Micron FY 3Q15 Earnings Call Notes

Revenue was lower because of weakness in the PC sector

“Thanks, Kipp. For our fiscal Q3 2015 Micron posted total revenue of $3.9 billion, within our revenue guidance of $3.8 billion to $4.05 billion. Revenue was sequentially lower as expected in fiscal Q3 due to near-term market headwinds, driven primarily by weakness in the PC sector.”

We expect DRAM ASPs to stabilize

“Turning to overall market conditions, we expect stabilizing DRAM ASPs across the broader market overtime, as we manage our product mix and distribute our capacity to a broad set of value added market segments. Consistent with prior expectations we are forecasting DRAM industry supply bit growth in the mid-20s in calendar 2015 and in the low to mid 20% in calendar 2016. We currently believe that DRAM demand in calendar 2015 in aggregate will be at or exceed supply.”

PC builds declined well below seasonally slow demand but other end markets were stable

“While PC builds declined well below seasonally slow demand in the first half of the year, we saw relative stability in other end markets and responded to these conditions by adjusting our production mix throughout the quarter.”

We think demand will be better in the back half of the year

” what I tried to indicate is that I think in aggregate for the year the demand is going to exceed the supply, which I think your takeaway from that would be that we believe that demand is going to be higher in the back half of the year as we said on the last call, and as we continue to believe.”

Even PCs should show small net growth

“Even PCs I think, our view is that by the time we get to the end of the year notwithstanding the decrease in unit sales, there will be a small net growth in bits into the PC segment.”

Nobody expected the PC segment to be this slow

“I think it’s fair to say that probably nobody expected the PC segment to be as slow as it’s been. And I think it’s also reasonable to expect that in an industry with a number of high growth segments balancing supply and demand is never going to be precise.”

Shift to other segments is an ASP headwind. Products have lower margin

“as companies like Micron and presumably our competitors over time readjust their supply to rebalance demand in different segments and pull supply out of that sector it creates an ASP headwind for us because we are moving to products that already have lower margin and it creates over the short-term more intense competition for those sockets in the high growth sectors.”

Mobile is more of a design to win business than PC

“Again we don’t want to — we don’t get into business of forecasting pricing too much. Generally what I would say characteristic of the mobile business is that it doesn’t exactly behave like PC business. That tends to be more of a design win type business, you design into a device or platform that has long lasting life cycles relative to interchangeability of PC modules. And in light of that it behaves a little bit more like a predictable pricing model where there is a sale price and a cost reduction target over through a longer period, maybe six months, maybe 12 months. And so the pricing behavior in mobile is somewhat different and we anticipate that to be similar going forward and it’s reflective of our current mobile performance.”

Company Notes Digest 6.26.15

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

The Macro Outlook:

The spring selling season has confirmed further improvement in housing markets

“This year’s spring selling season confirms that the market is continuing to improve at a very consistent pace.” —Lennar (Home Builder)

There’s strength across the board

“there is no question that our demand has broadened out…we’re seeing strength across the markets…there is none that I can think of where I’d say that’s a tough market today.” —KB Home (Homebuilder)

The first time homebuyer is coming back

“We are starting to see the first time homebuyer come back to the market place, but from basically a very flat level of virtually non-existent first time homebuyer to some beginnings of improvement.” —Lennar (Home Builder)

Household formation has rebounded

“Recent census reports put household formation at an annualized rate of almost 2 million, well above normalized historical levels and significantly higher than the 500,000 households we have averaged per year over the last eight years. This data point suggests that we may be at a turning point in this housing recovery, as household formation has been the missing link.” —KB Home (Homebuilder)

People have moved on with their lives

“over a 40-year period, the nation averaged 1.2 million household formations…With the job growth that’s occurring and the aging of the millennials, they’re getting to a point in their life where they’re getting a job and moving on with their life.” —KB Home (Homebuilder)

Consumers are feeling more flush

“I do think the consumer is looking for less discounting activity today than they were a year ago, or two years ago…we haven’t seen lower gas prices stimulate traffic, but we have seen it change the consumer behavior once they’re in our building, and they’re not seeking the deals the way they were years ago…We’re seeing some more –- the consumers buy more add-ons. They’re buying wine, dessert, apps.” —Darden (Restaurant Chains)

Small companies are growing more aggressively than larger ones

“our own order patterns suggest demand for midmarket customers may have grown faster than from the larger customers…what you see is that the companies that are in the $25 million to $50 million of revenue size are the ones that are leading the growth” —Steelcase (Office Furniture)

Wage pressure is rising

“There’s continued pressure, we see it more on the labor side, perhaps than the material side in today’s world” —Lennar (Homebuilder)

“I would say the wage rate is probably in the upper-half of [the inflation] range” —Darden (Restaurant Chains)

Given this environment, wouldn’t you expect higher inflation expectations?

“We anticipate fiscal 2016 to be a more normalized inflation environment, resulting in overall inflation of 1.5% to 2%, with commodity inflation of 0.50% to 1%, and we expect the price at the low end of the overall inflation range.” —Darden (Restaurant Chains)

International:

Carnival doesn’t see much pickup in Europe

“As we had said before in the notes, there is a lot of macroeconomic difficulties in Europe. The economy seems to be bouncing along at the bottom” —Carnival (Cruises)

Steelcase is seeing some strength in Western Europe though

“Our business in Eastern Europe has been affected by the political turmoil…However, we are also seeing signs of strength in export markets in Western Europe” —Steelcase (Office Furniture)

Accenture expects foreign exchange to lower revenue by 10%

“This assumes the impact that foreign exchange will be a negative 10% compared to the fourth quarter of fiscal ‘14. For the full fiscal ‘15, based upon how rates have been trending over the last few weeks, we now assume the impact of FX on our results in U.S. dollars will be negative 7.5%” —Accenture (Consulting)

Financials:

CarMax says that subprime auto lenders are staying well behaved

“We’ve seen pretty stable performance from our Tier 3 lenders. If you look at what they’re approving and the quality of their offers, it’s been pretty consistent for the last several quarters…if you look at credit quality of applications this quarter, it’s up about two points year over year.” —CarMax (Used Car Dealer)

New regulations could disrupt mortgage markets in October

“this is a rough and tumble mortgage market that is defined by a regulatory environment that has a lot of laws of unintended consequences coming through. And the new legislation, the new regulations that will come in to affect in October will have some ripple effect…we recognize that there is potential for disruption and we are trying to stay ahead of the curve.” —Lennar (Homebuilder)

It’s cheaper to buy land directly than acquire a homebuilder

“And when you are buying companies today, you are buying land assets, and we had found that we are able to buy those assets through negotiations with sellers at a cheaper price than acquiring the company and paying the goodwill associated with the company. We have continued to look at smaller acquisitions and you can and we’ll continue to do so. But with regards to the larger public companies don’t seem to pencil out for us today.” —Lennar (Homebuilder)

There is a cost to stock based compensation

“we’re also planning to reduce dilution from shares granted in our stock based compensation program. We’ve made good progress in reducing our stock based compensation expense over the last year and half. We remain committed to continuing this effort and will work to reduce our 2017 annual share purchase by approximately half of our current year level.” —IHS (Energy Data)

Consumer:

It will be easy to buy used cars in a few years because a lot of people are leasing vehicles right now

“Lease percentage right now, I think, in the new car industry is somewhere around 30%. And when you see that supply coming back is really two years and three years later after you see a high lease percentage. So I’m not sure that we’ve seen much of it yet, but it’s never been a problem for us to source cars. And when cars are at a high lease percentage, when you look out two years and three years later, generally, they’re more organized at the auction, so it’s a little easier for us actually to buy those cars when we see them come back to the marketplace.” —CarMax (Used Car Dealer)

Physical retailers have to create an “experiential shopping environment”

“physical stores remain integral to our success…we want to give our customers more reason to spend time in our stores. We want to encourage product discovery, create an experiential shopping environment and enhance the services we offer” —Bed Bath and Beyond (Retail)

Technology:

Blackberry is trying to pivot from a hardware company to a software company

“On the handset front, we are taking steps to get the business to profitability. A few key actions were taken in the quarter. Number one, we have reduced our spending in hardware through some level of reorganization. Number two, we moved some hardware resources to our software and our Internet of Things efforts…BlackBerry focuses to expand our leadership in mobile security connectivity and communications.” —Blackberry (Researching in Motion)

Accenture is one of the largest developers of mobile apps in the world

“With Accenture Mobility, it is now one of the world’s leading developers of mobile apps, leveraging the capabilities of our global delivery center. We have now developed over 1000 apps across nearly all industries.” —Accenture (Consulting)

Monsanto wants to transform agriculture with big data

“we will be able to unlock a new data driven approach to provide farmers even more valuable real time insights about their crops with our Climate platform. The information will provide actionable crop protection recommendations to farmers to maximize productivity, while ensuring inputs are applied in a precise manner to meet society’s broad goal to preserve and protect our environment.” —Monsanto (Seeds)

Materials, Industrials, Energy:

Nike supports the Trans Pacific Partnership trade bill

“the passing of the TPA was obviously an important step toward what we hope is a final approval of TPP and as we’ve said before as you know, this will help us to accelerate the work that we’re doing with advanced manufacturing, will help us expand our business overall, I think certainly give us an opportunity to build local manufacturing here in the United States” —Nike (Apparel)

The global supply chain may be shifting closer to home thanks to innovation

“I think you’re going to see the overall supply chain geographically shift a bit here and there with the advancements of new manufacturing innovation. That is a major priority for NIKE. It will give us the flexibility to create more localized manufacturing overtime, and that will put us closer to market and again allow us to advance products, particularly in the customization area and to meet more local demand as well.” —Nike (Apparel)

Steelcase mentioned that they are able to insource more processes that they outsourced 10 years ago

“In the Americas, we went through a shift towards outsourcing for a while. This is going back maybe 10 years now. While we were in a transition from the very vertically integrated model to the model we have today. Now, interestingly, and now that we have reached higher level of efficiency in our Americas footprint, we have been able to in-source some of the things that we had previously outsourced.” —Steelcase (Office Furniture)

The Energy sector is finishing up current construction projects, but halting future ones

“Orders from the energy sector grew modestly in the first quarter following a significant decline in the previous quarter. We expect this sector to be challenged for the foreseeable future while oil prices remain depressed. Most energy sector construction projects that were well underway are being completed, but many future projects have been postponed” —Steelcase (Office Furniture)

Miscellaneous Nuggets of Wisdom:

It’s tough to do business with people who wont talk to you

“call me traditional, but I always think that business gets done when people meet, when they sit down across the table and try and work out a solution and we’ve been singularly unsuccessful in getting Syngenta to sit down and talk. We’ve seen the videos where they talk to themselves, but I’d love to be able to engage in a conversation.” —Monsanto (Seeds)

Regulation benefits large players who can afford to make adjustments

“there are a lot of unintended consequences embedded in some of this legislation or regulation I should say. I think in many of the instances the consequences are that larger players are benefitted and the larger player’s ability to adjust, to adapt and to spend the dollars to be ahead of some of the regulatory changes works to the benefit.” —Lennar (Homebuilder)

You win and lose deals on products and relationships. Price is just an excuse

“you win, because you have got the right products, you have got the right relationships. When you lose, you might be told you lost because of price, but really you lost because you did not have the right relationships and the right products, so that is our philosophy on this.” —Steelcase (Office Furniture)

Mutual benefit is the key to a successful partnership

“To consistently achieve our success we follow a proven strategy. Our goal is to gain alignment and support from our trade partners by promoting and demonstrating mutual business success.” —Altria (Cigarettes)

Be a customer centric business

“The success in our business is a natural outcome of putting the consumer at the center of everything we do” —Nike (Apparel)

Full transcripts can be found at www.seekingalpha.com

Altria Investor Day Notes

Investment in developing people drives our results

“We’ve long believed our emphasis on and investment in developing people sets us apart and drives our business results. We were delighted recently when Forbes named ” among its top 100 list of America’s Best Employers. Our focus on people development supports a strong and deep management bench and effective succession planning.”

Three strategies: core, innovative products and financial performance

“We continue to pursue three strategies to deliver against our long term financial objectives, first to maximize our core tobacco businesses for the long term, second to grow new income streams through innovative tobacco products, and third to manage our diverse income streams and strong balance sheet to deliver consistent financial performance.”

We’ve embraced lower risk tobacco products

“For many years, we’ve embraced the vision of developing lower risk tobacco products that appeal to adult tobacco consumers. That’s one reason we supported FDA regulation of tobacco, and today real progress is being made.”

Developing the science needed to succeed in regulatory arena

“We’re also developing the science needed to succeed in the regulatory arena such as the recent data we presented to FDA on second hand vapor. And we are fully engaged in the modified risk tobacco product application process, in order to take advantage of the opportunities it offers for our businesses and adult tobacco consumers”

If there’s one thing Altria knows how to do it’s excel in a difficult environment

“Our final introductory word, given recent changes in industry structure. Market place change is of course constant. The recent transaction involving our competitors marks another one. It’s important to remember that we’d faced change before, lots of it, and we believe our leadership position today is stronger than ever. Consider for example, the signing of the Master Settlement Agreement, a 2004 consolidation of two competitors, a massive increase in the federal excise tax on cigarettes and cigars, and institution of FDA regulation of tobacco products. During this period of change over 15 years, PM USA grew Marlboro, retail share almost seven points. Altria evolved to offer a total U.S tobacco platform, while delivering TSR of more than 1,000% more than five times the S&P 500s return. As I hope, we’ll make clear today, we manage our businesses for the long-term which has allowed us to grow through change and deliver consistent performance. We do sell because of our company’s extraordinary brands, superior execution, and talented people.”

Immerse consumers in the equity of our brands

“We also immersed tobacco consumers 21 and older in the equity of our brands through experiences like Marlboro Black Lounge, Bar Nights, music festivals and once in a lifetime trips to the Marlboro Ranch in Montana. In total, our consumer engagement system delivered a remarkable 250 million interactions with adult tobacco consumers in 2014 up 20% from the previous year. As you will hear later, these interactions further our tobacco Company’s strong brand equities.”

Our goal is alignment and support of our partners by promoting mutual business success

“To consistently achieve our success we follow a proven strategy. Our goal is to gain alignment and support from our trade partners by promoting and demonstrating mutual business success. It begins with our world class distribution system which efficiently delivers products from our Company’s manufacturing facilities to our direct buying customers.’

Provide category and market analytics to our customers

“Our ability to provide category and market analytics to our customers also give our tobacco companies a competitive advantage. Our customers tell us that actionable insights are more important than ever. For example, retailers may understand the volume and share for the brands they sell, but not how their store performs against the local market. Our proprietary reporting system provides relevant store-level data for the tobacco categories. We can show customers how many stores are gaining or losing market share at an aggregate and store level. Then our sales team consults with retailers on how to capitalize on those insights to build their business.”

Bring in interns to experience AGDC

“we bring in over 100 interns annually to experience AGDC prior to their final year of school. Last year, 85% of these interns accepted the full-time offers we extended. And often these efforts result in leaders who rise rapidly through our organization. “

Nike FY 4Q15 Earnings Call Notes

Nike is a growth company

“We’ve shown once again that NIKE is a growth company. Here are the fiscal ’15 highlights. NIKE, Inc. revenues grew 10% to $30.6 billion, despite significant FX headwinds. On a currency neutral basis, NIKE, Inc. revenues grew 14%. Gross margin increased 120 basis points to 46%. Earnings per share rose 25% to $3.70 and we delivered ROIC of 28%. These are the quality results that our shareholders have come to expect from us and that we demand from ourselves. One of the reasons we are able to deliver results like these are the talented people who work at NIKE around the world.”

Nike continues to build digital

“At NIKE innovation comes in many forms and our growing digital ecosystem is the great example. Consumers are increasingly connected and utilizing premium personal digital services. Digital is an accelerator of growth that is shaping everything we do. We are building deep connections to consumers with digital services and communities to driving rapid expansion of our e-commerce business”

Always moving forward

“What I just recapped is by no means an exhaustive list, but it clearly shows how much ground this company can cover in just one year. And while we’re pleased with this year’s results, at NIKE, we’re always moving forward. We’re relentless in our pursuit to get better and we see opportunities that no one else can and most importantly we have the resources and the talented team to deliver.”

Put the consumer at the center

“The success in our business is a natural outcome of putting the consumer at the center of everything we do, our connection with consumers strengthens our brand every day from our own retail to wholesale partners, from in store to online, from digital experiences to unforgettable live events. It’s those deep and authentic connections that power the NIKE Brand around the world.’

There are some headwinds out there, but we’re confident we can keep expanding margin

“There are some headwinds out there of course with labor inflation and FX, but on the flipside, we’ve done a pretty consistent job of raising average gross selling prices, our DTC business of course is accretive. So overall on margin, we’re pretty confident we can keep moving margin forward.”

Passing of the trade bill and new manufacturing technologies could shift the global supply chain

“the passing of the TPA was obviously an important step toward what we hope is a final approval of TPP and as we’ve said before as you know, this will help us to accelerate the work that we’re doing with advanced manufacturing, will help us expand our business overall, I think certainly give us an opportunity to build local manufacturing here in the United States, can put us closer to market events, some of the innovation particularly in the area of customization. We are in the middle – Don had mentioned this briefly, but scaling our advanced manufacturing initiatives, which we’ve really been working on over the past three to four years, so you’re going to start see those scale, but opportunity to get some – translate some duty relief into investing in our advanced manufacturing supply chain efforts here in the United States is going to be significant we hope, I mean, that’s our goal. So that the idea is that we will accelerate and we will see some real benefits from that. I think you’re going to see the overall supply chain geographically shift a bit here and there with the advancements of new manufacturing innovation. That is a major priority for NIKE. It will give us the flexibility to create more localized manufacturing overtime, and that will put us closer to market and again allow us to advance products, particularly in the customization area and to meet more local demand as well.”

“brand accretive”

‘ we feel very confident that we’re going to be working through that inventory in a way that’s brand accretive and is not going to be problematic from a profitability standpoint.”

Monsanto FY 3Q15 Earnings Call Notes

Challenges facing the world’s food supply continue to evolve

“The challenges facing the world’s food supply continue to evolve. The growing population along with our volatile and changing climate place ever increasing burdens on global food production”

That’s why we want to own Syngenta

“Combining the strengths of Monsanto and Syngenta would accelerate the development of new innovations, increase our scale and reach and provide a broader spectrum of products for growers around the world and it would use data science to offer a more insightful, precise approach to agriculture.”

Today we reach 400 of 3.5B acres of arable land

“Today, our foundation and our core crops reaches 400 million of the world’s 3.5 billion acres of arable land.”

It’s been a tough year but our relationship with farmers is great

“There is no doubt it has been a tough year with the macro pressures facing global agriculture, namely our retreat and corn acres, currency and pressured commodity prices. That said, I’ve not seen our relationships with our farmer customers, our portfolio, our position in the market or our pipeline stronger than I see them right now.”

US corn acres will be 88-89m

“With the line of sight from our third quarter, where we’ve seen a good uptick in the U.S. end season ordering, we now believe corn acres will be in the of 88 million to 89 million acres.”

Soybean acres 85m

“with the additional clarity we have from the spring planting progress, we expect U.S. soybean acres closer to 85 million versus earlier estimates of 87 million acres and the combination of shipments in our order book continues to indicate our share is growing with farmers continuing to choose Roundup Ready 2 Yield as the product of choice across our branded and licensed footprint.”

Climate pro on 45% of corn and soybean acres in the US

“To date, we’ve enrolled more than 75 million acres on the Climate Platform, which is roughly 45% of the total planted corn and soybean acres in the U.S. and with the current usage trends from those who use the platform weekly, we are tracking nicely towards our active used target of 45 million acres.’

Shrunk the share count by 55m shares since last year

“we successfully completed our 6 billion accelerated share buyback program this quarter and our share count now stands at 469 million shares outstanding, a reduction of more than 55 million shares since we initiated our new capital allocation strategy just a year ago.’

We can’t get syngenta to talk to us

“call me traditional, but I always think that business gets done when people meet, when they sit down across the table and try and work out a solution and we’ve been singularly unsuccessful in getting Syngenta to sit down and talk. We’ve seen the videos where they talk to themselves, but I’d love to be able to engage in a conversation.”

Climate Pro helps farmers analyze data

“If you look at the early days of the Climate Pro, which were the paid acres this year, I’d say it was driven by the nitrogen model which gave farmers, lots of insights particularly in some areas this year that were kindly difficult with the early planning season and lots of rain et cetera in some areas so that played very well.”

“And then the shift which was just as exciting as how much interest there was in the Field Health Advisor this year which was the other big app that we had available on that paid system this year and that one really gets that worked. He was describing as thinking about field help in the field help and farmers make the decisions in raising the crop through the rest of the year and its really impressive to see the interest from farmers that it confirms again the farmer’s understand intuitively. They have this variability in the field and they believe that it can be addressed and they’re willing to work with us to figure out how to do that”

Accenture FY 3Q15 Earnings Call Notes

10% local currency revenue growth

“We delivered strong new bookings of $8.5 billion, bringing us to $25.5 billion year-to-date. We generated very strong revenue growth of 10% in local currency, with growth across all five operating groups and all three geographic regions.”

But only 3% eps growth

“We delivered earnings per share of $1.30 on an adjusted basis, a 3% increase. ”

FX will be a -10% to revenue in FY 4Q

” For the fourth quarter of fiscal ‘15, we expect revenues to be in the range of $7.45 billion to $7.70 billion. This assumes the impact that foreign exchange will be a negative 10% compared to the fourth quarter of fiscal ‘14. For the full fiscal ‘15, based upon how rates have been trending over the last few weeks, we now assume the impact of FX on our results in U.S. dollars will be negative 7.5% compared to fiscal ‘14.”

Still going to drive 5-6% earnings growth

“For earnings per share on an adjusted basis, we now expect EPS for fiscal ‘15 to be in the range of $4.73 to $4.78 or 5% to 6% growth over fiscal ‘14 results.’

Definitely want to make acquisitions

“I mean, we all have been very clear on our acquisition strategy. Do we want to leverage our cash to make acquisition in order to further enhance our capabilities and get more differentiation, the answer is, yes.

We are looking in acquisition in some very specific areas as you know, from deep expertise in consulting and strategy for an industry standpoint to digital native organization to companies with a deep footprint in operations,”

Big headcount of highly skilled people in their digital business

” If you look in this digital space, we have now roughly 28,000 people working in that environment. And this 28 is very interesting because you will see as you might suspect extraordinary, I would call them high calibers. I’m thinking about the business scientist we are hiring. I’m thinking about the PhDs we are hiring to drive algorithm in Accenture Analytics. And I’m thinking as well about some leading edge designers, we all hiring for Fjord, our design group, at Accenture.”

One of hte largest enterprise app developers, strong in analytics

“we are now one of the largest apps, enterprise apps developer in the world. All this apps development is done in our centers from India as an illustration. And they are marvelous app developer from India and we are leveraging part of the global deliver network for digital to deliver apps services. I’m thinking about Analytics we have as well very strong people in our delivery centers, who are everyday doing analytic work from the GDN and from a lower cost location.”

Saw better performance in Brazil because positioned correctly: digital and cloud

“I guess what we see in Brazil, likewise the other markets is our strategy of rotating the Accenture business to be more digital rich and cloud services rich what we turn now to call the new if you will is paying off. So again, all the markets that have a potential issue if you find the right entry point. And today the right entry point around the world is this unique combination of digital-related services and cloud-enabled services. So if you’re digital rich and cloud rich then you have probably the right formula to drive more growth in each and every market.”

Barnes and Noble FY 4Q15 Earnings Call Notes

Spinning off Barnes and Noble Education

“Additionally, as part of the separation and as announced in our press release this morning, we expect that I will be named Executive Chairman of Barnes & Noble Education when the pending spin-off becomes effective.”

The literate world is excite for Go Set a Watchman

“The literate world is anxiously awaiting the publication of Harper Lee’s, Go Set a Watchman. This rediscovered work, which was initially submitted to Ms. Lee’s publishers before To Kill a Mockingbird and was assumed to be lost features the same characters from that book from 20 years later.’

Dr Suess also has a new book

“We’re also very excited about another recently discovered manuscript that will delight an entirely new generation of readers, What pet should I get? It’s a first original Dr. Seuss’ book since 1990 and includes a very — it’s very own full text — his very own, excuse me, full text and illustrations.”

So does literary genius E.L. James

“Also E. L. James surprised all of her fans and book sellers too by announcing her new book Grey, which is a follow-up to her 50 Shade series Instagram, just two and half weeks ahead of its publication date.”

Sales down 9%

“Consolidated sales were $1.2 billion for the quarter and $6.1 billion for the full year. Retail sales decreased 9% to $869 million for the quarter.”

Searching for a CEO of retail after the spin

“. One thing I will say about that as we do have a search and very pleased with the results of that, that search we think it will be successfully completed in the near term.

We’re not to be for some reasons that would not hold up the spin, the retail management team is very strong and that’s not going to be a factor in the timing of the spin.”

JS Conference Call Notes MON, IHS, ACN

Jeremy S., an investment analyst in Southern California, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Jeremy has read this week.

 

 

Monsanto (MON) CEO Hugh Grant says merging their business with competitor Syngenta would create the world’s largest agricultural seeds company and gain significant synergies

“This would give us an even more precise approach to every acre creating immediate and long-term revenue growth opportunities through a diverse range of optimized, integrated solutions. Near term by combining Syngenta’s leading crop protection portfolio with Monsanto’s leading seeds footprint we would have the unique ability to provide leading science based recommendations of integrated seeds, traits, and crop protection solutions.  This combination would also allow us to more fully participate in the value creation from our crop protection solution recommendations. “

He added that big data will play an increasing role in precision agriculture in the coming years

“Longer term and unique to Monsanto, we will be able to unlock a new data driven approach to provide farmers even more valuable real time insights about their crops with our Climate platform. The information will provide actionable crop protection recommendations to farmers to maximize productivity, while ensuring inputs are applied in a precise manner to meet society’s broad goal to preserve and protect our environment.”

Monsanto (MON) CEO Hugh Grant said he expects to double ongoing earnings per share by 2019.  This type of pledge has the potential to be dangerous as it can cause perverse incentives by the salesforce to channel stuff or it can force senior management to stick to their publically stated strategy as opposed to adapting to shifting market dynamics

“Optimized spending and the milestones that we delivered this year reinforce our confidence in our five-year plan to more than double our fiscal year 2014 ongoing earnings per share by 2019. While we believe the combination with Syngenta as optimal to several customers for the long-term and would drive even greater growth in long-term earnings per share, our current portfolio and our pipeline leads the industry and provides multiple levers to drive our long-term growth projections.”

Monsanto (MON) COO Brett Begemann said the agricultural sector remains challenged

“There is no doubt it has been a tough year with the macro pressures facing global agriculture, namely our retreat and corn acres, currency and pressured commodity prices.  We fully expect the macro environment to recover and are well positioned to participate when it does.  That said, as we develop our operational plans for next year, we are taking a clear eyed view and we expect that many of these headwinds will continue into fiscal year 2016.”

 

 

 

IHS CEO Jerre Stead said the energy market they sell their software into saw softening demand during the quarter due to the recent downturn

“In terms of our core industries and horizontal workflows , resources which includes our energy and chemicals team, continues to experience moderating subscription growth due to industry dynamics.”

And he elaborated that there is plenty of room for improvement in streamlining the company’s operations

“It’s clear that we’ve got too many cooks in the kitchen.  There is not clear simple lines of accountability or simple way to think about it is I want to be able to go to one person and get the answer everything of we need to do and will do on a global basis on the products in each of those industrial areas”

IHS CEO Jerre Stead is taking steps to reduce share dilution of the company due to employee stock option plans

In addition to improving shareholder return from planned stock buybacks, we’re also planning to reduce dilution from shares granted in our stock based compensation program. We’ve made good progress in reducing our stock based compensation expense over the last year and half. We remain committed to continuing this effort and will work to reduce our 2017 annual share purchase by approximately half of our current year level.  Due to the accounting treatment of stock based compensation expense, which would cost the expense of the underlying share grants to be recognized over the vesting period, we expect annual declines in expense over the coming years in the high single digits.”

He wants the company to remain financially disciplined on acquisitions

“I don’t want us to get fooled like I’m watching some other companies today with cheap money buying something that’s accretive because the money is cheap, that wouldn’t be long term.”

 

 

 

Accenture (ACN) CFO David Rowland said the company remains a preferred customer for some of the world’s largest corporations 

“We had 12 clients with bookings in excess of $100 million, given us 33 year-to-date, which signifies the unique and trusted relationship that we have with many of the largest companies in the world.”

And the firm saw continued strength in their technology and healthcare digital practices

“Turning to the operating groups, Communications, Media and Technology continued to lead all operating groups was 17% growth in the quarter. While growth continued to be broad-based, it was most significant in North America.  The drivers across CMT continued to be digital-related services, cost rationalization, several large transformational projects and demand for network-related services.  Clients continue to be focused on digital-related services and operational effectiveness as they position themselves to be more competitive in the marketplace.”

One area of their business that has been growing substantially over the last few years is building mobile apps for corporate clients

“With Accenture Mobility, it is now one of the world’s leading developers of mobile apps, leveraging the capabilities of our global delivery center. We have now developed over 1000 apps across nearly all industries.”

Steelcase FY 1Q16 Earnings Call Notes

Longer time between orders and shipments because customers are taking on more ambitious changes in their work environments

“We have spoken before about how in the Americas, we are seeing a longer period between orders and shipments. As we expected, that pattern continued this quarter. We are getting a better sense of why this is happening. It is clear that customers are taking on more ambitious changes to their work environments instead of simply refreshing the existing design and these changes often involve more construction, even when they are only renovating an existing space.”

Construction issues unrelated to furniture. Also dealers can see they need to reserve capacity

“These customers place orders earlier than normal since their design is complete earlier and planned shipment dates of furniture are often delayed because of construction issues not involving furniture. There are other reasons as well. Today, we have better tools than in the past for our dealers to see our production capacity, and with demand increasing, they have every reason to place their orders early to reserve capacity in the system.”

Demand from middle markets has grown faster than large customers

“Our analysis of BIFMA data and our own order patterns suggest demand for midmarket customers may have grown faster than from the larger customers.”

Feeling good about North America,Europe and Middle East are question marks

“Overall, we are feeling good about how our Americas business is developing for the rest of this year. As for the European economy, questions remain of course about Greece and the impact of Russian sanctions. Our business in Eastern Europe has been affected by the political turmoil and our Middle East business is softer, because of lower oil prices.”

Seeing strength in export markets in Western Europe though

“However, we are also seeing signs of strength in export markets in Western Europe and our order patterns in many of those countries are reflecting that strength.”

Activity by vertical

“Across vertical markets in the Americas, orders grew in the federal government, insurance, financial services, technical professional, state and local government and manufacturing sectors, while information technology and healthcare declined modestly against the prior year.

Orders from the energy sector grew modestly in the first quarter following a significant decline in the previous quarter. We expect this sector to be challenged for the foreseeable future while oil prices remain depressed. Most energy sector construction projects that were well underway are being completed, but many future projects have been postponed and continue [ph] considerably.”

We are able to insource capabilities that we had previously outsourced

“In the Americas, we went through a shift towards outsourcing for a while. This is going back maybe 10 years now. While we were in a transition from the very vertically integrated model to the model we have today. Now, interestingly, and now that we have reached higher level of efficiency in our Americas footprint, we have been able to in-source some of the things that we had previously outsourced.”

Companies with 25-50m in revenue are leading the growth

“if you double-click and triple-click on some of the data, what you see is that the companies that are in the $25 million to $50 million of revenue size are the ones that are leading the growth and that suggest to us that it is possible that that demand is coming from smaller company, and with small company starting to come into the recovery.

That potential that we could be seeing, you know, an acceleration of the cyclical recovery, but I very intentionally use the word may in my quote, because we do not really know, but we like what we are seeing.”

We don’t think the competitive environment is any different than it has been

“The industry is always competitive and in the Americas that has always been true as long as I have been in these various roles. We have talked about that. There are some great manufacturers out there and we compete. I do not really feel it is being any different today than it ever was. There were some saber-rattling perhaps, but if you look at what is actually happening in the marketplace, we have not seen evidence of that.”

You win because of products and relationships. You lose on the same things, but people will tell you price

“you win, because you have got the right products, you have got the right relationships. When you lose, you might be told you lost because of price, but really you lost because you did not have the right relationships and the right products, so that is our philosophy on this.’

Harder to have price competition in an environment with a lot of small projects

” the idea of price competition probably becomes more acute when you have some very large projects that are defining the marketplace. That was maybe more true a couple of years ago than it is today. Today it is much more broadly balanced between projects continuing smaller business and so the idea that you are going to go out and try to change your market share dramatically by being very aggressive on a project – does not work as well when there are not many projects out there.”

Herman Miller FY4Q15 Earnings Call Notes

Initiatives to reignite North American growth are progressing

” the initiatives we outlined last quarter reignite the growth of our North American segment are progressing at an impressive pace and while it is unlikely these actions impacted our fourth quarter sales in a significant manner, we are pleased by the positive feedback from our dealers and among our sales teams.’

Purchased design within reach

“Today, Design Within Reach has a total of 35 studies and outlets, more fewer than we began with, but has increased its retail square footage by 11%.

Going forward, we’ll be aggressive at our studio conversion plans with six additional locations anticipated for fiscal 2016. The second value driver we outlined was our intent to increase Design Within Reach has made some exclusive product designs including Herman Miller brand products.”

$169m in FCF

“We generated $169 million in cash flow from operations and achieved a return on invested capital of 20% for the full year. We also made significant progress paying down the debt we incurred to fund the Design Within Reach acquisition. ”

Expect continued currency headwinds in FY 16

“Considering current exchange rate forecast, we expect these year-on-year headwinds to continue with the most significant impacts expected in the first half of the fiscal year and extending into the earlier part of Q3. We estimate that full year impact on sales will range between $25 million and $30 million with a corresponding impact on EPS of between $0.10 and $0.12 per share relative to the fiscal 2015 comparison.”

See aggressive competition

“while our gross margins over the past several quarters reflect a generally stable discounting environment, we continue to see aggressive competitive pricing within key markets and certain product categories and project sizes. While pricing is only one aspect of our overall value proposition, this is an area we are watching closely as we move forward.’

We think Restoration Hardware’s modern entry helps people see the market that we’re the leader in

“we think it’s probably, it’s nothing else but the validation of our strategy and the belief that modern as a category within residential is growing. And one that we say, more folks validating that in fact and talking more about modernism and the attraction to it, we think does nothing but actually, probably expands the consumers’ knowledge of that segment and as they expand the knowledge teams, we believe we are world’s leader in authentic modern, we believe that that move simply helps us – they’ll help us see the market that we believe we are the leader in.”

We don’t need to respond directly to RH

we don’t believe we have any need to do any direct response to them other than the things that we already have planned for Design Within Reach in terms of expanding our offer, expanding the number of studios that we have, implementing the large studio model which enables people to envision better their places. Those things that we have planned will continue to be on our agenda regardless of what Restoration Hardware or anyone else does.”

Pricing pressures are greatest in areas of the business where it’s difficult to differentiate

“he greatest pressures are in those areas of the business where we start before, where it’s getting increasingly difficult to differentiate. So you’ve got ongoing pressure around some of the benching type applications. Case goods remains an area where it’s highly competitive and other areas like, even just simple product categories like tables, so those are been the ones I’d point to”