Company Notes Digest 12.18.15

Each week we read dozens of transcripts from earnings calls and presentations as part of our 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.

This week’s post: Liftoff

The Fed raised rates by 1/4 point this week. In Yellen’s words this marks “the end of an extraordinary seven year period.” It’s not clear what happens next. The Fed expects to move gradually, but there is growing softness in the US economy.  Can an economic expansion re-ignite with the Fed tightening? Yellen seems to think yes.

This will probably be our last post of 2015, so we’d like to wish our readers a Merry Christmas and a Happy New Year. See you all in 2016!

The Macro Outlook:

This was a historic week

“This action marks the end of an extraordinary seven-year period” —Federal Reserve Chair Janet Yellen (Central Bank)

The Fed moved for two reasons: 1) they see deflation as transitory 2) monetary policy operates with a lag

“With inflation currently still low, why is the Committee raising the federal funds rate target? As I have already noted, much of the recent softness in inflation is due to transitory factors that we expect to abate over time, and diminishing slack in labor and product markets should put upward pressure on inflation as well. In addition, we recognize that it takes time for monetary policy actions to affect future economic outcomes.” —Federal Reserve Chair Janet Yellen (Central Bank)

And while the Fed recognizes that global growth has slowed, the US has stayed strong

“We have been concerned, as you know, about the risks from the global economy. And those risks persist, but the U.S. economy has shown considerable strength. Domestic spending that accounts for 85 percent of aggregate spending in the U.S. economy has continued to hold up. It’s grown at a solid pace.” —Federal Reserve Chair Janet Yellen (Central Bank)

Is there something the Fed isn’t seeing though?

Restoration Hardware’s CEO thinks that the performance they’re seeing should get the Fed’s attention

“the areas that are affected by oil…the Texas markets specifically…In the first half of the year, they were pulling down total Company sales a little under 2 points…In Q3, that accelerated to 4 points, and that’s meaningful, right? It’s not just meaningful to us, I’d say it’s meaningful to anybody who’s thinking about what the US economy ought to look like…It makes me think hey, should we be calling Yellen…and saying, let us tell you what we are seeing” —Restoration Hardware CEO Gary Friedman (Home Furnishing)”

Damage from falling oil prices and strong dollar continues to creep across the industrial economy

“oil has fallen even further than what most people thought was the bottom, that is now having a significant impact into what we’re seeing into the electrical distribution channel around industrial…we now have an industrial challenge that we were fearing and now we know.” —Pentair CFO John Stauch (Industrial Parts)

The industrial slowdown has become broad based

“I will more categorize it maybe broad based versus saying there was one specific area that’s slowed more than the other. So, I think it was broad-based, generally speaking” —3M CEO Inge Thulin (Conglomerate)

There has been a slowdown in consumer electronics too

“we see a slowdown, what I think is more of a global phenomenon in consumer electronics. And I think we all have seen some reports coming out lately that if you go the whole way from smartphones to tablets and TVs” —3M CEO Inge Thulin (Conglomerate)

Economic weakness isn’t acute at this point though

“When you go back six years ago, the economic downturn was pervasive it’s unlike anything any of us who are in business have seen in our career…I think what we are facing now is just is a mixed low growth environment with some areas that are experiencing some pockets of growth and other areas that are flattish” —Wesco CEO John Engel (Industrial Distributor)

There’s still growth in healthcare and consumer

“You still see good growth in, generally speaking, in healthcare and consumer around the world. So, those domestic markets are growing well and we capitalize on that. So, health care is one of the highest growth rates for us going into next year with a highest margin that we say as well.” —3M CEO Inge Thulin (Conglomerate)

E-Commerce is booming ahead of Christmas

“we’ve experienced record-breaking demand during this peak season largely driven by the rapid growth of e-commerce. Our busiest days during peak have exceeded our forecast and more than double our average daily volume and should be noted that our busiest days this year are approximately double what they were just about eight years ago.” —FedEx EVP Mike Glenn (Package Logistics)

And there are benefits to falling commodity prices too

“clearly we have benefited from commodities we mentioned that in the prepared remarks. Commodity pricing has been a big benefit for us…steel and steel component parts are big driver in our overall cost of goods sold and those levels are at levels that we haven’t seen since the early 2000s” —Herman Miller CFO Jeff Stutz (Office Furniture)

Even if the economy is slowing, policy still remains accommodative

“As I have often noted, the importance of our initial increase in the target range for the federal funds rate should not be overstated: Even after today’s increase, the stance of monetary policy remains accommodative” —Federal Reserve Chair Janet Yellen (Central Bank)

Yellen doesn’t believe that expansions die of old age

“I think it’s a myth that expansions die of old age. I do not think that they die of old age. So the fact that this has been quite a long expansion doesn’t lead me to believe that it’s one that has, that its days are numbered.’ —Federal Reserve Chair Janet Yellen (Central Bank)

They die because of “shocks”

“But the economy does get hit by shocks, and they were both positive shocks and negative shocks. And so there is a significant odd, you know, probability in any year that the economy will suffer some shock that we don’t know about that will put it into recession. And so, I’m not sure exactly how high that probability is in any year but maybe at least on the order of 10 percent. So yes, there is some probability that that could happen and of course we’d appropriately respond, but it isn’t something that is fated to happen because we’ve had a long expansion” —Federal Reserve Chair Janet Yellen (Central Bank)

Central banks may kill expansions, but only when they don’t tighten early enough and let inflation get out of control

“when you say that central banks often kill them, I think the usual reason that has been true is that central banks have begun too late to tighten policy, and they’ve allowed inflation to get out of control. And at that point, they have had to tighten policy very abruptly and very substantially, and it’s caused a downturn, and the downturn has served to lower inflation. So, if you don’t mind my flipping the question on you, I would point out that it is because we don’t want to cause a recession through that type of dynamic at some future date that it is prudent to begin early and gradually.” —Federal Reserve Chair Janet Yellen (Central Bank)

That theory didn’t work out well for Marriner Eccles in 1937 though. He thought he was staying accommodative too.

“I have been and still am an advocate of an easy money policy…The Federal Reserve System has exerted the greatest possible influence to bring about and maintain easy money conditions as a necessary integral part of the recovery movement. An ample supply of funds at reasonable rates exists and will exist after the increased reserve requirements take full effect on May 1.” —Marriner Eccles, Federal Reserve Chair, March 1937 (six months before the start of “Depression II”)

Financials:

The Fed is watching financial developments closely

“we have been and will continue to track developments in financial markets very carefully. I would say that I think we have a far more resilient financial system now than we had prior to the financial crisis” —Federal Reserve Chair Janet Yellen (Central Bank)

They sound prepared to accept some short term volatility

“what we’re looking at here is the longer term economic outlook, are we seeing persistent changes in financial market conditions that would have…a significant bearing, on the outlook…but it’s not short-term volatility in markets…if they move in persistent and significant ways that are out of line with the expectations that we have, then of course we will take those in to account” —Federal Reserve Chair Janet Yellen (Central Bank)

They also don’t sound too concerned about developments in high yield markets

“Third Avenue Focused Credit Fund was a rather unusual open-end mutual fund. It had very concentrated positions in especially risky and liquid bonds, and it had been facing very significant redemption pressures” —Federal Reserve Chair Janet Yellen (Central Bank)

The Fed still anticipates eventually being able to shrink its balance sheet

“in our normalization principles which are in effect, the Committee stated that we eventually want to operate with a much smaller balance sheet than we have at present. We would reduce the size of the balance sheet to essentially whatever size we needed to manage monetary policy effective– in an effective and efficient way.” —Federal Reserve Chair Janet Yellen (Central Bank)

Consumer:

In retail, the fourth quarter is war

“From a tactical short-term view, right, is every fourth quarter a war? Absolutely…you have got to be ready to fight the fights, and you have to be into the details, and if you want to win in Q4, you have got to be highly engaged, and you’ve got to be willing to improvise and to adapt” —Restoration Hardware CEO Gary Friedman (Retail)

Restoration Hardware said this was the most promotional environment that they’ve seen

“we track all the competitors’ promotions, and we know what everybody’s doing…when we look at the data internally, it is the most promotional environment we’ve seen, meaningfully so.” —Restoration Hardware CEO Gary Friedman (Retail)

Traffic patterns between Thanksgiving and Christmas have unfolded as usual, but at a lower base

“Starting really with the Thanksgiving weekend, our results over that weekend were pretty much what you heard people report in the industry, which was very good business online…and a pull back in store traffic. What’s happened since then is from that sort of lower base if you like, the Christmas cadence is pretty much what we normally see. We’re getting day-over-day, week-over-week growth as we approach the biggest weekend of the year, which is coming up, but it’s still right below last year.” —Pier One CEO Alex Smith (Retail)

We hope you got your e-commerce shopping done because the deadline to ship by Christmas has almost passed

“tomorrow I think or today is the last day we ship for Christmas. So the eCom participation does fall now for the next little while until after Christmas and then it will pick up again in January and that’s obviously just factored into our sales.” —Pier One CEO Alex Smith (Retail)

Industrials:

GE anticipates that digitally connected equipment will help drive productivity for their customers

“as these sensors and systems generate more data, that data is going to…go to our customers achieving what we call the power of 1%. If you can generate 1% fuel performance on GE’s installed base of jet engines that gives our customers $2 billion to $3 billion of profit every year. Small changes mean a lot. It’s all about the data.” —GE CEO Jeff Immelt (Conglomerate)

Materials, Energy:

Energy companies may be pulling back spending on shorter term projects, not just longer term ones

“we’ve now seen short cycle really pull back. So what was a capital spending cuts of our customers on the longer cycle projects we’ve seen now a fairly significant pullback in the short cycle orders here in the end of 2015.” Pentair CFO John Stauch (Industrial Parts)

2016 will probably be another tough year for the mining industry

“The mining industry in 2016 will be defined by strained cash flows, further austerity measures and asset consolidation. The net effect will be the third consecutive year of double-digit decline in capital spending.” Joy Global CEO Ted Doheny (Mining Equipment)

Miscellaneous Nuggets of Wisdom:

The highest bidder doesn’t always win a deal

“when we compete with a private equity firm that buys and sells buy the pound every three to five years, managements really find that very stressful. So when they have a say as some input we are always preferred buyer. When a seller who wants to have a liquidity event wants to protect his employees continue running the – very often continue in the position of presidency of his company, we are definitely the preferred buyer.” —HEICO CEO Larry Mendelson (Aerospace Parts)

Good partners stay transparent even when the news is disappointing

“I don’t mean to make anybody too worried about this stuff, right? But sometimes maybe I tend to be overly transparent, because look, we’ve got shareholders and supporters on the phone, and I think it’s important to know how we’re playing the game…We can speak less about stuff and pretend like everything’s just always great. I don’t think – I don’t think that’s the right way to build partnerships. I think, we tell you when things are working, we tell you when things are not working, we tell you when we make changes, we tell you when the changes are working, we tell you when the changes are not working.” —Restoration Hardware CEO Gary Friedman (Retail)

Full transcripts can be found at www.seekingalpha.com

Pentair 2016 Outlook Call Notes

Easy to get lost in negatives but have positives too. Residential and commercial should grow again next year, but maybe a little less than in 2015

“As we reviewed in our investor meeting last month several of our businesses face a number of economic challenges, it’s easy to get lost in all the negative headlines these days. We also have a few positives to highlight. Starting with our largest vertical Residential & Commercial we’re expecting another year of growth, albeit maybe a little less bullish than we experienced in 2015.”

Industrial is the biggest wildcard next year

“Industrial is perhaps the biggest wildcard next year, following a yearlong capital spending freeze in 2015. The recent rating in the ISM index suggest that there’s no near term recovery in sight but similar to energy we’ll watch closely to see if maintenance spending returns”

2015 ending with another sharp drop in oil

“2015 is ending like last year, with a sharp drop in the price of oil, which will undoubtedly cause more trepidation in our customer’s plans.”

We saw industrial down in 4Q worse than we anticipated

“we’ve seen short cycle certainly in Valves & Controls within energy generally, but then we saw it in industrial being down low single digits. The fourth quarter was considerably worse than that, and we think it’s — we did anticipate some of it, but it is worse than we anticipated.’

John Stauch

We’ve seen energy customers cutting back on more short cycle projects now

“If we said what’s new and we label it there on page six, it’s the fact that we’ve now seen short cycle really pull back. So what was a capital spending cuts of our customers on the longer cycle projects we’ve seen now a fairly significant pullback in the short cycle orders here in the end of 2015.

The fall in oil has led to an industrial challenge that we were fearing and now we know

” mean oil has fallen even further than what most people thought was the bottom, that is now having a significant impact into what we’re seeing into the electrical distribution channel around industrial especially with Canada being a really weak point. And so if you take a look at our customer’s forecast, our distributor — the electrical distribution forecast out there and you take a look at current order rates and you extrapolate those in the next year, we now have an industrial challenge that we were fearing and now we know. So that’s the way I would described it. As Randy said the residential commercial side of the business is still in growth mode, it’s the industrial and energy that are really starting to pull down the overall growth rates.’

Accenture FY 1Q16 Earnings Call Notes

Pierre Nanterme

Clients are clearly shifting investment from legacy systems to new

“I can characterize only the trend is clear that you see a shift from investment in the legacy, if you will, to investment of the new. I tend to believe that the shift is increasing and as reflected, growth in digital related services. Now I don’t have any market data that would characterize the percentage of the shift. There it’s getting bigger and indeed we could take advantage of this shift in term of budget, as reflected with our 20% plus growth in digital related services.”

David Rowland

Expect 6-9% local currency growth in FY 16

“For the full fiscal ‘16, we now expect our net revenue to be in the range of 6% to 9% growth in local currency over fiscal ‘15. For operating margin, we continue to expect fiscal year ‘16 to be 14.6% to 14.8%, a 10 to 30 basis points expansion over adjusted fiscal ‘15 results.”

Herman Miller FY 2Q16 Earnings Call Notes

Brian Walker

Information on the North America consumer is somewhat mixed

“As you know information on the North America consumer is somewhat mixed, as with the contract market some geographic areas are being impacted by the dislocations in the energy complex and the exceptionally strong dollar has reduced some of the appetite for vacation home buyers from some parts of the globe, while these factors are concerning, we believe strong employment, expanding wages and lower interest rates show to go well for investors in housing and furniture.”

There are more projects on the mid and smaller side, not a lot on the large

“Well first of all from everything we can read from dealer, sales people and those kind of things and looking at project activity. We feel pretty good about where that is, activity levels have remained strong and we think we are in a pretty good spot competitively. I’d say if there is anything that you will hear out there certainly the size of projects continues to be on mid to smaller size there is not as many very-very large things out there at least that we can see. ”

ERP conversions are always difficult

‘ERP conversions are always difficult is the best way to describe it so one of the reasons we talked about it on the first quarter call is to how we’re going to go through this. We like always you believe you’ve done everything that you can to prepare, I’ll say as these things go it was actually a pretty good one, but it still had more disruptive impact particularly at the sales level of what was going on to the sales team.”

Jeff Stutz

Commodity prices have been a big benefit for us

“clearly we have benefited from commodities we mentioned that in the prepared remarks. Commodity pricing has been a big benefit for us, I mean, that’s not unique to Herman Miller of course but that’s been very helpful as you know as we’ve talked in the past steel and steel component parts are big driver in our overall cost of goods sold and those levels are at levels that we haven’t seen since the early 2000s, right, so that’s been a big help now intertwined in that a bit that is the currency drag that we have been feeling and of course we feel that as an North American segment in our Canadian business.”

FOMC December 2015 Press Conference Notes

This marks the end of an extraordinary period

“This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression. It also recognizes the considerable progress that has been made toward restoring jobs, raising incomes, and easing the economic hardship of millions of Americans. And it reflects the Committee’s confidence that the economy will continue to strengthen. ”

The process of normalizing is likely to proceed gradually

“As I will explain, the process of normalizing interest rates is likely to proceed gradually, although future policy actions will obviously depend on how the economy evolves relative to our objectives of maximum employment and 2 percent inflation. ”

Why is the Fed raising rates with low inflation? Transitory factors and time lag of decisions

“With inflation currently still low, why is the Committee raising the federal funds rate target? As I have already noted, much of the recent softness in inflation is due to transitory factors that we expect to abate over time, and diminishing slack in labor and product markets should put upward pressure on inflation as well. In addition, we recognize that it takes time for monetary policy actions to affect future economic outcomes. Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly at some point to keep the economy from overheating and inflation from significantly overshooting our objective. Such an abrupt tightening could increase the risk of pushing the economy into recession.”

Policy remains accommodative even after today’s increase

“As I have often noted, the importance of our initial increase in the target range for the federal funds rate should not be overstated: Even after today’s increase, the stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation”

How we’re implementing the policy:

“in conjunction with our policy statement, we also released an implementation note that provides details on the tools that we are using to raise the federal funds rate into the new target range. Specifically, the Board of Governors raised the interest rate paid on required and excess reserves to 1/2 percent, and the FOMC authorized overnight reverse repurchase operations at an offering rate of 1/4 percent. Both of these changes will be effective tomorrow. To ensure sufficient monetary control at the onset of the normalization process, we have for the time being suspended the aggregate cap on overnight reverse repurchase transactions that has been in place during the testing phase of this facility. Recall that the Committee intends to phase out this facility when it is no longer needed to help control the federal funds rate. ”

Global risks persist but the US economy has shown considerable strength

We decided to move at this time because we feel the conditions that we set out for a move, namely further improvement in the labor market and reasonable confidence that inflation would move back to 2 percent over the medium term, we felt that these conditions had been satisfied. We have been concerned, as you know, about the risks from the global economy. And those risks persist, but the U.S. economy has shown considerable strength. Domestic spending that accounts for 85 percent of aggregate spending in the U.S. economy has continued to hold up. It’s grown at a solid pace. ”

We also recognize that monetary policy operates with lags

“And we recognize that monetary policy operates with lags. We would like to be able to move in a prudent, and as we’ve emphasized, gradual manner. It’s been a long time since the Federal Reserve has raised interest rates, and I think it’s prudent to be able to watch what the impact is on financial conditions and spending in the economy and moving in a timely fashion enables us to do this. ”

It’s important not to overblow the significance of this first move

“Again, I think it’s important not to overblow the significance of this first move. It’s only 25 basis points. It–monetary policy remains accommodative. ”

Neutral is not a policy goal, it’s an assessment

“Neutral is not a policy goal. It is an assessment. It’s a benchmark that I think is useful for assessing the stance of policy. Neutral is essentially a stance of policy, a level of short-term rates, which if the economy were operating near its potential–and we’re reasonably, not quite at that, but reasonably close to it–it would be a level that would maintain or sustain those conditions. So if this point, policy, we judge to be accommodative. ”

We would like to avoid a situation where we are forced to tighten abruptly

“we recognize that policy is accommodative, and if we do not begin to slightly reduce the amount of accommodation, the odds are good that the economy would end up overshooting both our employment and inflation objectives. What we would like to avoid is a situation where we have waited so long that we’re forced to tighten policy abruptly, which risks aborting what I would like to see as a very long-running and sustainable expansion. ”

We recognize that inflation is well below our 2% goal

“we recognize that inflation is well below our 2 percent goal. The entire Committee is committed to achieving our 2 percent inflation objective over the medium term. Just as we want to make sure that inflation doesn’t persist at levels above our 2 percent objective, the Committee is equally committed–this is a symmetric goal–and the Committee is equally committed to not allowing inflation to persist below our 2 percent objective’

I’m not going to give you a simple formula for what we need to see to raise rates again

“I’m not going to give you a simple formula for what we need to see on the inflation front in order to raise rates again. We’ll also be looking at the path of employment as well as the path for inflation. But if incoming data were, led us to call into question the inflation forecast that we have set out–and that could be a variety of different kinds of evidence–that would certainly give the Committee pause”

All oil prices need to do is stabilize to stop being a headwind to inflation

“First, let me say with respect to oil prices, I have been surprised by the further downward movement in oil prices, but we do not need to see oil prices rebound to higher levels in order for the impact on inflation to wash out. So all they need to do is stabilize. I believe there is some limit below which oil prices are unlikely to rise. ”

If the economy were disappointing, we would pursue a more accommodative policy

Well, you know, if the economy were disappointing, we– you know, our actions wouldn’t purely be based on inflation, we would also take employment into account. So I can’t give you a simple answer but we would pursue a more accommodative policy because we do certainly are committed to achieving 2 percent over the medium term”

We will watch financial developments, but we’ll need to see persistent changes in conditions, not short term volatility

“we will watch financial developments, but what we’re looking at here is the longer term economic outlook, are we seeing persistent changes in financial market conditions that would have a bearing, a significant bearing, on the outlook that we would need to take account in formulating appropriate policy. Yes we would, but it’s not short-term volatility in markets. ”

We will take into account if financial markets move in a way that is significantly out of line with our expectations

“we obviously will track carefully the behavior of both short and longer term interest rates, the dollar, and asset prices, and if they move in persistent and significant ways that are out of line with the expectations that we have, then of course we will take those in to account”

I feel confident about the fundamentals driving the US economy

“let me start by saying that I feel confident about the fundamentals driving the U.S. economy, the health of U.S. households and domestic spending. There are pressures on some sectors of the economy particularly manufacturing and the energy sector reflecting global developments and developments in commodity markets and energy markets, but the underlying health of the U.S. economy, I considered to be quite sound.”

*I think it’s a myth that expansions die of old age*

“I think it’s a myth that expansions die of old age. I do not think that they die of old age. So the fact that this has been quite a long expansion doesn’t lead me to believe that it’s one that has, that its days are numbered.”

The economy gets hit by shocks. There’s about a 10% chance one could happen in any given year

“But the economy does get hit by shocks, and they were both positive shocks and negative shocks. And so there is a significant odd, you know, probability in any year that the economy will suffer some shock that we don’t know about that will put it into recession. And so, I’m not sure exactly how high that probability is in any year but maybe at least on the order of 10 percent. So yes, there is some probability that that could happen and of course we’d appropriately respond, but it isn’t something that is fated to happen because we’ve had a long expansion”

We do eventually want to operate with a much smaller balance sheet

“in our normalization principles which are in effect, the Committee stated that we eventually want to operate with a much smaller balance sheet than we have at present. We would reduce the size of the balance sheet to essentially whatever size we needed to manage monetary policy effective– in an effective and efficient way. ‘

We don’t exactly know what size the balance sheet will be eventually

“I can’t tell you exactly what size of balance sheet we will determine is the best to operate in an efficient and effective manner. It might be somewhat larger than the very tiny quantity of reserves that we had in pre-crisis. We’ve not determined that. We’ve also said that we will– we expect to reduce the size of our balance sheet over time by ceased diminishing or ceasing entirely reinvestments”

We would like to be able to lower Fed funds in an adverse shock

“one factor that we’ve talked about is the desirability of having some scope to respond to an adverse shock to the economy by lowering the federal funds rate. And so, it would be nice to have a buffer in terms of having raised the federal funds rate to a certain extent to give us some meaningful scope to respond. ”

We don’t expect to cease reinvestment quickly

“it means that this is not something that we expect to be turning to, to cease reinvestment very quickly”

We think Third Avenue was an unusual case

“Third Avenue Focused Credit Fund was a rather unusual open-end mutual fund. It had very concentrated positions in especially risky and liquid bonds, and it had been facing very significant redemption pressures. My understanding is that the SEC is in touch with Third Avenue. And as you probably know, the SEC has proposed some reforms to address what’s a structural problem of liquidity mismatch in open-end mutual funds. ”

We are watching very carefully, but I think financial markets are much more resilient now

“So we continue to believe that financial conditions are supportive of economic growth. We will be–we have been and will continue to track developments in financial markets very carefully. I would say that I think we have a far more resilient financial system now than we had prior to the financial crisis and highly capital banks that are well situated to support corporate lending. ‘

Central banks kill expansions because they tighten too late. That’s exactly why we’re tightening early

“when you say that central banks often kill them, I think the usual reason that that has been true when that has been true is that central banks have begun too late to tighten policy, and they’ve allowed inflation to get out of control. And at that point, they have had to tighten policy very abruptly and very substantially, and it’s caused a downturn, and the downturn has served to lower inflation. So, if you don’t mind my flipping the question on you, I would point out that it is because we don’t want to cause a recession through that type of dynamic at some future date that it is prudent to begin early and gradually. ”

This move reflects our confidence in the economy

“the first thing that Americans should realize is that the Fed’s decision today reflects our confidence in the U.S. economy, that we believe we have seen substantial improvement in labor market conditions, and while things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement. ”

There are some upside risks in the economy too

“There are upside risks to the economy and I think, you know, we tend to focus on the downside risk, it’s right to do so. We want to be careful of that downside risks. But consumers are in much healthier financial condition. Their income prospects have improved. We see them buying a lot of cars. Housing has been recovering very slowly. But the demographics would point to considerable upside for residential investment. My mainline forecast is for gradual recovery but there is upside risk there.

While we’re not going to act mechanically, we will probably end up making evenly spaced hikes

“I do want to emphasize that while we have said gradual, gradual does not mean mechanical evenly timed, equally-sized interest rate changes. So, that is not what the Committee means by it. My guess is that the economy will progress in the manner that is not sufficiently even, that we will decide to make evenly spaced hikes.”

Oracle FY 2Q16 Earnings Call Notes

Mark Hurd

A sample of customer wins in PaaS vs. companies like Workday

Now, I’m going to review a bunch of names. I just want you to get a context for sort of the brands we closed in the quarter. In ERP, Blue Shield of California, DHL, FDIC, McKesson, Toshiba, Mitsubishi Electric, [indiscernible], a very large phone company in France, a very large industrial manufacturing company, perhaps the largest in the world with over a $130 billion of revenue. In HCM, AAA, Allergan, City of Aspen, Crocs, think of many of these now that I’m naming again beats against Workday, Exelon, Kaiser, McGraw Hill, Genesis actually a replacement of Workday, Brocade, More HCM, the United Nations, Stanford University. In CX, AmBev – CXP and being customer experience, AmBev, Expedia, Halliburton, Lufthansa, Maersk, Motorola Solutions, Sears, Toshiba Mitsubishi and United Airlines. In PaaS, Anthem, IKEA, Kaiser, Kia Motors, Maersk, Qantas, Symantec and Windstream, I could have named a lot more.”

Lawrence Ellison

Complete suite cloud applications

“Oracle’s strategy is to differentiate our cloud products from our competitors. In SaaS, we differentiate by delivering the industry’s most complete suite cloud application. In customer experience, we offer a CX suite made up of sales, service, marketing, e-commerce, and a lot more. In human capital management, we have an HCM suite made up of human resources, recruiting, training and so on. In Enterprise Resource Planning, we are delivering an ERP suite net of a financials, supply chain, manufacturing and all the rest. Oracle is the first company to mark it a complete cloud ERP suite from mid-size and large enterprises. By pioneering this market, we have become the ERP market leader with over 1,500 cloud ERP customers. Cloud ERP is now our fastest growing SaaS application suite.”

We made it easy for customers to move existing Oracle databases to the cloud, now we have a differentiated product

“In past, we have differentiated by making it effortless for our hundreds of thousands of customers to move their millions of existing Oracle databases and job of programs to our cloud with a push of a button, thereby obtaining the low-cost and ease of use to the cloud without having to sacrifice any performance loss or any securities degradation. We now have a highly differentiated rapidly growing SaaS and PaaS businesses.”

Jabil FY 1Q16 Earnings Call Notes

Mark Mondello

Automotive and digital connectivity are strong markets

“In my prepared comments, I touched on automotive. I think there are some good secular trends going on there that I highlighted. The overall, what I would call kind of a digital connectivity market, I highlighted one proof point in my commentary around what’s going on with connected home and I think you can extrapolate that out into some other end markets.”

Capital equipment market also an exciting market

“also highlighted our capital equipment market. And that’s really taking what we do at our core and also adding the capability of three acquisitions that we’ve recently made and support the capital equipment, and really it’s around the intricate capital equipment markets in the areas of semi-cap, advance test and industrial.”

Exciting things going on in healthcare and packaging side of business

“I will tell you pretty exciting things going on our business in the healthcare side and the packaging side. The healthcare business is interesting and I think I’d made a couple of comments in my prepared remarks. There’s a lot of disruption going on there. And we’re expanding our healthcare business into kind of looking at it as healthcare and wellness.”

Flexible, intelligent packaging

“And then on packaging, we’re really in the last couple of quarters driven an additional focus on that business with given it a little more independence than it had. And when you think about the packaging market, you’ve got packaging around rigid type devices or packages. You get flexible packaging and then you’ve got a whole area and smarter, intelligent packing.”

Healthcare is a space that’s being disrupted

“if you’re talking specific to healthcare. We have a bullish outlook on it, but I’d caution you up, everybody, not everybody – there’s lot of people racing to that space. It’s a space that’s been disrupted in a lot of different ways. It’s been disrupted at a hospital level. It’s been disrupted with data. It’s been disrupted from a digitization and mobility perspective. It’s being disrupted as far as industry consolidation, if you just look at the mega mergers that have taken place. So, if we’re thoughtful about it that disruption can be good for us.’

Pier 1 FY 3Q15 Earnings Call Notes

Alex Smith

Decreases in store traffic

“Our disappointing third quarter sales results are largely attributable to decreases in store traffic. Company comparable sales were essentially flat down slightly on a reported basis and up slightly on a constant currency basis.”

Starting from a low base in traffic, the cadence has been as usual through December

“Starting really with the Thanksgiving weekend, our results over that weekend were pretty much what you heard. People report in the industry, which was very good business online particularly direct to customer and a pull back in store traffic. What’s happened since then is from that sort of lower base if you like, the Christmas cadence is pretty much what we normally see. We’re getting day-over-day, week-over-week growth as we approach the biggest weekend of the year, which is coming up, but it’s still right below last year.”

Everyone is being highly promotional

“Well, I’m sure you will look at these things as closely as we do and it’s everybody and it’s the online only guys, it’s the brick and motor only guys, it’s the high end specialty, it’s the big box guys, it’s the mass merchants, it’s the home improvement guys, it’s everybody. There is not anybody who is not doing substantial discounting, which is unfortunate, but it’s the world we live in.”

Tomorrow is the last day we ship for Christmas

“tomorrow I think or today is the last day we ship for Christmas. So the eCom participation does fall now for the next little while until after Christmas and then it will pick up again in January and that’s obviously just factored into our sales.”

Jeff Boyer

We still think we can get back to high 50s merchandise margin again

“No, I think the long term goal still Budd is to get back, again we mentioned before probably won’t be at that 59%, 60% level that we’ve seen perhaps just given the promotional intensity, but we still think the high 50s is a very, very doable metric for us.’

FedEx Fy 2Q16 Earnings Call Notes

Fred Smith

Oversized packages are increasing in e-commerce

“A couple of developments in e-commerce are worth noting. First, oversized packages are increasing, and second, a number of e-commerce shippers continue to use extremely cubed inefficient packaging, loaded density and over-the-road ground trailers is therefore declining because of these trends.”

Congress should have allowed larger trailers on highways

“we are extremely disappointed that Congress did not approve the use of Twin 33-foot trailers on the nation’s highways versus the current 28-foot standard. 33 is already permitted in 18 states and we have safely driven them almost 1,500,000 miles in Florida along, drivers tell us they are more stable than the 28-foot trailers, with similar handling and turning. Our industry estimate this change would, one, eliminate about 6.6 million trips annually and thereby improve safety due to fewer accidents per year, the 33’s would materially reduce congestion, third, it would save over 200 million gallons of diesel and reduce carbon emissions by 4.4 billion pounds per year.”

A big part of ecommerce is being able to handle returns

” a big part of e-commerce is handling returns. So some years ago as we saw the market evolving, we decided it would be a very, very good thing for us to have a supply chain capability to offer a broader portfolio of value-added services to our e-commerce customers, because this was a huge part of the marketplace. It wasn’t just planning on how to get it to the end customer but how to efficiently process the returns and merchandise.”

Postal trucks were not designed to deliver packages

“I have to tell you, I feel for a lot of our postal folks out there. They operate their parcel delivery system with 200,000 jeeps, which were basically designed for mail delivery and watching them it looks like a submarine. These people are — they got at least, packages on the left-hand side of the truck, they have to stop, they have to pull them out, resequence them before delivery and at my house, I can promise you we’re getting a lot of very lightweight cube items coming from retailers through SmartPost or directly from an e-tailer.”

We work really closely with our good customers to manage peaks

“So our good customers that work with us in a partnership basis we can do an excellent job of anticipating what their needs are and provide the equipment in the right place and the sortation equipment. The people that have the real problem in the e-commerce business by and large are those that view the transportation companies as some sort of utility or a vendor and they make some really, really bad decisions. I mean, they are — we’ve just watched an amazement several of them just really dig themselves into a whole. But our good customers, we work very closely with them.”

Mike Glenn

Experienced record breaking demand

“we’ve experienced record-breaking demand during this peak season largely driven by the rapid growth of e-commerce. Our busiest days during peak have exceeded our forecast and more than double our average daily volume and should be noted that our busiest days this year are approximately double what they were just about eight years ago.”

Return rates are double digits in e-commerce

“Returns is a particularly big part of any e-commerce value proposition because they tend to be double digits whereas the traditional brick-and-mortar retailer is in the mid-to-lower digit return rate. ”

We think it would be very hard for someone to try to displace our network (i.e. Amazon)

“I do think it’s important to point out however that FedEx is a highly integrated global transportation network. In fact, one of only two operating at a significant scale in the United States today and only one of three major delivery networks in the U.S., the other two being UPS, the United States Postal Service. That’s not likely to change in the foreseeable future as these networks are very capital intensive and information intensive.”

Peak season is very highly planned

‘Well, I just want to add that, I think, it’s important to note that peak season is a very highly planned period of time. I mean we literally will start working with customers in late January, preparing for next peak season.”

Dave Bronczek

International shipping growing, but more modest

Transpacific, Transatlantic. It’s generally the same economic environment that Mike talked about at beginning around the world. It’s growing but it’s more modest. So I wouldn’t say — I think it is actually growing more out of Europe because of the currency exchange, a little bit less out of Asia but around the world we’ve balanced our network.”

GE Annual Outlook Meeting Notes

Jeff Immelt – CEO

China is not bad for us

“China is not bad for us to be honest with you. I’ve been doing five-year plans for a long time in China. This is the 13th five-year plan. It aligns well with GE’s policies and strategies. And those tend to be the genesis over time of more growth in China.”

Everyone has expected interest rates to go up

“I think everybody has expected interest rates to go up. We’re kind of counting on a stronger dollar world.”

Going to be targeting $1B in cost deflation next year by sourcing from lower cost countries

” we are really upping it a notch on deflation. We’re going to next year targeting about $1 billion of deflation. We are increasing our low cost country sourcing because that is an opportunity, in those economies is to get lower cost on source products. So that’s going to be a key lever that we play. ”

Additional industrial data will lead to productivity improvements

“When I talk about digital industrial, I really talk about it on three levels. I talk about it on the impact of smart machines, more sensors on machines across the board and with IT systems that integrate from GE through customers for the ecosystem. And the benefit of having more sensors and a better integration of IT systems is going to allow for more systems productivity, better productivity for us, better productivity for our customers, level one. Level two is as these sensors and systems generate more data, those data is going to be turn into applications, both hardware and software upgrades. This is going to go to our customers achieving what we call the power of 1%. If you can generate 1% fuel performance on GE’s installed base of jet engines that gives our customers $2 billion to $3 billion of profit every year. Small changes mean a lot. It’s all about the data.”

Wont be a super robust economy, but not a big macro slowdown either

“I certainly don’t think it’s going to be a super robust economy but we don’t see — when we look in orders and stuff like we don’t see a big macro slowdown.”

Internet of things adoption on industrial side will happen slower than on consumer

“this is going to happen slower than what happened on the consumer side, when you think about what happened on the consumer and this is going to be slower but there’s going to be opportunities for industrial companies to play there guys because the knowledge of the assets is more important than the knowledge of the systems”