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What factors will have either more or much more impact on company performance in the next five years? Management teams top the
list, say 72 percent of CEOs, followed by operational efficiency (68 percent) and new product development (62 percent).
As for the most robust budget increases over the next five years, one-third (33 percent) of NYSE CEOs who replied plan to boost capital expenditures by more than 10 percent, while 26 percent expect energy budgets to rise in excess of 10 percent.
Mergers will contribute more than 25 percent of revenue growth over the next five years, say nearly a quarter (22 percent) of the CEOs who responded, while 15 percent say that mergers will boost revenues between 10 and 25 percent. And about half (52 percent) say they expect an increased level of M&A activity in their industries during the
next five years.
Survey respondents report that energy costs (27 percent), health-care costs (26 percent), price volatility (24 percent) and changing global economic conditions (23 percent) are risks that will have a strong impact on their companies’ profitability in 2006. In fact, over the next five years, overregulation poses the greatest concern for the largestnumber (42 percent) of NYSE CEOs, along with health-care costs (36 percent), changing global economic conditions (30 percent) and changing domestic
economic conditions (27 percent).
What Shareholders Want
The benchmarks that shareholders follow today, the survey reveals, are not necessarily the same as those of five years ago. When it comes to
their views on what shareholders value most, four out of five NYSE CEOs rank operating income growth, stock price, cash flow from operations and free cash flow as “more important.” Total liabilities and total assets, meanwhile, are less important to shareholders, according to respondents.
Despite today’s more discerning shareholders, more than two-thirds of respondents say it is about the same, or even easier, to attract and retain investors compared with five years ago. Still, 50 percent of the CEOs say
they are spending more time on investor relations.
On Opportunities and Risks:
■ New products (according to 40 percent of respondents), new
markets (38 percent) and acquisitions (32 percent) are the top
sources that will fuel revenue growth in the next five years.
■ Overregulation is the greatest factor that could have an impact
on profitability in the next five years (42 percent), followed
by health-care costs (36 percent) and changing global
economic conditions (30 percent).
■ Management will have “more” or “much more” impact on
performance in the next five years (72 percent), as will
operational efficiencies (68 percent).
■ The greatest likely budget increases (of at least 11 percent)
next year will be in the areas of capital expenditures (37 percent),
energy (31 percent) and technology (24 percent).
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