"The sentiment of CFOs this quarter can best be described as 'cautious optimism,' and at this point, there is no clear consensus among chief financial officers as to whether the conditions have in fact stabilized," said John Elliott, Dean of the Zicklin School of Business at Baruch College. "Though we saw noticeable signs of concern this quarter from CFOs toward their respective companies' financial prospects, their increased optimism in the overall economy for the first time since 2007 gives us the first indication of a potential recovery."
CFOs See Increased M&A Opportunities but Still Some Difficulties in Lending/Credit
CFOs this quarter also revealed a mixture of positive and negative views. Demonstrating positive signs in the market, over a quarter (27%) of CFOs have increased their interest in making acquisitions. Furthermore, more than a quarter (28%) feel the economy has already stabilized, with an overwhelming majority (90%) anticipating an economic recovery by the first half of 2011, or before. When asked what signs of stabilization they are noticing at their company, 33 percent of CFOs expect to report positive earnings for the second quarter. CFOs also cited positive first quarter earnings (28%), increased cash flow over the previous quarter (21%), and increased consumer demand (13%) as signs of improvement.
"It is apparent that growth opportunities are manifesting, as CFOs increased their interest in mergers and acquisitions," said Marie Hollein, CEO and President, Financial Executives International. "Amidst this challenging environment, CFOs do point to some signs of stabilization including increases in both cash flow and consumer demand, implementation of layoff alternatives, and higher expectations for positive second quarter earnings. However, it is clear that the road to recovery is far from over."
More than half (56%) stated they are spending cautiously, while approximately one quarter are holding off on all, or nearly all, capital investments (28%). In terms of lending, nearly nine out of 10 (87%) CFOs reveal that amounts being lent have either decreased or gone unchanged, whilst more than a third (34%) believe it will become increasingly difficult to access credit over the next six months. Although 34 percent feel credit is still difficult to access, it has loosened in comparison to third quarter 2008 findings (67%).
President Obama Steadily Gaining CFOs' Confidence, Skeptical of Geithner's Performance
In the previous quarter's survey, CFOs weighed in on their sentiments toward President Barack Obama's performance and their thoughts on the first 100 days of his Administration. On a positive note, more than twice as many respondents (23%) expressed heightened optimism this quarter compared to last quarter (9%). While nearly half (47%) stated their confidence in the economy has weakened, this signals a sharp decline from the number of CFOs who expressed unfavorable opinions toward the Administration in the first quarter (58%).
At the same time, CFOs' sentiments toward the leadership of Treasury Secretary Timothy F. Geithner and his response to the current financial situation in the U.S. were less than favorable. When asked to rate Geithner's performance, 43 percent of respondents assigned him a "C" grade and nearly three-fourths of respondents (73%) assigned him a "C" grade or worse. By comparison to his predecessor, CFOs viewed former Treasury Secretary Henry Paulson's performance as satisfactory, with over half (55%) issuing him at least a "B" grade in the third quarter 2008.
Bleak Prospects for College Graduates and Paid Summer Interns; Current Employees Also Impacted
CFOs are witnessing signs of stabilization at companies where layoffs did not occur this quarter (30%). However, the findings are not as promising for recent graduates entering the work force or for paid summer interns. Of the CFOs surveyed whose companies have historically hired recent graduates, nearly all (95%) have either hired less, or the same amount as the previous year. Accordingly, only 5 percent of respondents reveal that their company is hiring more recent graduates. In comparison, of the companies that have historically hired paid summer interns, approximately 61 percent are hiring less, and only 8 percent are hiring more.
The current economic environment is not only affecting individuals seeking work, but also those who are currently employed. Over one quarter (28%) of respondents specified the work week at their companies was reduced, and 21 percent revealed their companies had expanded offerings of early pensions and other retirement incentives, whilst only 17 percent saw furloughs implemented at their companies. Forty-seven percent of respondents specified other options, including salary reductions, unpaid vacations, pay raise stalls and preferences to hold onto experienced personnel.
