About the 2012 CFO Outlook —
Who Participated and How Results Were Gathered:
From September 21 through November 3, 2011, Granite Research Consulting completed 600 interviews with financial executives from U.S. companies with annual revenues between $20 million and $2 billion. Participants are referred to as CFOs throughout the report since more than half have C-suite titles and most are CFOs.
Bank of America Merrill Lynch’s 2012 CFO Outlook survey reveals the changing perceptions and plans of U.S. CFOs in the year ahead. Importantly, it sheds light on the forecast for the American and global economies, as well as the projected revenues, profits, staffing, financial concerns and international activities of U.S. companies.
In its 14th year, the survey finds that despite lower economic confidence and an expanding range of concerns heading into 2012, U.S. CFOs are largely holding firm on employment and hiring projections, research and development spending, new borrowing and other activities that drive both day-to-day operations and future growth.
EXECUTIVE SUMMARY
Taking a ‘Wait and See’ Approach
Looking ahead to a year that will be marked by U.S. elections, ongoing sovereign debt and deficit issues and a likely Supreme Court ruling on healthcare reform, the 2012 CFO Outlook survey results depict a cautious but not overly reactionary CFO mindset.
From a “glass-half-full” perspective, more than half of the 600 executives surveyed expect their corporate revenues to grow in 2012. Forty-six percent expect their companies to hire employees, 48% expect to maintain the same employment levels and only 7% anticipate reductions. More than three-fourths of CFOs say their R&D expenses were the same or higher than pre-recession levels. Finally, more CFOs this year say that more credit is available, and fewer CFOs say they expect the cost of capital to increase in 2012.
But as the data snapshot below indicates, the burgeoning optimism from early 2011 has ebbed on several important fronts. CFOs now give the U.S. economy a score of 44 out of 100, down from 47 last year and equal to the 2010 score, which was the lowest in the survey’s 14-year history. A year ago, 55% of U.S. companies expected to be more profitable in 2011, whereas today 41% anticipate profit margin growth and 15% predict declines in the year ahead. In terms of mergers and acquisitions, 18% of all U.S. companies expect to participate in a merger or acquisition in 2012, compared to 26% that forecast M&A activity for 2011.
A Growing Watch List of Concerns
Senior financial executives are more concerned about more factors that could affect the economy than in any previous point in the CFO Outlook survey’s history. Heading into a critical election year, it’s telling that 70% of CFOs cite concern about the effectiveness of U.S. government leaders and 63% cite the U.S. budget deficit. In addition, 60% list healthcare costs, 58% list unemployment levels and 55% list consumer confidence as concerns. By contrast, last year’s top concern regarding the economy was healthcare reform, chosen by 54% of CFOs.
KEY FINDINGS BY CATEGORY
The 2012 survey captures views across six key categories: Economies and Sectors, Performance and People, Financing, Mergers and Acquisitions, International Trade and Corporate Concerns.
Economies and Sectors
Performance and People
Financing
Mergers and Acquisitions
International Trade
Corporate Concerns
The full report and accompanying webcast are available at www.bankofamerica.com/cfooutlook.
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