Company Notes Digest 5.31.13

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

US Macro

John Stumpf is still bullish on the economy and housing:

“I am more optimistic today than I have been in some time…housing is clearly on the upside of the curve.” (Wells Fargo)

But business investment is still sluggish and maybe just starting to be on the upswing, especially in IT:

“I think that the financial crisis of 2008 fundamentally reset not only consumer spending, but also business spending on categories like IT. And if you look at like financial institutions their compliance costs have gone up dramatically and that money has to come from some place. And we see businesses of all sizes fundamentally having reset how much they are willing to spend and I think that is a function of the financial crisis and sort of a confidence around are we really out of the woods yet.” (Hewlett Packard)

Business spending may also be sluggish because there remains excess capacity though:

“companies have gotten a lot more efficient the last five years. There’s still capacity left in plant and equipment. I think technology has changed some of that.” (Wells Fargo)

In retail even if the weather isn’t bad now, we still may have to hear about it in Q2:

“overall, I think it is a fairly promotional environment right now, that’s one of the challenges that we are all facing, and that’s something that we talked about on our last earnings call, that we were expecting the promotional’s second quarter due to the late start to spring selling, because of the challenging weather.” (Steve Madden)

International Macro

Japan

There is a real increase in economic activity in Japan, but is Jewelry a special type of purchase?

“Without a doubt, Japan sales growth in the quarter exceeded expectations more than any other region…we took a price increase in Japan on April 10…included an adjustment for the yen’s weakness…it spurred purchasing in advance of the increase. However, we did not experience the typical expected slowdown after that…we attribute the unusual strength to recent reports of a surge in household spending in Japan, likely tied to the Japanese government’s efforts to stimulate their economy.” (Tiffany)

Clearly the Japanese people aren’t exactly feeling more wealthy as they will spend at home, but purchasing power has fallen abroad:

“pronounced softness in the Hawaii and Guam stores that reflected less Japanese tourist spending.” (Tiffany)

China

A very interesting discussion from Dow’s CEO about China:

The Chinese feel ok about investing in the US:

“I would remember meetings in the hotel rooms like this where the Chinese issue was over here trying to figure out whether the U.S. is going to be good on all the money that China had over here in terms of its banking system, financial system, that’s over with and the Chinese are quite happy to put money in the United States.” (Dow Chemical)

But Europe was a “wakeup call”:

“I think Europe was a big wakeup call for the Chinese and about a year or so ago there were transition in the leadership, they pretty much decided that they can no longer rely on an export led economy.” (Dow Chemical)

That China needed to change their export driven model. The new leadership is focused on stoking domestic consumption. (This is some of the first clear commentary that I’ve heard on the direction that China’s new leaders are moving):

“[China] fundamentally took a very profound decision with the new leadership…I’m a China head, I’ve been going there since the 70s, I do six trips a year, I’ve lived through the remake of China. I think the profound remake of China is to move their economy to 70% or 80% domestic demand drivers…That means not the property speculative world they’ve seen that means not the bridge to nowhere type infrastructure builds that means sustain consumption and to do that they’re focusing it on the service sector.” (Dow Chemical)

In the mind of the Chinese, more domestic consumption means pushing service businesses like financial services. (Someone should tell them that financial markets can do a poor job of allocating capital too):

“they are creating insurance sectors, health sectors, pension based sectors if you like mutual funds or alternative uses of capital, trying to liberate liquidity inside their economy so smarter choices can be made on how capital is allocated” (Dow Chemical)

Still, China’s economy as it is today is clearly struggling. Can you turn a ship that big deliberately?:

“China continues to slow and cannot seem to find traction. The growth in electricity production has slowed to 5%, below half the prior rate. And despite this slowing, domestic coal production continued to grow at 7% or 8%.” (Joy Global)

Egypt

According to Apache Oil and Gas, the environment in Egypt is stable, and actually may be improving for oil companies because the government realizes how important oil is to their economy/political control.

“I’ve been to Egypt twice in the last six months. I’ve met with the President of Egypt. I’ve met with the Prime Minister of Egypt. I meet with the Petroleum Minister every time I’m there…It’s too simple to say nothing has changed but I talked to the U.S. Ambassador, who I talk to occasionally, a couple of days ago and I said, “Anne, what’s changed?” And she said, “Nothing, it’s the same as it is.”…we haven’t seen any change currently other than a little bit things have gotten faster. We’ve got more development leases in 2012 than we’ve gotten over the last four or five years. …We got 27 in 2012. In 2011 and before, we probably got nine a year. So they recognize the importance of the product.” (Apache)

Financials

Bank analysts should focus on interest rate risk as credit risk is probably controlled:

“one of the biggest risks today in our industry is not credit risk, it is interest rate risk” (Wells Fargo)

Banks still have legacy spending from the crisis that is inflating costs:

“we have some expenses related to the downturn that we think will go away or become less, so that’s kind of a tailwind side.” (Wells Fargo)

For the economy to continue to re-leverage, growth is going to have to come from new consumers buying homes (i.e. Gen Y). Also–is this an indication that housing demand is primarily coming from investors today?:

“[to get loan growth] it’s going to take consumers to start to buy housing again” (Wells Fargo)

When it comes to capital there is a tradeoff between stability and profitability:

“I want sufficient capital, but not – or even – I don’t even care if it’s 5% or 10%, whatever, I mean, we can argue about what the exact number ought to be, but I don’t want to go over the top in this. There’s also a cost of having too much capital.” (Wells Fargo)

A couple of interesting notes on the banking businsess:

“We have found that deposits that come with a primary checking account that relationship is 2.4 times more profitable than one that does not” (Wells Fargo)

“When you’re in the auto lending business, you are a little bit in the used car futures business” (Wells Fargo)

Consumer

That product you think you’re getting at a discount because you waited for the next season may not be the exact same product:

“If it’s a real fashion forward item, in that very first few months… the real fashion forward customer…will pay virtually whatever the price is, so we can typically 200, 150, in that range for newness. When you then go into the second season…then typically $99 for an item like that is going to be a magic price point…In terms of the gross margin, I think it’s important to understand that we build the product differently…so there is not a big gross margin deterioration, when we take prospects back to $99…we have made adjustment to the materials…etcetera such that we can price it out.” (Steve Madden)

Rupert Murdoch talking about how Ted Turner said he was going to “squash him like a bug” (Oh Billionaire problems):

“when we launched Fox News, no one thought we could take on CNN. Nobody. Even Ted Turner bragged that he was going to squash me like a bug, and a lot of other things. But with hard work and the genius of Roger Ailes, Fox News has been #1 in cable news for 11 straight years” (Newscorp)

Interesting stats on the Journal’s readership base:

“43% of Wall Street Journal readers are millionaires, and the other 57% will be millionaires if they continued to read the Journal.” (Newscorp)

We spend a LOT of money on K-12 education in the US:

“K-12 alone, 50-plus-million kids in America we’re talking about, is now almost $700 billion market. And of that, about $40 billion goes into products and services and $17 billion on instructional materials and technology.” (Newscorp)

Technology

Dueling perspectives on how people are watching video content:

AT&T is seeing people move away from the TV to smaller screens:

“I would have thought before started really seeing how customer use the devices, that if you are inside the home, you are going to watch on a TV, the biggest TV you can go find, and certainly, there still some of that, a lot that. But increasingly tablet usage is inside the home, predominantly as oppose to out of the home.” (AT&T)

Logitech is seeing more an more people hooking their computers up to their TVs:

“our number one selling product right now in keyboards and desktops is actually a product used for the TV so an increasing number of people…bring their computer their laptop connecting up to the TV…this is a phenomenon that started about four or five years ago and it just keeps picking up steam. It is in fact in the U.S. it was 8% of people doing that about three years ago it is 30% doing it now 30% to 31%” (Logitech)

Either way people still aren’t cutting their cable quite yet:

“so far we have not seen [TV] cord cutting in any material way, in fact not even in an immaterial way at least from our perspective.” (AT&T)

Statistically people are still browsing the web more on PCs:

“if we look at statistics actually still most hours on the Internet [are spent] on the desktop or the laptop because if you want to stay long time on the internet it is still much more comfortable to be on your PC” (Logitech)

Big shift in iPad satisfaction according to a study by Logitech. Does this say more about Apple or tablets?

“18 months ago, we did a survey of iPad owners and 70% of them globally said they love the iPad exactly as it is, don’t need anything else, it’s perfect. We repeated the same survey 12 months later. This time only 30% of consumers said they like the iPad as it is and 70% of them this time said they want more things around the iPad to accessorize it to make it more useful” (Logitech)

Your data provider has more information about you than Google, Facebook, etc:

“because of all IP and its every set top, every home and every set top in every home, we collect the data anonymously, aggregate and enormous, let me repeat that a couple of times. But we have that information and have very good insight on how our customers are behaving, what they are watching et cetera…if an advertiser wanting to by the Ellen Show, we know based on our data who that audience is. We can do a couple of things. We can go find that same audience outside of the Ellen show and maybe extend reach or drive price a little bit better. We can also go find that same audience online or on your mobile phone.” (AT&T)

Mature technologies in the US still may have legs in emerging markets:

“enterprise printing is not shrinking as you look around the globe and part of that is because so many enterprises in emerging countries are actually growing their printing even though in the U.S it maybe flat to slightly declining.” (Hewlett Packard)

This means that there may still be price elasticity to demand:

“my view is that the low end is growing very rapidly, whether it’s low end PCs in Brazil or 1P servers here in United States and we have got to not over engineer our products, but have the best quality and the best features for a given price.” (Hewlett Packard)

As dysfunctional as HP was, Meg Whitman making the argument that the revolving door of CEOs left HP with some good assets:

“say what you will about my predecessors, they assembled a set of assets here that just happens to be perfect for what I call the new style of IT.” (Hewlett Packard)

Materials/Industrials/Energy

Joy Global’s mining outlook, seems to be making the case that the worst is over:

“Yes, I definitely think we’re at a low point. There’s no doubt about that. I think the question is what does the slope look like as things get better and how long will that take.” (Joy Global)

Coal may be turning positive:

“the outlook for the U.S. coal market has turned positive. I guess, this is first in, first out, if you will. With natural gas prices above $4 per million BTUs, fuel for power generation is increasingly switching back to coal.” (Joy Global)

Copper is a little better than people think:

“I think copper is an underestimated market, especially because of the inventory that has moved from private to exchange stocks. Our customers agree with copper strongly represented on our prospect list.” (Joy Global)

But it’s still a while until CapEx spending returns to coal:

“both met coal and thermal coal, on a global basis, we probably have 5% to 7% excess capacity…And so that’s going to take us a little bit of time to work off…I think we need to see supply/demand balance get closer, which is probably not a couple of quarters away, maybe 1 year away” (Joy Global)

Contrast Joy’s view on electricity demand to Apache’s which says the move to gas is structural:

“I’m changing my view [on nat gas] a little bit. Not that it’s going to go back to $14 but I think you got some upside in the price right now…it’s not about how much gas you can flow or what you’re gas production is. But I sense for a lot of reasons I think you’re seeing utilities being regulated to go to natural gas.” (Apache)

Seems that most oil and gas companies see oil in a $90-$110 band:

“We are definitely way over the maturity curve on wells. I think whether in the next year or two, you see oil prices linger a little bit between 90 and a 110, I think forward curve is going to be up.” (Apache)

The US isn’t the only market where unconventional drilling makes sense:

“Unconventionals, that’s been the story in North America but we think over the next five to ten years will be the story of the international markets as well…we’re the unconventional leader in North America…it’s an important strategic thrust for us to…be ready to work for customers around the world in unconventionals.” (Halliburton)

Take note of soy:

“soy is an emerging story, and within Monsanto, we say that this is decade of the bean” (Monsanto)

Miscellaneous Nuggets of Wisdom

Be fair and honest with your customers when times are good, because you’ll be glad you were when times are bad:

“[we’ve been able to hold our margins because] We’ve been consistent, open, transparent with [our customers] on pricing when we need to price. And we haven’t tried to overprice in the up cycle and they’ve — I think they’ve developed a confidence that we’re fair and balanced with them. And therefore, we’re able to execute pricing when we need to in the down cycle.” (Joy Global)

Business isn’t about financial statements, it’s about serving customers well:

“We don’t manage the Company to the margin. We manage it around providing services and products that our customers need and help them succeed financially.” (Wells Fargo)

It’s not about being the biggest either:

“Incidentally, we don’t set out to be number one in anything. If we get there because we’re doing a good job, great, but I don’t have league tables on anything that – because the size has never been the arbiter for us.” (Wells Fargo)

It’s tough to compete with state owned enterprises:

“We’ve gotten out of me too businesses that subsidized companies can go win at…I can do a lot of things, I can’t get subsidies like…state owned companies” (Dow Chemical)

Dow Chemical at Bernstein Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

” there has been an enormous amount of change in our sector probably as many as any sector out there in a context of the names that were there in 1990 and the names that are there in 2010 and even since 2010 has been further changed and I think to notice, there has been about a 40% survival rate, eight companies will come out on the other end which Dow is one.”

“chemistry and the material that comes from chemistry are foundational to everything we do”

“We’ve gotten out of me too businesses that subsidized companies can go win at…I can do a lot of things, I can’t get subsidies like…state owned companies”

“We have worked very hard to go downstream into markets and work at the intersection of sciences…material science, chemistry, biology, that’s where discoveries occurring in today’s world”

“BSF is the other one that’s most like us and DuPont little less like us these days that are integrated diversified across key markets’

“In our sector to be a player in all the sciences and the key markets with an integrated proposition on technologies, products and processes, is a domain of a few”

“I would remember meetings in the hotel rooms like this where the Chinese issue was over here trying to figure out whether the U.S. is going to be good on all the money that China had over here in terms of its banking system, financial system, that’s over with and the Chinese are quite happy to put money in the United States.”

“I think Europe was a big wakeup call for the Chinese and about a year or so ago there were transition in the leadership, they pretty much decided that they can no longer rely on an export led economy.”

“[China] fundamentally took a very profound decision with the new leadership…very focused in on trading demand drivers in China that solved China’s needs as an urbanized, modernized economy that looks after its people removes pollution, addresses food safety, addresses health concerns and really if you like distributes well in a much better way than what they’ve seen”

“I’m a China head, I’ve been going there since the 70s, I do six trips a year, I’ve lived through the remake of China. I think the profound remake of China is to move their economy to 70% or 80% domestic demand drivers…That means not the property speculative world they’ve seen that means not the bridge to nowhere type infrastructure builds that means sustain consumption and to do that they’re focusing it on the service sector.”

“they are creating insurance sectors, health sectors, pension based sectors if you like mutual funds or alternative uses of capital, trying to liberate liquidity inside their economy so smarter choices can be made on how capital is allocated”

“If we’re going to live in a deflationary world and volatile and China’s remake is on the worse end more than a year or two then the capacity is not required in the world.”

“These are short cycle based on consumers. I think our industry needs to get short cycle at the consumer end.”

Hewlett Packard at Bernstein Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“at our core, we are an engineering company. That engineering expertise commitment to great products, great software, great services is very much part of the HP DNA”

“the second great strength of this company, to the passion for customers and customer support we will do anything for customers, sometimes at great cost.’

“the challenges that we face are clear…we face these huge tectonic plate shift in terms of IT, how technology is bought, how it’s sold, how it’s paid for, how end users relate to that technology, how software is sold and serviced”

“I think that the financial crisis of 2008 fundamentally resets not only consumer spending, but also business spending on categories like IT. And if you look at like financial institutions their compliance costs have gone up dramatically and that money has to come from some place. And we see businesses of all sizes fundamentally having reset how much they are willing to spend and I think that is a function of the financial crisis and sort of a confidence around are we really out of the woods yet.”

“in the technology business there are very quite predictable life cycles of products. And in the CEO transition, I think we left some of these products go too long on the downside before we had the next generation of those products.”

“say what you will about my predecessors, they assembled a set of assets here that just happens to be perfect for what I call the new style of IT.”

“we have to demonstrate that across cloud, across security, across big data and frankly across mobility and then each of our businesses needs to perform up to their full potential.”

” this company is not — was not a well instrumented company. I thought I would come in with almost like a traders dashboard at my desk saying okay server market share in plans greed, you know storage market share in Asia, whatever it was, there was none of this data in the way that you could absorb it that you could measure people on, there was not a consistent scoreboard of data across business units, there was not a consistent customer loyalty metric.”

“enterprise printing is not shrinking as you look around the globe and part of that is because so many enterprises in emerging countries are actually growing their printing even though in the U.S it maybe flat to slightly declining.”

“my view is that the low end is growing very rapidly, whether it’s low end PCs in Brazil or 1P servers here in United States and we have got to not over engineer our products, but have the best quality and the best features for a given price.”

Wells Fargo at Bernstein Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

$WFC at Bernstein Conference Notes

“I am more optimistic today than I have been in some time.”

“housing is clearly on the upside of the curve.”

“housing plays a bigger role in the economy than just the economics around it. It has such a big influence on people’s attitudes.”

“overall, people are more optimistic and that is good. When that happens, it’s a better environment for us.”

“We don’t manage the Company to the margin. We manage it around providing services and products that our customers need and help them succeed financially.”

“one of the biggest risks today in our industry is not credit risk, it is interest rate risk”

“we have some expenses related to the downturn that we think will go away or become less, so that’s kind of a tailwind side.”

“one of the most undervalued parts of our franchise today is our deposit franchise. We put an enormous amount of effort into that and not only deposits, the kind of deposits you have. The fact that we have 15 basis points as cost is not – is less to do about our pricing in deposits and more about the mix.”

“We have found that deposits that come with a primary checking account that relationship is 2.4 times more profitable than one that does not.”

“[to get loan growth] it’s going to take is for consumers to start to buy housing again”

“companies have gotten a lot more efficient the last five years. There’s still capacity left in plant and equipment. I think technology has changed some of that.”

“We love the mortgage business. For two-thirds of Americans, it is still the biggest asset purchase they’ll ever do. It is part of how the way Americans save and it changes families.”

“I want sufficient capital, but not – or even – I don’t even care if it’s 5% or 10%, whatever, I mean, we can argue about what the exact number ought to be, but I don’t want to go over the top in this. There’s also a cost of having too much capital.”

“Our DNA is much more of a regional bank.”

“Incidentally, we don’t set out to be number one in anything. If we get there because we’re doing a good job, great, but I don’t have league tables on anything that – because the size has never been the arbiter for us.”

“I’ve worked for three Wells Fargos. The one was called Norwest. The second one was called Wells Fargo. It was 15 years ago. And now, this new company is four and a half old. It’s by far the best company I have worked for”

“When you’re in the auto lending business, you are a little bit in the used car futures business”

Aren’t You Glad You Stayed for May?

It’s the last day of May, and as long as today’s market isn’t awful, it turned out to be a pretty good month despite fear inducing rhymes.  Month to date the $SPX is up 3.6%, which ranks 2013 as the 12th best May of all time.  We’ve also broken the streak of negative Mays at three in a row.

That’s all great, but since apparently none of us are English majors here, it’s worth noting that the statement “sell in May and go away” actually implies that the top comes in May, which is why you would want to sell in May rather than April.  May has been positive on average in the last 10 years, but June has not.

Best May Ever

Joy Global 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Backlog fell to $2.2 billion from $2.4 billion at the beginning of the second fiscal quarter.”

“Our prospect list has bottomed and improved this quarter. Projects that were de-scheduled are being replaced…However, the new normal will sustain rather than materially increase our order rate, at least in the near term.”

“surplus mine capacity in most commodities is putting pressure on prices, customer margins and their cash flow. Management at most mining companies has been changed and they have new mandates. Second, CapEx spend on mining equipment is down 40% to 50%…projects will go forward selectively. They must be low risk and they must come in low in the marginal cost curve. Most of these projects can achieve returns without material improvement in market demand.

“projects will go forward selectively. They must be low risk and they must come in low in the marginal cost curve. Most of these projects can achieve returns without material improvement in market demand.”

“we’ll leave it to others to predict timing and we’ll continue to operate under the assumption that the inflection point is over the horizon. As such, we will continue to focus on process efficiency, a reduction of our base cost and on cash flow.”

“the outlook for the U.S. coal market has turned positive. I guess, this is first in, first out, if you will. With natural gas prices above $4 per million BTUs, fuel for power generation is increasingly switching back to coal.”

“China continues to slow and cannot seem to find traction. The growth in electricity production has slowed to 5%, below half the prior rate. And despite this slowing, domestic coal production continued to grow at 7% or 8%.”

“I think copper is an underestimated market, especially because of the inventory that has moved from private to exchange stocks. Our customers agree with copper strongly represented on our prospect list.”

“Our aftermarket order rates slowed in the first quarter, but quickly started to improve in the second quarter. This confirmed our belief that the decline in the international markets would quickly correct.”

“we saw that go through about 5 quarters to — for the order rates to come down, bottom out and begin to improve. We saw the order rates bottom between the fourth and first quarters and improvement for this quarter”

” I think it tells you that there’s — this is more about cutting costs and driving cost reductions”

“our customers don’t have the — they’re not carrying the inventories of parts that they used to, so now they’re going to need and expect us to have instantaneous delivery”

“Yes, I definitely think we’re at a low point. There’s no doubt about that. I think the question is what does the slope look like as things get better and how long will that take.”

“old projects that weren’t going to make the ROI thresholds have been cleaned out. New projects have replaced them so we’re looking at a new set of projects that have been reviewed by new management teams. And I think that they’re more likely to go forward.”

“equipment we delivered in 2011, 2012, those will come into normal rebuild cycles”

“The price levels have stayed sort of in that $3.20 to $3.40 kind price range. And that stays at an incentive level for copper producers. And so we’ve seen investments in copper. We’ve seen customers talk about continued expansion in copper without a lot of reservation. I mean, we’re — there are a number of projects that are underway in various phases.”

“both met coal and thermal coal, on a global basis, we probably have 5% to 7% excess capacity. It seems like a lot now because everybody’s fighting over — more supplies fighting over less demand. But it’s a single-digit kind of capacity excess. And so that’s going to take us a little bit of time to work off some combination of closing, some high-cost mines that need to come out and demand improving. But I think we need to see supply/demand balance get closer, which is probably not a couple of quarters away, maybe 1 year away before you begin to see the point where our customers are willing to accelerate their CapEx.”

“2 things, I think, we’ve done in the business that we feel very confident that we’re going to be able to hold margins pretty well. And one of those things is being very transparent with our customers on pricing. We’ve been consistent, open, transparent with them on pricing when we need to price. And we haven’t tried to overprice in the up cycle and they’ve — I think they’ve developed a confidence that we’re fair and balanced with them. And therefore, we’re able to execute pricing when we need to in the down cycle.”

Halliburton at UBS Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“we are very, very confident inside of Halliburton that there are three key areas where our business is going to grow more than other places…deepwater, unconventionals, and mature fields.”

“deepwater is much more service-intensive than other areas and provides a higher margin and higher technology opportunities in other areas”

“Unconventionals, that’s been the story in North America but we think over the next five to ten years will be the story of the international markets as well…we’re the unconventional leader in North America…it’s an important strategic thrust for us to…be ready to work for customers around the world in unconventionals.”

“many customers who last year were still drilling wells to delineate their acreage and where the reservoir had moved to pad drilling this year. And with that you’ve seen an increase in our 24-hour operations and the efficiency of when you go to pad drilling it allows us to create a factory approach to the way that we conduct our business.”

“As we look at Latin America, our largest issue right now is Mexico…in the project management areas which we kind of consider Burgos, the Chicontepec area, the Tertiary and Mesozoic areas – the project management rig allocation is dropping from like 80 some odd rigs to 30 some odd rigs, about a 47- to 50-rig drop. Pretty dramatic.

So we know our rig allocation overall in the project managements has dropped from 17 to 6; Schlumberger’s has dropped from 16 to 7; Weatherford’s has dropped from 22 I think down to 14, I think something like that.”

“In the Eastern Hemisphere we’re continuing to feel pretty good. It’s a slow and steady ramp-up. The Saudi area we’re continuing to see rigs coming into that market and anticipating that it will be to about 170 rigs by the time we get to the end of the year.”

“the Eastern Hemisphere story kind of remains intact, a slow and steady increase. We’ll be increasing margins as we do that as activity goes. We’re not seeing a real price inflection, not seeing an opportunity for a significant price inflection. Big tender activity continues to remain competitive and therefore it’s not that pricing is going down but certainly not many opportunities to increase pricing on the big tenders.”

Bank Quarterly Profits Reach an All Time High but Where’s ROE?

The FDIC quarterly banking profile, which was released yesterday, showed that the US banking system generated its largest quarterly profit of all time in the first quarter of 2013.  This is pretty amazing considering the state of the banking industry just four years ago, but it should be noted that even though profits have recovered, returns on capital haven’t.  In the previous peak quarter, 2Q06, the banking system generated a 12.6% ROE.  In the most recent quarter the ROE was only 9.95%

Unfortunately for bank bulls there are signs that this depressed ROE is as much structural as it is cyclical.  ROA is actually much closer to its former peak levels, which implies that the lower ROE is more a symptom of lower leverage rather than an unfavorable yield curve.  Given that post-crisis regulation has stressed de-risking through de-leveraging, it’s unlikely that banks will be able to lever to former levels and therefore may have structural difficulties reaching their prior heights of ROE.  This is important to consider from a valuation standpoint, because if banks can’t post mid or high teen ROEs then it is difficult to justify paying much more than book value for an inherently unstable business model.  Of course, in a bull market, value doesn’t have to mean a whole lot…until it does.

Bank Profit vs. ROE

AT&T at Nomura Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“TV every where, those rights are moving at a much more accelerated pace. We saw those starts to really shake out at the end of last year and we did, we in particular had a lot of deals up and got all of those TV everywhere rights for our customers.

And so you are seeing TV everywhere give customers that ability to control when they are watching at a much broader and deeper library capability”

“I would have thought before started really seeing how customer use the devices, that if you are inside the home, you are going to watch on a TV, the biggest TV you can go find, and certainly, there still some of that, a lot that. But increasingly tablet usage is inside the home, predominantly as oppose to out of the home.”

“but what is clear is customers like that ability just to watch either in the bedroom that doesn’t have a TV or just even in the same room with somebody else that has the TV on and so inside the home it’s been pretty significant, I think that will continue for awhile.”

“so far we have not seen [TV] cord cutting in any material way, in fact not even in an immaterial way at least from our perspective.”

” I don’t think we felt pressured yet but there’s an enormous load on the network. And I think others are probably seeing it. And at some point, I think everybody will feel that.”

“So again because of all IP and its every set top, every home and every set top in every home, we collect the data anonymously, aggregate and enormous, let me repeat that a couple of times. But we have that information and have very good insight on how our customers are behaving, what they are watching et cetera.”

“if an advertiser wanting to by the Ellen Show, we know based on our data who that audience is. We can do a couple of things. We can go find that same audience outside of the Ellen show and maybe extend reach or drive price a little bit better. We can also go find that same audience online or on your mobile phone.”

“we would love to move to a la carte. And we are very open to that model. We’ve suggested that a number of — in particular the regional sports network conversations we had that something we’re very open to. I think it’s very tough for the industry to go there.”

Steve Madden at Citi Consumer Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

$SHOO at Citi Consumer Conference Notes

“in a recent survey upper income teens, when asked their favorite footwear brand, girls named Steve Madden number two, behind only Nike.”

“Our success in all of these brands, channels and business models is predicated on our unique ability to create trend-right footwear and accessories and get them to market in a timely fashion.”

“how we’ve been able to do that so consistently, season after season? Number one, it is a testament to our design team. We believe we’ve assembled the best design team in our industry, led of course by our founder, Steve Madden. But in addition to that, there are a couple things about our business model that helps to differentiate us from our competitors and help us to mitigate fashion risk.”

“The first is our test and react model; where we test products in our retail stores and leverage selected winners into the wholesale channel. That has been absolutely critical to our ability to hit the trends over the years, and then we have married that up with an industry leading speed to market capability. We have managed to shorten leadtimes, to short at six to eight weeks, versus the industry standard of three to four months, which has been another primary competitive advantage in the fast moving trend business in which we operate.”

“We do focus primarily on the younger fashion forward woman customer, that’s our primary customer.”

“we turn our inventory about once a month in wholesale…we managed to shorten our lead times to about six to eight weeks, we make a lot of progress out of Mexico, for instance, which enables us to work faster than if we are working out of China, and enable us to be a little bit more nimble; and when we do see changes happening in season, we are able to adjust our inventory levels, and we have been able to do that, and we feel pretty comfortable about where we are, in terms of inventory.”

“I would say on the direct to consumer side, our biggest competitor is probably Aldo. Within the wholesale channel, they are obviously not as big a player. There are a number of big competitors there, one of them would be the Camuto Group, which is a private company that does brands for people like Jessica Simpson, BCBG, Tory Burch, their Vince Camuto brand, etcetera”

“overall, I think it is a fairly promotional environment right now, that’s one of the challenges that we are all facing, and that’s something that we talked about on our last earnings call, that we were expecting the promotional’s second quarter due to the late start to spring selling, because of the challenging weather.”

“If it’s a real fashion forward item, in that very first few months… the real fashion forward customer…will pay virtually whatever the price is, so we can typically 200, 150, in that range for newness. When you then go into the second season…then typically $99 for an item like that is going to be a magic price point…In terms of the gross margin, I think it’s important to understand that we build the product differently…so there is not a big gross margin deterioration, when we take prospects back to $99…we have made adjustment to the materials…etcetera such that we can price it out.”

“One of the interesting things that we can do now in terms of testing is to utilize the internet, and we have always utilized our stores for testing”

“we think that over time, there is going to be an opportunity to have significantly better profitability or profit margins in the outlets, than in our full price stores.”

“That single brand in small footprint shoe store is a challenging model, in the B and C mall. I think it works quite well in the A malls, but I think you also have a lot of customers who like to go to the multi-branded environments for shoes, like in Nordstrom or DSW or Zappos online. So we want to be careful about that. But you’re right, that it may create an opportunity at some of the other guys, reduce their footprint.”