job growth (2)
Europe moving into deeper
recession, carrying emerging
markets with them
Too much stimulus in the
economy driving distortions
US monetary policy
Equity market correction
GOVERNMENT
Federal regulation – risk of
new/burdensome (11)
Complexity of regulation
Uncertain tax laws in key
markets
Emerging and uncertain
accounting/capital rules
MACRO/ECONOMY
Impact of global economy on
pricing environment and
access for new products
Inflation
MACRO/ECONOMY
Consumer spending
Excess stimulus by central
banks igniting inflation
GOVERNMENT
Federal regulation – risk of
new/burdensome
MACRO/ECONOMY
Europe's economy (3)
Commodity pricing
World economy
Chinese economy
Lack of growth
Quebec economy
GOVERNMENT
Environmental regulation
Slowing permitting
Regulatory risk
Industry /
Company
Pension obligations
Construction costs
Cost control
Internal execution
Price competition at retail
Slowing growth of our largest
business unit
Cyber-risks/security
Online competition
Cyber-risks/security
Cost of providing benefits to
employees
Managing operations
Competitive forces
Delivering services cost-
effectively
Strategy execution
Succession planning
Acquisition integration risk
Hiring good senior talent
Brand perception
Irrational competitors
Product performance
Cost management
Being second-guessed by
(short-term-oriented) activist
investors
Pricing in our industry
Operating risks
Open-ended text entry.
30
Special topic: Uncertainty To what degree is uncertainty around the following areas impacting your business planning?
Manufacturing (n=23)
Retail/Wholesale (n=13)
Technology (n=5)
Energy/Resources (n=13)
Financial Services (n=25)
Healthcare/Pharma (n=5)
Services (n=8)
Telecom/Media/Ent. (n=6)
9%
17%
22%
13%
13%
17%
17%
17%
9%
9%
30%
17%
13%
17%
9%
30%
18%
22%
17%
22%
4%
9%
26%
17%
30%
43%
52%
39%
36%
39%
57%
57%
17%
30%
22%
39%
30%
22%
17%
9%
27%
22%
4%
9%
48%
48%
13%
9%
4%
4%
9%
14%
26%
4%
North American economy
European economy
Chinese economy
Monetary policy/interest rates
Fiscal policy
Health care policy
Industry-specific regulation
Post mid-term election politics
Equity markets
Debt markets
Commodity/input prices
Geopolitical events
8%
54%
46%
8%
8%
8%
8%
8%
8%
8%
15%
8%
8%
15%
8%
15%
8%
8%
8%
23%
38%
23%
54%
69%
46%
31%
38%
62%
54%
54%
54%
54%
15%
23%
15%
46%
54%
38%
23%
23%
15%
31%
15%
15%
8%
8%
8%
8%
20%
20%
20%
40%
40%
40%
40%
20%
20%
20%
20%
20%
20%
20%
40%
60%
40%
60%
80%
60%
40%
20%
20%
40%
20%
20%
20%
20%
20%
20%
20%
20%
40%
20%
20%
80%
20%
20%
20%
46%
46%
8%
15%
33%
8%
8%
8%
23%
15%
8%
15%
17%
8%
31%
15%
31%
8%
8%
23%
23%
15%
15%
23%
17%
15%
38%
38%
23%
31%
54%
8%
15%
62%
38%
25%
8%
46%
38%
31%
15%
38%
23%
8%
8%
8%
8%
85%
54%
15%
20%
20%
20%
40%
40%
40%
20%
20%
40%
40%
20%
20%
20%
20%
20%
40%
80%
60%
40%
40%
20%
20%
40%
20%
20%
60%
40%
20%
20%
40%
60%
100%
60%
20%
17%
50%
67%
17%
17%
17%
17%
17%
17%
17%
17%
17%
33%
33%
33%
17%
50%
67%
50%
33%
67%
83%
50%
33%
50%
50%
17%
17%
33%
17%
17%
33%
17%
33%
17%
33%
33%
13%
13%
38%
13%
29%
13%
13%
25%
13%
25%
13%
13%
38%
13%
13%
29%
13%
13%
13%
25%
38%
50%
38%
38%
13%
13%
43%
38%
50%
13%
50%
25%
50%
38%
13%
38%
38%
25%
38%
25%
25%
25%
25%
0%
13%
38%
38%
32%
32%
32%
12%
16%
8%
28%
32%
8%
16%
8%
24%
12%
29%
20%
24%
32%
28%
52%
20%
20%
32%
28%
25%
16%
8%
40%
60%
24%
24%
20%
60%
40%
28%
56%
33%
56%
8%
8%
68%
16%
32%
North American economy
European economy
Chinese economy
Monetary policy/interest rates
Fiscal policy
Health care policy
Industry-specific regulation
Post mid-term election politics
Equity markets
Debt markets
Commodity/input prices
Geopolitical events
Five-point semantic differential scale.
CFO Signals
* Totals in bar charts may not sum to 100% due to rounding.
Very little impact Little impact Neutral Moderate impact Very high impact
Special topic: Rates and prices How are you viewing/approaching the current environment of low interest rates and low energy prices?
31 CFO Signals
* Sample sizes for industries may not sum to total due to responses from “other” industries.
Five-point semantic differential scale.
Total (n=102*)
Manufacturing (n=23)
Retail /
Wholesale (n=13)
Technology (n=5)
Energy /
Resources (n=13)
Financial
Services (n=25)
Healthcare /
Pharma (n=5)
Telecom /
Media / Ent. (n=6)
Services (n=8)
Interest rates
higher in a year
Interest rate
expectations are
affecting our pricing
plans
Energy prices will be
higher in a year
Energy price
expectations are not
affecting our pricing
plans
Our prices will be
higher in a year
Interest rates
lower in a year
Interest rate expectations
are not affecting our
pricing plans
Energy price
expectations are
affecting our pricing
plans
Our prices will be
lower in a year
Energy prices will be
lower in a year
Our prices are
higher now than
pre-recession
Our prices are
lower now than
pre-recession
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 51 2 3 4 5
4Q14 Cross-industry
32
Special topic: Retirement obligations How aggressive have you been in de-risking your pension/retirement obligations?
0% 25% 50% 75%
Plan termination
Retiree medical buy-outs
Annuity buy-outs
Voluntary lump-sumpayouts (Former
employees)
Voluntary lump-sumpayouts (Retirees)
Medicarecoordinators/exchanges
0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75%0% 25% 50% 75%
Total (n=77**)
Manufacturing (n=20)
Retail /
Wholesale (n=10)
Technology (n=2)
Energy /
Resources (n=12)
Financial
Services (n=17)
Healthcare /
Pharma (n=5)
Services (n=5)
Telecom /
Media / Ent. (n=4)
** Those without current or past plans were asked to skip this question.
Single select.
CFO Signals
* Sample sizes for industries may not sum to total due to responses from “other” industries.
33
0% 25% 50% 75%
Don't know or won't
More than 5% above ournew/higher GAAP liability
Up to 5% above our new/higherGAAP liability
Equal to our new/higher GAAPliability
Only below our new/higherGAAP liability
0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75% 0% 25% 50% 75%0% 25% 50% 75%
Total (n=72**)
Manufacturing (n=19)
Retail /
Wholesale (n=9)
Technology (n=1)
Energy /
Resources (n=11)
Financial
Services (n=16)
Healthcare /
Pharma (n=5)
Services (n=5)
Telecom /
Media / Ent. (n=4)
Special topic: Retirement obligations Assuming adoption of new mortality tables that increase you GAAP pension liability, what premium would you pay to settle all/part of your plan(s)?
Single-select from list (choices = not considered, decided
against, planned for longer term, planned for this year,
implemented); plotted in this chart is percent of CFOs who
chose one of the latter two options
CFO Signals
** Those without current or past plans were asked to skip this question.
* Sample sizes for industries may not sum to total due to responses from “other” industries.
Longitudinal data tables
34 CFO Signals
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Revenue 9.3% 10.9% 6.5% 8.2% 7.1% 6.8% 6.3% 5.9% 6.6% 4.8% 5.6% 5.4% 5.7% 5.0% 4.1% 4.6% 6.1% 6.8% 6.0%
6.0% 10.0% 5.0% 5.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
84% 93% 81% 89% 80% 83% 87% 79% 85% 82% 83% 81% 84% 78% 82% 90% 90% 89% 90%
Earnings 17.3% 19.5% 12.0% 12.6% 14.0% 9.3% 10.1% 12.8% 10.5% 8.0% 10.9% 12.1% 10.3% 8.0% 8.6% 7.9% 8.9% 10.9% 9.7%
6.0% 10.0% 8.0% 10.0% 10.0% 8.0% 9.0% 9.5% 8.5% 6.0% 7.0% 10.0% 10.0% 9.0% 8.0% 7.0% 8.0% 8.0% 8.0%
89% 93% 80% 83% 83% 82% 84% 79% 81% 84% 76% 84% 83% 82% 82% 84% 83% 90% 86%
Dividends 6.5% 8.6% 4.1% 4.4% 3.7% 3.5% 2.4% 2.2% 3.9% 2.5% 2.5% 3.6% 4.5% 3.4% 4.0% 5.7% 4.1% 4.1% 3.0%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
38% 39% 28% 36% 35% 41% 27% 31% 33% 30% 29% 38% 40% 39% 37% 47% 45% 45% 44%
Capital spending 12.4% 8.3% 8.7% 11.8% 10.7% 7.9% 9.6% 12.0% 11.4% 4.6% 4.2% 7.8% 7.5% 4.9% 6.4% 6.5% 6.8% 5.0% 5.5%5.0% 5.0% 4.0% 5.0% 10.0% 5.0% 5.0% 6.0% 10.0% 3.0% 0.0% 0.0% 3.5% 2.4% 3.0% 3.0% 5.0% 5.0% 5.0%
62% 58% 57% 61% 69% 59% 61% 68% 70% 53% 43% 57% 57% 54% 59% 57% 64% 60% 62%
Number of domestic personnel 3.1% 2.0% 1.8% 1.8% 2.0% 1.2% 1.0% 2.1% 2.1% 0.6% 1.0% 0.9% 2.4% 1.3% 1.4% 1.0% 1.6% 2.3% 2.1%
0.5% 2.0% 1.0% 1.0% 2.0% 1.0% 1.0% 1.0% 1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.0% 1.0% 1.0%
50% 60% 48% 61% 64% 52% 51% 51% 52% 40% 40% 43% 46% 47% 48% 42% 58% 58% 60%
Number of offshore personnel 3.5% 2.8% 3.6% 3.7% 4.1% 2.9% 4.8% 3.7% 3.8% 1.5% 0.5% 2.4% 2.5% 1.9% 4.1% 2.5% 1.9% 2.6% 1.9%0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
41% 49% 47% 41% 57% 37% 50% 43% 41% 30% 32% 39% 36% 33% 42% 34% 42% 45% 44%
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Optimism (% more optimistic) 63.5% 46.8% 53.3% 62.4% 39.7% 28.6% 28.6% 63.0% 39.1% 38.8% 29.1% 51.0% 59.0% 41.9% 54.2% 46.8% 44.3% 43.7% 49.0%
Neutrality (% no change) 19.3% 16.8% 26.0% 22.0% 28.3% 18.6% 32.1% 21.9% 32.6% 21.2% 31.3% 30.1% 27.7% 33.9% 33.4% 33.0% 37.2% 44.6% 35.3%
Pessimism (% less optimistic) 17.2% 36.4% 20.7% 15.6% 32.0% 52.8% 39.3% 15.1% 28.3% 40.0% 39.6% 18.9% 13.3% 24.2% 20.8% 20.2% 18.6% 11.7% 15.6%
Net optimism (% more optimistic less % less optimistic)46.3% 10.4% 32.6% 46.8% 7.7% -24.2% -10.7% 47.9% 10.8% -1.2% -10.5% 32.1% 45.7% 17.7% 33.4% 26.6% 25.7% 32.0% 33.3%
S&P 500 price at survey period midpoint 1,088 1,072 1,200 1,343 1,333 1,123 1,161 1,361 1,317 1,418 1,387 1,520 1,667 1,656 1,798 1,839 1,878 1,955 2,040
S&P gain/loss QoQ -1.5% 11.9% 11.9% -0.7% -15.8% 3.4% 17.2% -3.2% 7.7% -2.2% 9.6% 9.7% -0.7% 8.6% 2.3% 2.1% 4.1% 4.3%S&P
Ope
rati
ng
Res
ults
Inve
stm
ent
Opt
imis
mEm
ploy
men
t
35 CFO Signals
* All means have been adjusted to eliminate the effects of stark outliers. The “Survey Mean” column contains arithmetic means since 2Q10.
** Averages for optimism numbers may not add to 100% due to rounding.
Longitudinal trends Expectations and sentiment
CFOs’ Year-Over-Year Expectations* (Mean growth rate, median growth rate, and percent of CFOs who expect gains)
CFO and Equity Market Sentiment**
Longitudinal trends Means and distributions for key metrics
36 CFO Signals
Vertical lines indicate range for
responses between 5th and 95th
percentiles.
Horizontal marks indicate outlier-
adjusted means.
Dotted lines indicate 3-year
average (mean).
-40%
-20%
0%
20%
40%
60%
80%
100%
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
-40%
-20%
0%
20%
40%
60%
80%
100%
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
-20%
-10%
0%
10%
20%
30%
40%
50%
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
Revenue
growth
Earnings
growth
Capital spending
growth
Domestic employment
growth
-20%
-10%
0%
10%
20%
30%
40%
50%
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
Industry trends
37 CFO Signals
38 CFO Signals
Manufacturing
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
(13.9%)
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=65)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs’ expectation for how this sector will be
performing a year from now (n=125)
Average
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
-5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
15%
20%
-5%
0%
5%
10%
Demand/Growth
• Global economic growth (17)
• Consumer confidence/spending (9)
• Currency/FX rates (5)
• Global operations/coordination (4)
• Business demand (3)
• Govt. spending (2)
• Geo-political turmoil (2)
• M&A
Innovation
• Tech innovation/R&D (6)
Competition
• Falling price points (4)
• Foreign/global competition (3)
• Price competition (2)
Prices/Costs
• Commodity/materials prices (7)
• Regulatory burdens (5)
• Low interest rates (5)
• Low energy costs (4)
• Labor costs (3)
• Taxes (2)
• Health care costs
39 CFO Signals
Retail/Wholesale
Earnings Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
Demand/Growth
• Consumer confidence/income (23)
• Economic growth (4)
• Difficulty forecasting with shifting
demand (3)
• Currency/FX rates
• Market disruption
• Changing demographics
• Lack of new products
Innovation
• eCommerce evolution/logistics (5)
• Tech shifts (3)
• Omni-channel shopping
• Changing delivery methods
Competition
• Competing with internet pure-
plays
• Competitive pricing
Prices/Costs
• Consumer power/pricing
constraints (2)
• Rising commodity costs
• Rising shipping costs
• Margin squeeze
• Tax reforms
• Cybersecurity
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=49)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs' expectation for how this sector will be
performing a year from now (n=119)
Average -5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
15%
20%
-5%
0%
5%
10%
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
40 CFO Signals
Technology
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
Demand/Growth
• Economic growth (4)
• Business confidence (2)
• High market valuations/speculation
(2)
• Consumer confidence
• Counterfeiting
• Pace of changing customer
interests/needs
• Trade Policy
Innovation
• Speed of change/obsolescence (7)
• Movement to cloud (2)
Competition
• Intense competition (2)
• Apprehension to invest in faux
innovation
• Disintermediation
• Foreign competition
Prices/Costs
• Regulatory burdens (2)
• Cybersecurity
• Evolving operating models
• Global mfg. costs
• Productivity
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=28)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs' expectation for how this sector will be
performing a year from now (n=113)
Average -5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
15%
20%
(15%) (11%)
-5%
0%
5%
10%
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
(-15.3%)
41 CFO Signals
Energy/Resources
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
Demand/Growth
• Earnings growth despite low volume
growth and rate pressure (4)
• Canada—ability to get product to
market
• Low oil prices reduce capex, depress
oil/gas
• Geo-political conflict
• Talent shortages
Competition
• US energy independence;
resulting global shifts (4)
• Saudi moves
• Mexico deregulation
• Impact of lower OPEC influence
on supply/pricing
Prices/Costs
• Oil/crude pricing (15)
• Energy reforms (12)
• Impact of global supply shifts on
price trends
• Climate/EPA regulation (5)
• Natural gas prices (3)
• Managing production costs with
low oil prices
• Rising costs from regulatory
requirements
• P&U low rate pressures
• Lower fuel prices driving better
P&U performance
• Cybersecurity data/grid risk
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=58)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs' expectation for how this sector will be
performing a year from now (n=57)
Average -5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
-5%
0%
5%
10%
15%
20%
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
42 CFO Signals
Financial Services
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
Demand/Growth
• Economic growth (7)
• Global economies/markets
uncertainty (4)
• Business confidence (3)
• Countries’ debt/tax problems
• Excess capital in specific markets
• Availability of capital and seed
investments
• M&A
Innovation
• Innovation in technology
• Digital revolution
• Moving to cashless society
• New delivery models
Competition
• Competition among peers and
other sectors
• Asset overvaluation
Prices/Costs
• Regulatory burdens/changes (29)
• Growing capital requirements
• Interest rates/low interest rates
(15)
• Federal Reserve action
• Emerging insurance risks
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=59)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs' expectation for how this sector will be
performing a year from now (n=124)
Average -5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
15%
20%
-5%
0%
5%
10%
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
43 CFO Signals
Healthcare/Pharma
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
Demand/Growth
• Aging populations (3)
Innovation
• Commercial innovation (2)
• R&D pipeline success
• Technology
Competition
• Consolidation (3)
• Restructuring
• Disaggregation
• Generics competition
Prices/Costs
• Govt. regulation/intervention (15)
• ACA requirements (7)
• FDA actions (2)
• Uncertainty from new Congress
• Value provided at reasonable
cost
• Challenges to health care
spending
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=37)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs' expectation for how this sector will be
performing a year from now (n=107)
Average -5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
15%
20%
(-8.7%)
-5%
0%
5%
10%
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
44 CFO Signals
Telecom/Media/Entertainment (T/M/E)
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
Demand/Growth
• Consumer spending (2)
• FCC regulation (2)
• Consumer fatigue; changing interests
(2)
• European economy
• Global economy improvement
• Advertising spending
• Audience fragmentation
• New revenue streams
• International investments
Innovation
• Technological disruption (5)
• Innovation (2)
• Business model shifts (2)
• Delivery given Internet evolution
• Rate of technological obsolescence
Competition
• Competition (4)
• M&A/consolidation (3)
• Alternative access options
• Chinese competitors in US
• Non-traditional competitors
Prices/Costs
• Regulation (9)
• Price pressures (2)
• Piracy
• Cost containment
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=39)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs' expectation for how this sector will be
performing a year from now (n=115)
Average -5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
15%
20%
(43%)
(-6.7%)
-5%
0%
5%
10%
(-5.5%)
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
45 CFO Signals
Services
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Domestic and offshore hiring
Dividends and capital spending
Operating metrics expectations
CFOs’ expected change year-over-year (mean)
Revenue and earnings
Demand/Growth
• Economic growth (6)
• Consumer spending/confidence (3)
• Business expansion
• Talent shortage/challenges (3)
• Services related to global
investments
• Shrinking market
Innovation
• Impact of technological innovation (2)
Prices/Costs
• Pricing constraints (2)
• Competition on price
• Increased value
expectations/lower price points
• Perceptions of value changing
• Slow sales processes
• Interest rates
• Accounting overregulation
• Taxes
External forces (participant-only insight*)
Deloitte LCSPs' assessment of some of the most
important external forces affecting their clients (n=29)
0% 25% 50% 75% 100%
Much worse Worse Same Better Much better
Future performance (participant-only insight*)
Deloitte LCSPs' expectation for how this sector will be
performing a year from now (n=107)
Average -5%
0%
5%
10%
15%
20%
25%
30%
-5%
0%
5%
10%
(-5.0%) -5%
0%
5%
10%
15%
20%
* Participant-only insights are provided to current and frequent survey participants. Statements
reflect consolidated opinions expressed by surveyed individual lead client service partners
(LCSPs) from North America and do not necessarily reflect the opinions of Deloitte.
Country trends
46 CFO Signals
-5%
0%
5%
10%
15%
20%
-5%
0%
5%
10%
-5%
0%
5%
10%
15%
20%
25%
30%
47 CFO Signals
United States
Dividends and
capital spending
Earnings
Revenue
Capital spending Dividends
Offshore hiring
Domestic hiring
Operational Metrics
CFOs’ expected change year-over-year (mean)
Domestic and offshore
hiring
Revenue and
earnings
-5%
0%
5%
10%
-5%
0%
5%
10%
15%
20%
25%
30%
48 CFO Signals
Canada
Dividends and
capital spending
Earnings
Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Operational Metrics
CFOs’ expected change year-over-year (mean)
(-9.4%)
Domestic and offshore
hiring
Revenue and
earnings
-5%
0%
5%
10%
15%
20%
-5%
0%
5%
10%
15%
20%
-5%
0%
5%
10%
-5%
0%
5%
10%
15%
20%
25%
30%
(-9.4%)
49 CFO Signals
Mexico
Dividends and
capital spending
Earnings Revenue
Capital spending
Dividends
Offshore hiring
Domestic hiring
Operational Metrics
CFOs’ expected change year-over-year (mean)
Domestic and offshore
hiring
Revenue and
earnings
About the survey
50 CFO Signals
Public, 72.3%
Private, 27.7%
No (Holding Company or
Group), 82.2%
Yes (Subsid. of North
American Company),
9.9%
Yes (Subsid. of Non-North
American Company),
7.9%
Demographics
51 CFO Signals
$1B - $5B, 41.2%
Less than $1B, 17.6%
More than $10B, 17.6%
$5.1B - $10B, 23.6%
Annual Revenue ($US) (n=102)
Ownership (n=101)
Subsidiary Company (n=101)
81% - 100%, 61.4%
61% - 80%, 15.8%
41% - 60%, 12.9%
21% - 40%, 5.9%
20% or less, 4.0%
Revenue from North America (n=101)
CFO of Another
Organization, 31.4%
Controller, 18.6%
Treasurer, 7.8%
Financial Planning/ Analysis
Leader, 6.9% Tax Director, 0.0% Public
Accounting Professional,
2.0%
Consultant, 2.0%
Business Unit Leader,
12.7%
Other, 18.6%
US, 77.4%
Canada, 16.7%
Mexico, 5.9%
Demographics (cont.)
CFO Signals
CFO Experience (Years) (n=102)
Previous CFO Role (n=102)
Country (n=102)
Industry (n=102)
52
Manufactur-ing, 22.5%
Retail / Wholesale,
12.7%
Technology, 4.9% Energy /
Resources, 12.7%
Financial Services,
24.5%
Healthcare/ Pharma,
4.9%
Tel / Med / Ent, 5.9%
Services, 7.8%
Other, 3.9%
Less than 5, 40.2%
5 to 10, 29.4%
11 to 20, 24.5%
More than 20, 5.9%
Methodology
Background
The Deloitte North American CFO Survey is a quarterly survey of CFOs from large, influential companies across North America. The
purpose of the survey is to provide these CFOs with quarterly information regarding the perspectives and actions of their CFO peers
across four areas: business environment, company priorities and expectations, finance priorities and CFOs’ personal priorities.
Participation
This survey seeks responses from client CFOs across the United States, Canada, and Mexico. The sample includes CFOs from
public and private companies that are predominantly over $3B in annual revenue. Respondents are nearly exclusively CFOs.
Participation is open to all sectors except for government.
Survey Execution
At the opening of each survey period, CFOs receive an email containing a link to an online survey hosted by a third-party service
provider. The response period is typically two weeks, and CFOs receive a summary report approximately two weeks after the survey
closes. Only CFOs who respond to the survey receive the summary report for the first two weeks after the report is released.
Nature of Results
This survey is a “pulse survey” intended to provide CFOs with information regarding their CFO peers’ thinking across a variety of
topics; it is not, nor is it intended to be, scientific in any way, including in its number of respondents, selection of respondents, or
response rate – especially within individual industries. Accordingly, this report summarizes findings for the surveyed population but
does not necessarily indicate economy- or industry-wide perceptions or trends.
53 CFO Signals
As used in this survey, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
Copyright © 2014 Deloitte Development LLC. All rights reserved.
Member of Deloitte Touche Tohmatsu Limited.