Jones Lang LaSalle 2Q14 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. Full transcripts can be found at Seeking Alpha

Office leasing continues to strengthen

“I mentioned earlier that business confidence is showing solid improvement across the world. This is reflected in office leasing, which further strengthens globally. ”

Rents growing, no reason it wont continue

“rental rates are now growing in almost all markets, internationally, which is further encouragement for corporate rental activity. We currently seeing no business reasons why these positive market trends, which I’ve covered, should not continue for the balance of this year at least.”

Investment clients continue to move out along the risk spectrum

“nvestors are continuing to increase the allocations to real estate and to move further out along the risk in pursuit of attractive returns.”

Extreme disappointment from under-bidders

“the capital markets demand levels seem to be high and sustained, and we see no sign of any reduction in demand. We’re seeing a multiple bid summon any transactions which we put out. We’re seeing extreme disappointment on the part of under bidders, which sort of makes them more determined to go out again.”

INternational $ back in real estate markets

“f you put that strong equity demand together with the increasing levels of international capital flow, we’re seeing those rising up to the same level, as we saw in the last cycle”

Banks all feel much healthier

“You put that together, in turn, with the ever-improving levels of debt availability as banks improve their balance sheets globally, as they get more confident and, indeed, as competition amongst them to put money out increases and that brings spread in and solutions”

People thinking about expanding again

“The world we are seeing amongst our clients is the willingness to gradually move away from the phase of total concentration on cost to a phase where they’re actually thinking about building and expanding and driving revenues again.”

As long as rates rise steadily, it wont have an effect on the market

” our best guesstimate is that as long as rate increases are steady and moderate and the market is not surprised that there won’t be any significant pullback on capital market.”

Debt more available

“It’s just simply that the availability of debt is just getting easier. It’s again a cyclical thing”

“We’ve seen banks make more debt available at lower spreads. So spreads coming in from over the last 12 months, for example, from 250 to 125 basis points or lower, and we’ve seen them loosen the covenant in terms of around the loans they are giving. So putting it all together, and there is adequate debt — more than adequate debt available within the U.S. market. The same comments would apply to Europe but more — the presence has been slower. But that is now pretty freely available for well-underwritten transactions. In Asia Pacific, you can have a great debt problem, the banks were very robust throughout the crisis and came out strongly. So that is sort of world deal for the situation.”

General Cable 2Q14 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. Full transcripts can be found at Seeking Alpha

Tough economy for wire and cable industry

“The wire and cable industry have been waiting through an uneven and lengthy global economic recovery over the past several years including 2014, where growth momentum continues to be inconsistent. We continue to face uneven spending for utility and construction products in North America and Latin America, as well as persistent challenges in Spain and Thailand.’

Better construction season failed to materialize

“While the momentum we anticipated going into the construction season failed to materialize, we are still planning on a solid second half of the year as the burden of selling higher average cost inventory subsides and the initial benefits of our restructuring program are realized.”

Strong pressure from a competitor who wants market share

” We are seeing strong pressure on the aluminum building wire business. A competitor entered the business and seems intent in growing that business. We’re going to defend our position strongly. It’s where we have a wonderful brand name, STABILOY and NUAL in Canada, and that’s an unfortunate element of people taking strategies and that’s their strategy. So we’ve seen a lot of value add be erased, as well as volume from that business. And we will defend our position vigorously, and I would say that cost us volume and price over the first half of the year, and we expect that pressure will be there, but we will meet it.”

Copper prices are neither headwind nor tailwind

“Right now, copper is around $3.23. So it’s broadly neither a headwind nor a tailwind. Again, the issue has been the industry is not running at capacity, so there is — it’s pretty far from capacity other than in a few segments. So the ability to recover up or down is more limited, but it would be a push broadly if it stays where it is today.”

Got to drive the costs lower in a commodity business

“So all in all, in Europe, we’ve got to keep driving our cost and driving our cost and driving our cost, and then work the niches, which really are communications and a lot of the utility cables, as well as the turnkey business.”

Walter Energy 2Q14 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. Full transcripts can be found at Seeking Alpha

Encountered some adverse mining conditions

“Although we encountered some adverse mining conditions in the quarter, I am pleased with our overall performance and four and seven are running as expected.”

Produced 2.4m tons, sold 2.7m

“Second quarter met coal production totaled 2.4 million tons. Production was down compared to last year in large part due to idling Wolverine in April. Combined met coal production at mines four and seven was 1.8 million tons compared with 1.9 million tons last year and in the first quarter of this year…Met coal sales totaled 2.7 million tons in the quarter, up 11% versus last year. ”

646m in liquidity

“On a pro forma basis, the Company’s liquidity at June 30th was 646 million comprised of 612 million of cash and 34 million of unused capacity under the revolving credit facility. We believe we’ve taken the necessary steps to manage our liquidity and position ourselves to reduce financial risk prospectively.’

First debt maturity now 2018 vs 2015 formerly

“I think the date that matters with respect to runway if that’s what you are pointing to, is the first material debt maturity now versus even three to four months ago it used to be in 2015, now it’s April 2018 and again we will take the necessary actions to put ourselves in a position to refinance the debt at that time. So, we are focused on all the controllables”

No liquidity concerns in our company at this point

“As I mentioned on the last call, the timing of any asset sales is dependent on the recovery in met markets and there is no liquidity concerns in our company at this point. We think we have adequate liquidity and we’re not going fire sale assets.”

We do believe our equity is undervalued right now

“I think as we mentioned on the last call, if you remember that we do believe our equity is undervalued right now but at the same point we are not ruling anything out but it’s not really part of it, that debt equity swaps have never been — it’s not a program by any means”

Hard to say when capacity cuts will start to work through into pricing because people are still clearing inventories

“As I said, there has been about 20 million tons announced in terms of what’s been implemented, I think a large amount of that may have been implemented, but they are now they are working just as we are, the inventories both at the mine and then those inventories have to work the way clear through the customer. And that’s going to take some time to estimate how quickly that will happen is very-very difficult. I have seen estimates as early as we’ll start to really see the impact of that in the fourth quarter. I’ve seen folks say that they believe that will be early next year, but it’s really very hard to tell.”

I think these cuts are enough to balance the market

” given the projects that are coming online and the announced cuts, I think we might be pretty close to balance once it all works its way through.”

T-Mobile 2Q14 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. Full transcripts can be found at Seeking Alpha

Added 7.6m customers in last 5 quarters

“T-Mobile continues to be the fastest-growing wireless company in America. It now has 50.5 million customers. In the second quarter of 2014, we grew our customer base by a total of 1.5 million total net additions, making it the fifth consecutive quarter that we’ve delivered over 1 million total net adds. Now that’s 7.6 million total customers added over the last 5 quarters since we launched the Un-carrier revolution.”

Increasing their guidance for subs

“We’re increasing our guidance range for branded postpaid net adds this year to 3 million to 3.5 million”

We’re growing because we’re listening to our customers

“over the last 5 quarters, we turned the declining business into a growth business by simply listening to our customers and offering them what they told us they wanted: great service or a nationwide lightning-fast 4G LTE network; devices, when and how they want them; and plans that are simple, affordable and without the restrictions the other guys place on them.”

Keeping churn in check

“In the second quarter, branded postpaid phone churn was 1.5%, flat sequentially and year-over-year.”

We are the competitive environment

“From a competitive environment, not to be cocky or to point out, but we are the competitive environment. And what’s very important is our actions on the Un-carrier, our moves and our promotions are not based on reacting to anybody. We’ve been going straightforward since we started this initiative and doing things that we know we can profitably do and that customers will respond to. The competitors are responding to our moves”

This is a scale game

“We have always been clear. If you look at the long term of the wireless industry, it is a scale game. It is an industry here where the #1 and 2 players are hugely more powerful from a standpoint of scale and capital, et cetera, than the rest of the industry. We’ve been very successful, and we see a path forward to be highly successful as a stand-alone company, but we also know that we could significantly accelerate that growth and create an even higher level of competition in the U.S. wireless industry by various forms of accelerating this platform.”

There’s a different revenue model associated with tablets

“There’s definitely a different revenue model associated with tablets. And what we’ve started to show is, yes, we’re going to play in the tablet space profitably, but not at the demise of our other businesses. We’re going to play in the wearables and accessories. We’re going to call them what they are and there’s a different — and by the way, the revenue models may shift and we’ll adapt and play to that as well. So I think everybody sees what it is. That’s why we’re getting ABPU and ARPU and postpaid phone net adds and tablets, and we’ll give as much information as possible. But with our retail presence in our brand and our association with our customers, you’re also seeing, by the way, a significant growth in accessory sales and high-margin products in our stores as well.”

McKesson 2Q14 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. Full transcripts can be found at Seeking Alpha

Raising EPS guidance

“Based on the strength of our Distribution Solutions results in the first quarter and our confidence in the full year, we are raising our previous outlook and now expect adjusted earnings per diluted share of $10.50 to $10.90 for fiscal 2015.”

HepC revenue in line with market share

“Well, you’ve seen Gilead announce their results, and I’d just say that directionally, our revenues coming out of Sovaldi, for example, would have been in line with the overall market share across the 3 big distributors in this country”

HepC drugs leading to very modest margin reduction

‘the guidance that I offered a little earlier, mathematically it represents a very modest reduction in margins for Distribution Solutions. And obviously, those have been going up consistently in recent years. And at Analyst Day, you’ll recall that we reset the long-term margin goal for Distribution Solutions up to between 250 and 300 basis points. So modest impact from these Hep C drugs in the short term.”

Generic inflation is going to affect each of the distributors differently

“would say is that I would reflect on the fact that we all have different fiscal years. We all have different portfolios of generics. We have different proprietary programs in the generic world. We have different relationships with generic manufacturers. And having said all of that, our point of view on generic price inflation for our fiscal year remains unchanged”

Whole Foods 2Q14 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. Full transcripts can be found at Seeking Alpha

Comp soft because of value efforts, competition and the economy

“Our 3.9% comp increase reflects continued headwinds from our value efforts, cannibalization, competition, and the economy. Our comp increase was driven by approximately equal increases in transaction count and basket size.’

1200 store demand in the US

“We expect to cross the 500-store mark in 2017, and over the long-term, see demand for 1,200 Whole Foods Market stores in the U.S. alone.”

Gross margin heading to 34-35 range

“We will continue to increase our value efforts and expect gross margin to return to our historical range of 34% to 35% over the next several years.”

Organic is in a lot of places, but no one does what we do

“Natural and organic products are increasingly available, but no one does what we do. Our brand and our marketing campaign will highlight both our value and our values, reinforcing our leadership around quality and transparency in the marketplace.”

Launching delivery options

“Through strategic partnerships, we will offer home delivery and customer pickup in 12 to 15 major markets and launch our first online subscription club by calendar year end. Next year, we expect to offer direct ship in several key categories.”

We’re really learning on the value side

“even though we’ve been doing the value investments for a while, particularly with our 365 line, which has been out, I think it’s fair to say we’re in an early innings, we’re really learning and growing and how to do this and do it well, and we’re going to apply that, as we say, going forward and particularly focusing on the perimeter. ”

Launching a national marketing campaign

“The principal thing we’re showing today is our first ever national marketing and branding campaign that we’re going to launch this fall, and that campaign will really all be about what is different about Whole Foods than the other folks in the marketplace”

Big announcement coming in delivery

“we’ll have a much bigger announcement to make shortly, but this is being accomplished through partnership and it is a new feature”

“So, there’s going to be a lot more details on next several weeks about this. We actually expect to make the major launch by September 1.”

Once we anniversary cannibalization, comps improve again

“One of the things I don’t think people fully understand, so your question gives me an opportunity to articulate it, is that when our stores anniversary either our own cannibalization of our own new stores or competitive opening, those stores tend to comp extremely strongly, often times back in double digits.”

organic foods could be $225B opportunity by 2018

“market opportunity that continues to grow and grow and grow, and so if people use a number sort of $50 billion for natural and organic sales right now, people are saying by 2018 it’s sort of $225 billion an opportunity”

Beginning in 2015, new store acceleration will moderate

” over the last two years, we’ve had significant acceleration in our new store growth. We don’t anticipate that same rate of acceleration. So you will see some moderating going forward, I think actually probably beginning in 2015.”

QE’s Not So Special Anymore

QE is still underway, but yesterday’s taper was important because the pace of purchases has now fallen to a level that is consistent with “normal” monetary growth.  Since 1946 the US monetary base has grown at an annualized pace of 7.2% per year.  If the Fed were to grow the base at $25 billion per month from here (the new pace of QE), it would grow by 7.4% over the next 12 months.

It’s still debated how much of the current rally has been driven by Fed policies, but empirically, equity prices fell precipitously both times that QE went on hiatus since 2009.  Prices have also seemed to levitate higher without any pullbacks whenever QE has been in process.  So even the most ardent economic bull should be watching this situation very closely.

Prior to yesterday, the Fed was still applying unusual monetary stimulus to the economy, just diminishing amounts of it.  This taper may be the first really important one because it represents the threshold that QE goes from being an abnormal boost to the markets to just a normal positive force.

QE Now at Normal Pace

 

Cullen Frost 2Q14 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. Full transcripts can be found at Seeking Alpha

Existing customers borrowing more

“Over the past year, we have seen a steady increase in the percentage of our pipeline from existing customers. This is important because our success rate is much better with these opportunities. The willingness of customers to seek financing, also is a good indicator of our improving economy.”

“During the past year, customers have started to use their lines more. As a result, the advanced rate on both revolving lines and construction loans has increased. The advanced rate on lines grew faster than the growth of commitments, which is what we’ve been waiting for.”

Don’t mess with Texas

“At Frost, we’re blessed to operate in Texas, a business-friendly state with an extraordinary diversified economy and bright future. The Federal Reserve Bank of Dallas projected 2014 job growth in Texas to be 3% to 4%, nearly double the national average. Texas unemployment is projected to end the year at around 4.8%, which is lower than the national average.”

Prime spread has stabilized

” The first quarter was 93 basis points spread to prime, second quarter was 92.3. So I felt pretty good about that in terms of how we held up spreads. We had sort of begun to see, at least in that prime sector of the portfolio, sort of some stabilization over the last few quarters.”

Competition realizes that it’s crazy to give away money

“I’d also say to you, while there’s still some insanity in pricing loans, I think competition realizes that it’s not healthy to go below 0. There’s still risk and loan in money, which seems to be common sense but it went kind of crazy. But we — we’re doing all right on the pricing. Certainly, we walk away from things we think are ridiculous, but I think that’s kind of stabilizing around this low area. ”

Got to be disciplined

“And we have said to you, ever since we’ve been talking, for years, and for 146-year history of this company, we believe in our strong credit discipline. We’re not always right, but I think it’s the way to run a bank, and it’s paid off for 100-plus years. And I think in this very competitive, and particularly in Texas, environment, we’re doing what we ought to do”

Not in the transaction business, in the relationship business

“We’re not in the transaction business, we’re in the relationship business, to where we want to make sure that we have that major deposit account and a major relationship before we loan to anybody”

Work for years then get your payoff

“So basically, the change you see is people are starting to use these commitments that we have worked so hard over the last years in relationships to build, and that’s really good news.”

We’re aggressive lookers and conservative buyers

“don’t forget our position. We’re aggressive lookers and conservative buyers. We bought one bank since ’08. So I wouldn’t get too twisted up about that. I think in regard to the other factor, the — about people, we want to find the right people and that takes a little bit of time. But we’re not going to just stack people in just for the sake of stacking people. That’s the reason this company’s strong is that we have really outstanding individuals, very committed to what we do in our culture.”

Look at average, not period end deposits

“to be honest with you, I don’t really follow the period end number too much because there’s such volatility and the number — can be — particularly with our high level demand deposits, so I tend to look more at the average. ”

We think about the deposit question all the time

“We think about it all the time. But we’ve said before that we believe that balances are unusually high, we definitely agree with that. We did see something similar in 2001, whatever Greenspan jam rates down [ph] for 1% for such a long period of time, we saw really extremely high deposit growth and really high demand deposit growth. We expect it may — we might see some actual deposit outflows at that time. But we actually saw a flattening, and the reason it flattened I think in retrospect — although, we didn’t have as good the numbers as we have today to evaluate what was going on back then. But I think the reason it flattened, and didn’t go down back then is because we have a really good growth in relationships, which grew deposits”

Rates have been lower for longer now though

“But to be honest, we can’t really say, because rates have been lower and they’ve been longer than they were in ’01. So we got sort of a sneaking suspicion that we might see some decline there, but it’s that sneaking suspicion that helps us keep what is really extremely high liquidity levels that we maintain, I think relative to peers.”

You don’t bring a policy on knife fighting to a knife fight

“‘ve said it before, but the only liquidity, I believe, we have in a crisis is the liquidity you bring to a crisis. I also believe that if you’re going to a knife fight, you don’t bring a policy on knife fighting, you bring a knife.’

This economy is turning

“this economy is turning. People are — despite their uncertainty, see business there and starting to invest and take care of the customers”

Anadarko 2Q14 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. Full transcripts can be found at Seeking Alpha

Record North America production growth

“In the quarter Anadarko delivered record U.S. onshore growth on a same-store sales basis by growing year-over-year U.S. onshore volumes by an incredible 117,000 BOE per day”

Seeing success in excess of expectations

“we have another significant emerging oil opportunity in the Wolfcamp Shale and the Delaware Basin in West Texas. Our ongoing development program has been very successful to-date and we’re working to optimize spacing, lateral lengths and completion designs. We’re also further evaluating the resource potential of our 600,000 gross acre land position due to success outside our previously defined high confidence area and well performance significantly exceeding early expectations for the production of high margin oil.”

Share knowledge across the organization

“one of the reasons we’ve been so effective, if you hear recently in the Wattenberg as we’ve taken the learning from the Eagle Ford and other places where we’ve had success but lot of learnings from the Eagle Ford were applied to the Wattenberg, because Chuck creates such a great environment for that exchange to occur between these groups and people certainly have the right incentive to share those. And so even for a company as large as our, we don’t get into the towers of knowledge and don’t share it. And it’s easy to say and hard to do”

Not surprisingly, a positive long term outlook for oil markets

” I’d say our early outlook particular like the international benchmark for Brent remains strong, market is tight their capacity is low, supplier outages are pretty strong the 3 million barrels a day and demand growth is returning to long term trends.”

Bank Balance Sheets Edging Closer to Normalcy

One positive trend that has been apparent in the banking sector in the second quarter is that legacy non-performing loans are finally starting to completely clear off of balance sheets.  Here’s what BB&T had to say:

“I would point out though that…we probably have kind of a base floor or normal level of NPAs”

Non-performing loans are typically loans that have defaulted, but have already been written down to net realizable value.  They are not a significant source of future losses, but are more a symbol of past mistakes.  The fact that NPAs (nonperforming assets) are starting to completely clear is mostly symbolic as well, but it’s a great sign that six years later we can finally put the ghosts of the financial crisis to rest.

BB&T was one of the better performing banks during the crisis, so it has hit a normalized level of NPAs faster than many of its peers, but BB&T’s path is one that the industry will likely follow within a few quarters.  The chart below shows industry non performing loans as of the end of Q1.  There’s still some wood to chop, but we’re getting much closer.

Even though the two are unrelated, I’d expect for litigation risk at large banks to clear up along the same time line that NPAs have.  Crossing our fingers, we’re in the home stretch for a totally normalized banking system.

Nonperforming Loans to Total Loans