CFOs Optimistic, But Lower Their Sales Expectations

CFO optimism has remained strong for the past year, but in a new survey, their projected sales expectations are dropping.

According to Deloitte’s fourth quarter (Q4) CFO Signals survey, CFO optimism is driven overwhelmingly by confidence in their own organization’s operations and not by confidence in the broader business environment. Consequently, their year-over-year sales projections hit an all-time survey low of 4.1 percent in the survey, and many CFOs now indicate lower perceptions of the status and trajectory of the North American economy than they have over the past two quarters.

The quarterly survey, which tracks the thinking and actions of approximately 100 CFOs from North American organizations averaging more than $7 billion in annual revenue, recorded 54 percent of CFOs expressing improved optimism about the prospects of their organizations versus 21 percent expressing declining optimism – for a net optimism of +33 percentage points. This is the first time optimism has remained net positive for an entire calendar year since the survey began in Q2 2010. 

Despite this optimism, most of the survey’s other key metrics suggest CFOs expect substantial challenges in 2014. The expectation for sales growth reached a historic low of 4.1* percent, falling from 5.0* percent in the third quarter. Earnings growth projections did increase from 8.0* percent to 8.6* percent, however this expectation remains far below the survey’s nearly four-year average of almost 12 percent. Similarly, while capital spending rebounded this quarter from 4.9* percent to 6.4* percent, it remains well below the survey’s historical average of 8.6* percent.

While CFOs indicate their organizations remain focused on growth, signs have appeared this quarter demonstrating rising conservatism and defensiveness. To a greater extent than at any point in the last year, organizations are indicating a focus on risk, business rationalization and cost reduction. Accordingly, projections for domestic hiring remain modest at 1.4* percent.

“Internally, optimism remains strong, and organizations continue to believe they can grow margins,” said Sanford Cockrell III, national managing partner, CFO Program, Deloitte LLP. “But externally, CFOs remain troubled by uncertain economic growth and slow progress in Washington, D.C. even with the recent budget deal. With risk, rationalization and cost concerns back on the table again, it seems many organizations are not hitting the gas as they enter 2014.”

CFOs have expressed rising confidence in the North American economy in recent quarters, but the trend has now reversed. This quarter, 26 percent classify the North American economy as good, a decrease from 38 percent in Q3. There are signs of rising optimism regarding Europe and China, however. The proportion of CFOs classifying the European economy as good is still below five percent, but the proportion viewing it as bad fell to 63 percent – an improvement from 80 percent in Q3 and 90 percent in Q2. Similarly, expectations for China rebounded this quarter, with 33 percent of CFOs saying the Chinese economy is good, up from 25 percent last quarter.

In addition to concerns about the North American economy, CFOs continue to express high levels of concern regarding government economic policy, regulation and the effects of the potential end of quantitative easing. Industry specific regulation was cited as a substantial impediment by 45 percent of CFOs overall, with the highest prevalence in the financial (54 percent), healthcare/pharma (67 percent) and services (63 percent) sectors. Government spending and budget policy was cited as a substantial impediment by 40 percent.

“This is the first quarter in which CFOs have voiced strong concerns about the near and long -term impacts of the U.S. stimulus program,” noted Greg Dickinson, director, North American CFO Signals Survey, Deloitte LLP. “The prospect of the Federal Reserve tapering and eventually ending its bond purchases is clearly causing concerns about the future of capital markets, economic growth and customer demand.”

Additional findings from the Deloitte Q4 CFO Signals survey include:

  • Affordable Care Act (ACA) impacts health care costs: U.S. CFOs indicate little impact on the scope and quality of their health care benefits, but they cite significant impact on costs. Nearly 60 percent say their organizations have raised or will be raising employees’ financial responsibility for costs, and about half say the ACA is the reason. About 13 percent say they have reduced earnings forecasts due to the Act, and about eight percent say they have constrained hiring.
  • Limited pressure on cash levels: More than half of CFOs say they have added liquidity sources over the last few years, and equal proportions say their cash levels will be higher and lower in a year. Seventeen percent say they have received Board pressure to return cash, and the same proportion say their Boards are worried about activist investors. About one-third say they face conflicting pressures from long-and short-term investors.
  • Finance organizations evaluated mostly on “business support”: CFOs say business support metrics are their most important finance measures, led by internal client satisfaction scores, achievement of plans and budgets, and forecast accuracy. Also among the most-mentioned measures are quality of financial reporting and finance costs. 

To download a copy of the survey, please visit:

*All numbers with an asterisk are averages that have been adjusted to eliminate the effects of stark outliers.

 The Deloitte CFO Signals survey was conducted for the fourth quarter of 2013 between November 8, 2013 and November 22, 2013. Seventy-nine percent of the 96 CFO respondents were from organizations with more than $1 billion in annual revenues, and 68 percent were from publicly-traded organizations.

Each quarter, CFO Signals tracks the thinking and actions of CFOs representing many of North America’s largest and most influential organizations. This report summarizes CFOs’ opinions in four areas: business environment, company priorities, and expectations, finance priorities and CFOs’ personal priorities.