Accenture FY 1Q15 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

10% Revenue growth

“We delivered new bookings of $7.7 billion in line with our expectations. We grew revenues 10% in local currency gaining significant market share. We delivered outstanding earnings per share of $1.29 a 12% increase“

Our energy clients are just watching right now not panicking

“As we speak and we comment almost as of today, we’ve not yet seen any form of significant impact in our business with what’s happening. I believe that these big organizations in energy, oil and gas are just watching the situation. It has been very volatile this last few weeks and I guess our clients in these companies are waiting a bit to understand whether there is going to be some form of stabilization and when you have some form of stabilization you can stop executing your strategy. But as we speak we’re not seeing any different pattern with our clients and I would characterize my dialog as being in a watching mode not panicking.

Very pleased with the US market

“I am pleased with what’s happening. I am extremely pleased with the sustainability of our performance in the United States. It is very important it is the largest market of Accenture and it is I would say the global market where things are happening in our industry.

This is where things are happening

“This is where things happening from a digital standpoint, from an innovation standpoint as well from a disruption standpoint from an energy standpoint we can comment all of this and it’s for us all goodness that we are doing so well in the U.S.

Pier One 3Q14 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

Almost done with the omni-chanel investment phase

“As each quarter goes by, we get nearer to the point when we will view our omni-channel capabilities to be sufficient to claim transition is complete. From that point on, we expect to see progressive improvement in our operating ratios.“
Strong September, weak October, good November though
“After strong start in September, our third quarter sales were somewhat softer than anticipated, primarily reflecting the weak traffic patterns in October. We saw meaningful improvements in November, which finished particularly strong with our five-day events surrounding Thanksgiving.

Cross channel traffic is driving synergistic sales

“The website is driving store traffic. The fast-growing numbers of customers who shop both online and in store is very encouraging as they spend more than online only or store-only customers. Also the fact that 30% of online sales originate in the stores, means stores are driving traffic to the web, two mutually supportive and independent vehicles that’s the beauty of 1 Pier 1.

No impact from west coast port delays

“delays of the West Coast ports have had no impact on our sales, but we continue to closely monitor the situation.

Strong first half of December

“Well, as we said we had a strong half to the month, but of course, as you know we are only half way through December in terms of the volume. So we feel good the way we are positioned.

No sign of retreat from promotional environment as of now

“If I try to give it a sort of a vanilla answer, I’d say we don’t see anything very significantly different than we’ve seen in the last number of years frankly. I mean, it became a while ago a very promotional environment. And there is no sign yet that the customers retreating from that.

Closing stores because of omni-channel

“I think what you see it is a precursor to us thinking differently about our store base as we get to really understand the whole ramifications of our omni-channel strategy. And you’re going to have to bear with us on this because we’re learning everyday. By the end of the fourth quarter, we’ll be a lot smarter.

Fulfill to store obviously costs less than fulfill to home

“Well, fulfilling to the home is obviously more expensive than fulfilling to the store. I mean, you’re absolutely right from that. But we expect the fulfillment cost per item to the home also to decrease over time because we’re going to get the efficiencies of throughput in the fulfillment center, number one and we will get as much about all those costs so. And then we have to offset that what we get in delivery revenue for each of those orders that we fulfill to the home

FOMC December 2014 Press 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. Full transcripts can be found at Seeking Alpha

This isn’t new guidance, but it is new guidance

“This new language does not represent a change in our policy intentions and is fully consistent with our previous guidance…[but] the Committee judged that some modification to our guidance is appropriate at this time.”

Oil will effect inflation

“sizable declines in oil prices will likely hold down overall inflation in the near term. But as the effects of these oil price declines and other transitory factors dissipate, and as resource utilization continues to rise, the Committee expects inflation to move gradually back toward its objective.”

This is not a change in policy

“Today’s statement, which indicates that the Committee judges that it can be patient in beginning to normalize the stance of monetary policy, does not signify any change in the Committee’s policy intentions as set forth in its recent statements.”

We changed our guidance because the asset purchase program is over

“The reason is that with the asset purchase program having been wound down in
October, it seemed less helpful to continue to communicate about the possible timing of our first rate increase with reference to an event that is receding into the past. Instead, we have shifted to language that better reflects the Committee’s focus on the economic conditions that would make lift off appropriate.”

No normalization for at least the next couple of meetings

“the Committee considers it unlikely to begin the normalization process
for at least the next couple of meetings.”

10 years after the financial crisis, finally back to normal maybe

“most participants expect the federal funds rate to move close to its longer-run normal level by the end of 2017”

We don’t have to wait for a scheduled press conference to make a policy move

“I would really like to strongly discourage the expectation that policy moves can only occur when there’s a scheduled press conference…”

We view the decline in oil prices as a net positive

“The very substantial decline we have seen in oil prices is one of the most important developments shaping the global outlook. It will have different effects in different regions, and could well have effects on financial markets, as we are seeing. I think the judgment of the committee is that from the standpoint of the United States and the U.S. outlook, that the decline we have seen in oil prices is likely to be on net; a positive. It’s something that’s certainly good for families, for households. It’s putting more money in their pockets. Having to spend less on gas and energy, and so in that sense, it’s like a tax cut that boosts their spending power.”

Rates have been at zero for 6 years now

“you know, the federal funds rate has been sitting in the zero to a quarter percent range now for six years. This is — and we have a very large balance sheet. We are providing a very highly accommodative monetary policy. And even as we begin to normalize the stance of monetary policy when that becomes appropriate, it’s important to remember that monetary policy will still be very accommodative for a long time”

We probably will not repeat a “measured pace” approach to rate increases

“There certainly has been no decision, you know, decision on the part of the Committee to move at a measured pace or to use language like that. I think quite a few people looking back on the use of that language in the–I can’t remember if it was 12 or 16 meetings, where there were 25 basis point moves. We’d probably not like to repeat a sequence in which there was a measured pace and 25 basis point moves at every meeting. So I certainly don’t want to encourage you to think that there will be a repeat of that.”

General Mills FY 2Q15 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

Minimally processed foods driving granola sales

“Consumers today are showing interest in products they perceive as minimally processed. This is driving strong growth for the granola segment where sales are increasing at a 10% compound rate in the past four years. We are the segment leader and retail sales for our granola cereals, including Nature Valley and Cascadian Farm, America’s favorite granola have grown at a 27% compound rate over the same timeframe.’

More protein too

“Consumers are also looking for more protein options at breakfast. So over the past 18 months, we have introduced a variety of higher protein cereal options.”

Improving share in greek yogurt

“Our share of the Greek yogurt segment continues to rise, reaching 12% in the second quarter thanks to continued distribution gains and strong advertising highlighting the great taste of Yoplait Greek and Greek 100. We have also been able to drive two successive quarters of double-digit retail sales great growth on original Yoplait through product renovation and compelling snack focused advertising”

Annies helps give more scale in organic

“The addition of Annie’s this October puts our overall natural and organic portfolio at over $600 million in net sales. That is meaningful scale for both our suppliers and our customers. We are operating Annie’s separately with John Foraker running the business out of Berkeley headquarters and reporting directly to me. ”

Pursuing the organic customer has led to synergies in other parts of the business

“far from getting lost, what we have found is that not only have we been able to grow those businesses but also the understanding of the natural and organic consumer and what they are looking for has actually rubbed off on the rest of the people in the business. And so we think that there is an opportunity, not only to accelerate our growth for our natural and organic brands within these operating units, but also that the consumer understanding we generate there will have benefits for our other brands as well.”

We feel like we get the consumer, we just have to innovate to meet them

“we have a good understanding of where the consumer is and we feel like we have a really good understanding of where they are going. Whether it’s in better-for-you snacking or whether it’s in wellness or what they expect of the economic value for their products. And so, because we feel like we have a good idea, when we innovate well and we spend behind it, we like the results.”

Joy Global 4Q14 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

Most challenging market in more than a decade

“2014 was another challenging year characterized by weak commodity market conditions and slowing global economic growth. Our customers are facing depressed cash flows and oversupplied end markets. We knew that these conditions would persist in 2014 and planned for that, but it goes without saying this is the most challenging market we’ve seen in more than a decade.”

Oil sands partners have $50 costs

“While lower oil prices have cut into margins, most oilsands customers we work with have production cost around the $50 level, in some cases lower. In the current environment, they can still produce at positive margins and have more cost takeout opportunities in front of them.”

Still a good outlook for copper

“Strength in our Latin American market has primarily been driven by global copper market fundamentals. While recent global economic fears have driven a decline in copper prices dipping below $3 per pound, the medium-term outlook along with supply side dynamics continue to make copper an attractive investment. Over the medium-term, continued power grid expansion in China, which now consumes nearly 10 million tons of refined copper per year or 45% of the world’s total, will continue to drive demand dynamics.”

Supply side of copper is challenged too

“From the supply-side, a number of issues continue to contribute to the annual supply constraints that help support the copper market. These include falling ore grades, lower-than-expected ramp up from new mines and labor issues. Over the last 10 years, an average of 750,000 tons of supply has been affected by these issues and has resulted in years of deficit.”

40% of power generation was coal this year

“While coal has accounted for nearly 40% of electricity generation through the first three quarters of the year, falling gas prices have driven some switching to gas. During the calendar third quarter, natural gas accounted for 31% of electricity generation, up from 25% during the first half of the year. ”

There needs to be consolidation in the industry

“The consolidation, it feels like it has to happen. Obviously we don’t want to talk about any of our customers because of the oversupply situation. I think this winter is going to be very interesting. They are predicting a colder winter. The supplies at utilities are more than the 10-year low average. Maybe that’s the new normal. It’s interesting. We’re talking to our customers about what’s going on with oil now.

It might be an interesting effect because last year the coal burn would have gone up higher if the utilities could have gotten coal during that winter polar vortex, but they couldn’t get the coal because they couldn’t get rails. Now with that shifting a little bit, that dynamic may be different this year, so that could help. Now that’s banking on the weather forecast to help, but right now just the simple answer is, there’s too much supply and that’s got to be consolidated.”

FedEx FY 2Q15 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

West coast ports are affecting things

“While we are still in the heart of peak season, there are several trends and developments that are affecting the season, including labor issues at the West Coast ports that have affected productivity and impacted retailers’ ability to get inventory where it’s needed and when it is needed. This issue has impacted our operations as we’ve made adjustments to capacity in key markets to support our customers facing these ongoing port slowdowns.”

Lower fuel costs offset by lower fuel surcharge revenue

“While second quarter results benefitted slightly year-over-year from the net impact of fuel, due to lower fuel prices this year versus last, the year-over-year reduction in fuel surcharge revenue largely offset the benefit of the lower fuel prices.’

Peak is a little more spread out than in past years

“I would also say that – reference back to what Mike said, looks like peak is more spread out than in years past. So while we had a great November at Ground, it was a little bit lower than we had planned for and we put in all that peak planning cost and everything”

Lower oil price could stoke foreign trade

“We’ve positioned our global powerful network around the world with exactly the right infrastructure, we have the 777s of course that are now flying non-stop out of Asia Pacific and around the world. So we think that the decrease in oil is going to have an increase in customers demand for higher yielding products.'”

The ecommerce economy is changing patterns

“November volumes were softer than our expectations but you need to know that this is not at all unusual in this new ecommerce economy. Over the last several peak seasons we have regularly observed situations where volume hasn’t always come where we expected it or come when we expected it but one thing has been certain, it always comes.”

The west coast port thing has been much bigger deal than people realize

“Let me put a little color on an issue that I think has been underreported and I suspect you’re going to hear a lot more about in January when the retailers start putting their results out. The slowdown in the West Coast ports has been a much bigger deal than people think and a tremendous amount of inventory was simply not put through the ports in the timeframe that the retailers had expected”

Air transport is driven by value per pound of the good

“what drives the movement of goods by air more than any other thing is the value per pound and there may be some closing samples that go air express or move by air but the vast majority of apparel is never going to move by air simply because the price point of the goods won’t justify the much higher cost of moving by air. “

Factset FY 1Q15 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

Lots of people adding Factset terminals

“:Net user count, of FactSet terminals increased this quarter by nearly a 1,000 users, in total 55,600 at quarter end. The net user addition in Q1 is our highest since November 2007. Overall users are up 9% year-over-year. This is the best annual user growth rate in more than three years.”

Seeing expansion on buy/sell side

“The group came from both buy and sell-side clients. As discussed last quarter, we continue to see an uptick from our investment banking clients whose activities had previously languished over the past few years.

From what we have seen M&A and capital market activities are on the rise. As a result, we’ve seen few cancellations and expected from our investment banking clients.

The market environment for our buy-side clients also continues to be constructive as the majority of our user expansion in this quarter came from this segment.”

The potential customer base is pretty static

“The FactSet — the end customer base is static for us. It’s true for almost every player in this industry. Certainly, the bulk of the revenue of the industry comes from the largest 500 firms in this space. I remember when we went public we had 85 of the top 100. I’m sure we’re deep into the 90s at this point. So the client count hasn’t changed much over time. It’s really about selling workflows to the clients we have.”

December 2014 Investor Letter

Below is a letter that is written monthly for the benefit of Avondale Asset Management’s clients. It is reproduced here for informational purposes for the readers of this blog.  If you are interested in receiving this letter monthly by email, sign up here.

Dear Investors,

Stock prices rose again in November, but the significant news is that oil prices continued to slide. The price of oil is now back to where it was in late 2009, when the global economy was still recovering from recession. The decline in oil prices has important implications for the broad economy, but the drop may either be bullish or bearish depending on how you interpret the reasons for the decline.

If you believe that prices have fallen because oil production is booming, then you might be more inclined to believe that this has been a positive development. Low oil prices are a bad thing for energy companies, but a good thing for the rest of the economy because they effectively give consumers more disposable income. If prices are really only lower because US oil companies have found a way to produce more oil using new technology, then that’s a net positive signal for the larger economy.

On the other hand, it’s not positive if oil prices are being driven by weak demand rather than strong supply. If this is the case, the falling price of oil is more a canary in the coal mine than a welcome stimulus. Commodity prices are often the most sensitive market segment to an impending recession, and a lower oil price could be a harbinger that economic growth has slowed.

Judging by the fact that the S&P 500 has risen as oil prices have fallen, most investors appear to be buying into the bullish argument. However there is some reason to believe that the impact of US supply growth has been overstated, and that the decline is more demand driven than supply driven.

According to Schlumberger, the largest global oil services company in the world, “The North American supply surge continues to be just enough to equal the world’s growing demand, while all other growth regions, including Iraq, Brazil and the Caspian are struggling to meet their production targets” (April 2014). Oil production in the US has increased by 61% since 2008, but global oil supply has only grown by 7% over the same period. To this point, the US is not large enough of a producer by itself to create a real shift in the supply dynamics for the world oil market.

Additionally, supply growth from US shale may be starting to slow. EOG, the pioneer of shale oil drilling, had this to say about production prospects earlier this year: “it looks like the rate of growth in 2013 slowed compared to 2012 and we expect this trend to continue in subsequent years…We are still bullish regarding U.S. oil prices because of slowing domestic oil growth and we are not particularly concerned about a surplus of U.S. light sweet oil” (February 2014). Nothing has fundamentally changed about the supply picture since these comments were made. There haven’t been significant new reserves discovered, nor has there been a material change in the expectations of the amount of oil that could be recovered using these new techniques. Further, oil markets reacted negatively to an OPEC meeting last month, but the big “news” was that the cartel decided to hold output targets constant.

Since supply dynamics have been relatively unchanged as oil has fallen in price, there must be other dynamics at play in oil’s price decline. Truthfully, there isn’t evidence to say for sure that demand has weakened either, but oil’s price decline does match with other markets that are signaling slowing growth. Oil’s decline is consistent with other commodities, like iron ore, copper and gold, and is also consistent with movements in currency and fixed income markets. Whatever force is moving the oil markets, it’s not an oil specific one. It is weighing on nearly every market besides large cap equities. It is not a positive force, and oil’s strong reaction in November shows that it is a force that is gaining strength.

It is very significant, for instance, that credit spreads on debt also widened last month. Credit spreads are frequently leading indicators of a weakening economic environment and often see signs of recession well before equity markets do. If credit quality is starting to fray around the edges there is no way that equity markets will be able to maintain their bull run. We should be particularly careful to watch credit markets because regulatory changes have left these markets with significantly less liquidity than before 2008. If sellers come to market, prices could drop very sharply without liquidity providers to grease the wheels.

As I mentioned last month, either equity markets are wrong or currency, commodity and fixed income markets are, but both can’t be right. I believe that the current price of oil is much more indicative of the trend of where stock prices “should” have been headed over the last several months. Because of this divergence, I am preparing for a sharp convergence.

As 2014 winds down, December is rarely a negative month, so it would be somewhat surprising to see stocks decline between now and year end. However, markets tend to reset in the New Year. 2015 will bring a new focus on when the Fed may raise rates. There is also pent up demand to take taxable gains come January 1. This could start us off in 2015 with a wave of selling. Frequently mass tax selling creates opportunities, not sustained declines; however, with the market hovering at all time highs with limited value support, a nudge in one direction could change a lot.

Scott Krisiloff, CFA