FLORHAM PARK, N.J. and NEW YORK, June 29 /PRNewswire/ -- CFOs expect
nearly a tripling of short-term interest rates over the next year, but have
little fear that rising interest rates will have much effect on their profits.
More than a third (36%) of the 355 CFOs surveyed in mid-June by Financial
Executives International and Baruch College's Zicklin School of Business for
FEI's quarterly "CFO Outlook Survey" believe the three-month Eurodollar
interest rate will triple to 3.5% in the next 12 months, the rise anticipated
by the futures markets. Half (51%) of the CFOs think the markets are only
"somewhat" overestimating the rise in interest rates.
Eighty-four percent of the CFOs say that the markets' expected rise in
short-term rates will have "little to no effect" or only a "somewhat negative
effect" on their companies' earnings. They hold a similar view of oil prices.
Eighty-nine percent say that there will be "little or no impact" or only a
"somewhat negative impact" on their earnings if the price of oil per barrel
remains at the current level through the end of 2004.
"CFOs know interest rate rises are inevitable and have accepted the
reality of current oil prices," said Burton Rothberg, Assistant Professor of
Accounting at Baruch College. "They don't seem worried the trends will
interfere with their companies' growth in an expanding economy."
Cap Ex, Revenues, Earnings and Other Indicators To Rise
An important economic driver, capital spending, should continue to rise.
CFOs reported that their capital spending over the past 12 months increased
7%, and they are predicting that it will increase 15% over the next 12 months.
This is the highest forecasted spending increase in over three years of CFO
quarterly surveys. Industries this quarter with the highest expected capital
spending increases are energy and health care, followed by manufacturing.
"The capital spending forecast is an important indicator," noted Mr.
Rothberg, "because it is quite cyclical and shows the expansion has legs."
Both earnings and revenues are expected to grow over the next 12 months,
at 18% and 11%, respectively. The difference indicates that some of the
earnings growth will be powered by cost cuts or operating leverage rather than
increases in revenues.
Technology spending and wages are expected to increase at about the same
rate as the last 12 months. Health care costs, numbers of employees and prices
are expected to grow, but at a lower rate than the last 12 months.
Optimism Indices
Overall, CFOs are optimistic about the economy and their own company's
prospects. The CFO economic optimism index and company financial prospects
optimism index are their highest since the survey initiated the indices in
June 2002. The economic optimism index this quarter is 73.55 out of 100,
compared to 62.02 in June 2002. The corporate optimism index is 76.40 this
quarter, compared to 66.53 in June 2002.
"We've watched our members' economic outlook move from gloomy to generally
optimistic to bullish. They're now saying this recovery is underway and
robust," said Colleen Sayther, FEI's President and CEO.
Outsourcing
Despite the widespread concern that outsourcing is increasing and hurting
the U.S. labor force, in the area of corporate finance and accounting,
outsourcing does not appear to be taking hold. Ninety-three percent of survey
respondents said they do not anticipate outsourcing either of these functions
over the next 12 months.
Bush and Kerry Rankings
For the second time, CFOs ranked President George Bush and Senator John
Kerry in a number of key areas. Like last quarter, most thought President
Bush would do a better job than Senator Kerry with homeland security, the U.S.
economy and foreign policy. Regarding oil prices, while 49% thought President
Bush would do a better job, another 38% thought there would be no difference
between the two.
About the Survey
For full survey results, visit http://www.cfosurveys.com. The results
include more detailed information on topics in this release, as well as
responses to questions about Sarbanes-Oxley and health care coverage.
The CFO Outlook Survey, conducted by Financial Executives International
and Baruch College's Zicklin School of Business, interviewed 355 CFOs of U.S.
companies electronically the second week of June. CFOs from both public and
private companies and from a broad range of industries, geographic areas and
revenues are represented. Survey respondents are members of Financial
Executives International.
FEI has been conducting surveys gauging the country's economic outlook
from the perspective of corporate CFOs for the past seven years.
Financial Executives International (FEI) is the leading advocate for the
views of corporate financial management. Its 15,000 members hold policy-
making positions as chief financial officers, treasurers, and controllers.
FEI enhances member professional development through peer networking, career
planning services, conferences, publications, and special reports and
research. Members participate in the activities of 86 chapters, 75 of which
are in the United States and 11 in Canada. For more information about FEI,
visit http://www.fei.org.
Baruch College, founded in 1847, is a senior college of the City
University of New York. The Zicklin School of Business at Baruch College is
the largest collegiate school of business in the nation, producing graduates
who assume leadership positions in all areas of American business as well as
conduct important academic research. Baruch has one of the largest accounting
programs in the country whose graduates become practicing CPAs.
Contact:
Andrew Healy Chris Allen Burton Rothberg
TowersGroup FEI Baruch College
Zicklin School of Business
212.354.5020 973.765.1058 646.312.3204
andrewhealy@towerspr.com callen@fei.org burt@rothberg.net
SOURCE Financial Executives International; Baruch College's
Zicklin School of
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Related links:
http://www.fei.org
http://www.cfosurveys.com
CONTACT:
Andrew Healy of TowersGroup, +1-212-354-5020,
andrewhealy@towerspr.com; or Chris Allen of FEI, +1-973-765-1058,
callen@fei.org; or Burton Rothberg of Baruch College Zicklin
School of Business, +1-646-312-3204, burt@rothberg.net
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