Deloitte “CFO Signals” Report 2Q 2012 – Notable Aspects

Recently Deloitte released their “CFO Signals” (pdf) “high-level” report for the 2nd Quarter of 2012.

As seen in page 2 of the report, “Ninety-three CFOs responded during the two weeks ended May 29. Three fourths are from public companies, and over 77% are from companies with more than $1B in annual revenue.”

Here are some excerpts that I found notable:

from page 4:

“Last quarter’s comparative reprieve from terrible news about Europe and the broader global economy yielded a substantial rise in CFO optimism – although this is not saying much given the two quarters of dismal CFO sentiment we saw in last half of 2011. CFOs were still voicing strong concerns, however, about slow growth at home, government stagnation – especially going into an election year in the U.S. – and the potential for renewed global economic volatility.”


Despite their worries, CFOs continue to project improving company performance.  Sales growth rebounded from a survey-low 5.9%* last quarter to 6.6%* this quarter, but with very high variability. And after climbing to 12.8%* last quarter, earnings growth receded to 10.5%* – 12.3%* for the U.S. (down from 14.5%*), 11.7%* for Mexico (down from 15.8%*), and just 4.6%* for Canada (down from 6.9%*) – also with very high variability.


CFOs say their companies have been bolstering margins through both strategic and tactical shifts. More than half say they have reduced their focus on lowermargin businesses and/or lower-margin customers, and a remarkable two thirds say they have raised prices. The most common approaches, however, reflect operational blocking and tackling, with more than 80% of CFOs citing a heavy focus on improving process efficiencies in both indirect and direct cost areas.

from page 5:

Pricing management may be one of the brightest spots in companies’ continued strong performance. With slow growth putting heavy pressure on sales volume, many companies have turned toward very aggressive pricing management – and with very good results. Fueled by improved understanding of pricing sensitivities and profitability at regional, product/service and customer levels, companies have often been able avoid deep discounts and price wars that might have made matters worse.

from page 13, regarding “Company Top Challenges” :

Revenue from existing markets again tops this quarter’s list, with 60% of all CFOs naming it a top challenge – the same as last quarter. It is the top company challenge for all industries, which has not been the case for any of our previous surveys.

page 18, regarding “Company” :

Since this survey launched in the second quarter of 2010, CFOs’ expectations for year-over-year earnings growth have been consistently positive and considerably above their estimates for sales growth. Sales growth expectations have been positive but falling for the last several quarters, prompting the question, “How much longer can companies continue to generate earnings growth despite weakening sales growth?” The good news is that nearly two thirds of CFOs say their earnings growth can outpace their sales growth for at least six more months. The bad news is that only one third thinks this can continue for more than a year, and 17% say this dynamic has already run its course.


I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these surveys.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1354.43 as this post is written