DeloitteThe sustainability of historically high corporate profit margins is one of the top debates in the economy and financial markets.
Deloitte recent published the findings of its most recent quarterly survey of America’s Chief Financial Officers (CFO). And the CFOs seem to agree: margins are heading higher.
“Companies believe they can squeeze further savings for their bottom line – in fact this trend is increasing as the gap between earnings and sales growth projections has increased over the past 24 months,” writes Deloitte.
Here are the bullets from Deloitte’s study (verbatim):
Sales growth expectations are positive and above 3Q12 survey lows, but they are still below the long-term average:
- Sales are expected to rise 5.4% overall, similar to last quarter’s 5.6% and above the survey-low 4.8% in 3Q12; the median is again 5%, with 81% of CFOs expecting year-over-year gains.
- Country-specific expectations are 5.2% for the U.S. (4.8% last quarter), 7.4% for Canada (5.5% last quarter), and 6.6% for Mexico (10.6% last quarter).
- Financial Services is highest at nearly 8%; Retail/Wholesale and T/M/E both declined notably this quarter and now sit at just 3.9% and 2.8%, respectively.
Earnings growth expectations continued to rebound off 3Q12 lows and are now just below their long-term averages:
- Earnings are expected to rise 12.1%, up from last quarter’s 10.9% and well above the survey-low 8.0% in 3Q12; the median rose from 7% to 10%, and 84% of CFOs expect year-over-year gains (above last quarter’s 76%).
- Country-specific expectations are 12.0% for the U.S. (10.5% last quarter), 11.8% for Canada (9.2% last quarter), and 13.0% for Mexico (9.2% last quarter).
- T/M/E is highest at 19%, but the sample size is just five, and one company’s very high estimate had a strong influence on the average. Technology and Financial Services both posted large gains this quarter and now sit at more than 16%. Manufacturing, Retail/Wholesale, and Healthcare/Pharma all posted notable declines.
For the full study, head to Deloitte.com.
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