Company Notes Digest 1.29.16

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: Business as usual?

CEOs struck an optimistic tone on earnings calls this week. While almost every management team mentioned macroeconomic uncertainty, most CEOs (outside of energy) were pleased with business conditions. CEOs were even positive on the environment in China, but it’s a little hard to believe that everything is business as usual.

The Macro Outlook:

CEOs spoke with positive tones because they are seeing positive things

“Well, we’ve a positive tone, because we’re seeing positive things happen out in the market…what we’re seeing going into January gives us a lot of confidence.” —DR Horton CEO David Auld (Homebuilder)

There’s obviously been turmoil in the markets, but most indicators continue to look strong

“there has obviously been turmoil in the markets recently…Having said that, most indicators of the real economy at least in the US continue to look pretty strong…from our own portfolio direct indicators of consumer behavior like payment rates and purchase volume, and from leading edge credit indicators like delinquency flow rates. These indicators all look consistent…they are not giving us cause for concern.” —Capital One CEO Richard Fairbank (Bank)

Credit quality remains solid in all domains outside of energy

“all domains consumer, retail, mortgage, small business, large commercial they all continue to perform well and metrics are all solid.” —Zions CCO Michael Morris (Regional Bank)

Silicon Valley Bank hasn’t seen a slowdown in companies raising capital

“Our innovation clients continue to drive their business forward regardless of the Unicorn Flu that has been going around…just over the last week as this volatility has been obviously very active…the number of rounds that we have seen closed…actually is consistent with what we saw in the third quarter and the fourth quarter of last year…so that’s a very recent data point kind of to give you an example. We haven’t seen any slowdown” —Silicon Valley Bank CEO Greg Becker (Bank)

Texas Instruments doesn’t see any signs that we’re in a traditional semiconductor downturn

“people ask us if we think a semiconductor cycle is underlying what we’re seeing and we just haven’t seen those signs of a traditional cycle. So there are things like our lead times continue to remain short. Our cancellations remain very low. Our distribution inventory continues to hold around 4 weeks.” —Texas Instruments IR David Pahl (Semiconductors)

Apparently even China is strong

“the opening of our year in China on the consumer side of our business has been really quite strong. And I focus my remarks on the consumer side because for us China has really become predominantly a consumer business…I was just there with the China team last week and met with the management over there…they continue to be quite optimistic.” —McCormick CEO Lawrence Kurzius (Spices)

It’s just moving to a consumer led economy from an investment led economy

“We are witnessing two significant trends consistent with Chinese government reforms…First, China is moving from an investment-driven economy to a consumption-driven economy. Consumption-driven growth is clearly more sustainable…Second, China is moving from an industrial manufacturing economy to a service economy. While the manufacturing sector lost jobs in 2015, the service sector added 17 million jobs. Job growth is taking place and it is driven by the services economy. People now have more employment opportunities in technology, commerce, logistics, entertainment, leisure, travel and finance.” —Alibaba Executive Vice Chairman Chung Tsai (E-Commerce)

Macau’s mass market gaming volumes have hit bottom

“I thought we had either hit bottom in the mass market or we are bottoming out. Ever since I said that I’ve been reading the issues, I’ve been reading from analyst reports and from other Sands China reports that I get daily…that people are starting to believe that and some of the numbers put out and experienced through December and January indicate to me that that’s the case.” —Las Vegas Sands CEO Sheldon Adelson (Casinos)

Chinese airline passenger traffic increased 15% last year

“We also continued to see strong growth in Chinese airline traffic. In 2015, passenger traffic in China increased 15% compared to GDP growth of 7%, a steady trend we have seen for the past five years.” —Boeing CEO Dennis Muilenburg (Aerospace)

Is it time to stop wringing our hands about China?

“Every morning we get up, we see CNBC. Everybody wrings their hands about China, but whether China is 7% growth or 6% growth, 6% is way bigger than the rest of the world. It’s a fundamentally strong market for us as our practically all of these emerging markets.” —Abbott Labs CEO Miles White (Diversified Healthcare)

Are people just overreacting to the stock market?

“I think people are over reacting to the stock market. I mean, we had whatever a seven year bull market without a correction. We were like just statistically got to be a way overdue for correction…So, we had a correction, big deal…I think people are overreacting to that.” —Blackstone COO Tony James (Private Equity)

Whatever is happening, it’s not business as usual out there

“we don’t look at it as a crisis but isn’t business as usual out there” —Tupperware CEO Rick Goings (Consumer Products)”

Apple called these “extreme conditions”

“We’re seeing extreme conditions unlike anything we’ve experienced before just about everywhere we look. Major markets, including Brazil, Russia, Japan, Canada, Southeast Asia, Australia, Turkey and the eurozone, have been impacted by slowing economic growth, falling commodity prices and weakening currencies.” —Apple CEO Tim Cook (Consumer Electronics)

It’s very hard to believe that the Chinese economy is doing well when steel output is being slashed

“inventory levels of iron ore at the Chinese ports continue to build over the past couple months heading back to above 100 million tons…Earlier this month, China’s biggest steel producing province announced that that the steel output will be cut this year to ease pollution and help curb oversupply. Three days ago, the Chinese Premier, Li Keqiang, released target numbers for steel production cuts to the order of 100 million tons to 150 million tons.” —Cliffs Natural Resources CEO Laurenco Goncalves (Iron Ore)

In the US, industrial companies are still experiencing challenges

“We continued to experience general industrial activity weakening due to the knock-on effect from natural resource markets.” —Parker Hannifin CEO Tom Williams (Industrial Components)

Large commodity companies are starting to feel acute stress on their balance sheets

“We face serious challenges because of what’s going on in the marketplace and because of the situation with our balance sheet, and we want to convey that we’re addressing this seriously and with a degree of urgency and we’re very focused on it…The situation has developed in a negative way very quickly and aggressively, and we’re responding to it.” —Freeport McMoran CEO Richard Adkerson (Copper)

Decreases in travel and entertainment spending are usually a leading indicator for a slowdown

“I would say the segment that I’ve been most disappointed in has been the corporate segment…the easiest expense category to cut is T&E that’s the first thing you see…as I evaluate 2015, that was an area that…we saw a pretty consistent decline. And certainly what we’ve seen in my 30 plus years experience with the Company is cut backs in T&E tends to be an early indicator for a slowdown.” —American Express CEO Ken Chenault (Payments)

The global cargo market stalled during 2015

“As we highlighted in our rate reduction announcement last week on the 747-8, the global cargo market recovery stalled during 2015 with the air freight traffic growing a modest 2% during the year.’ —Boeing CEO Dennis Muilenburg (Aerospace)

We may be looking at top-ish auto volumes

“I do subscribe to the notion that we are looking at top-ish volumes today…if we went to 16 million, it’s not going to be the end of the world” —Fiat Chrysler CEO Sergio Marchionne (Automobiles)

At best there’s nothing terribly exciting in the economy as a whole

“I think that at the highest level, we think we’re continuing to operate in a relatively weak macro economy as we have been for the last couple of years. So nothing terribly exciting in the economy as a whole.” —Texas Instruments CFO Kevin March (Semiconductors)

International:

There’s still a lot of faith in the long term potential of China

“We are sitting in a business today that, as I said publicly when I was in China last week, that we believe one day could very well be larger than the U.S. business. So anyone on the call who is in any way dissuaded by our commitment or our success in China as a result of a 5% comp in the region is not only mistaken, but you are looking at the wrong metric.” —Starbucks CEO Howard Schulz (Coffee Shops)

Financials:

There are more opportunities open on the M&A front at the margin

“So, some of the anxiety out here is definitely helping some of the conversations. So, on the margin, we’re a little bit more encouraged than we were 60, 90 days ago on the M&A front.” —Danaher CFO Daniel Comas (Diversified Industrial)

Valuations are still high though

“the pipeline is active, but valuations are still high and I think what you’re seeing is a delay in reality from seller’s expectations…we’re disciplined buyers and we buy things that are in our space, so we understand what the growth rates are…I think as time goes on and people see the new reality that they – it’s maybe not going to grow what they thought it was the previous decade, but those valuations will come more in line and I think our pipeline will become more actionable at that point.” —Parker Hannifin CEO Tom Williams (Industrial Components)

In many cases they are just plain non-economic

“the valuation that property went for was non economic. I mean just plain non economic. I would challenge the buyer to explain where the economic return was in that particular deal. They obviously have their reasons and they obviously saw something rest of us didn’t appreciate…the price of some of these things would be for sale at isn’t prudent, it just isn’t prudent.” —Abbott Labs CEO Miles White (Diversified Healthcare)

Changes are reshaping the payments industry

“our performance comes against the backdrop of changes that are reshaping the payments industry. These include a reset in co-brand economics, regulatory and competitive pressure on merchant fees and intense competition for customers.” —American Express CEO Ken Chenault (Payments)

Alternative capital sources continue to pressure prices in the reinsurance industry

“When we see larger players writing accounts at a 100% of expected model loss providing three months of extra coverage for no charge and readily deploying $100 million policy limits, we have to wonder if discipline will return anytime soon. Memories are short, the paybacks are long in this business.” —RLI COO Craig Kliethermes (Reinsurance)

Consumer:

Birthrates are picking up around the world

“It is going to be the year of the monkey in China which is a good year and so you typically have a little bit of an uptick in the birth rate…the birth rate in the U.S. is actually ticking up.” —Kimberly Clark CEO Tom Falk (Consumer Packaged Goods)

Auto makers need to change the way they view themselves

“But I think that ultimately trying to move the discussion the way from the concept of auto making, trying to re-pitch our future as being involved in the transportation business in the broadest sense of the term” —Fiat Chrysler CEO Sergio Marchionne (Automobiles)

“when you look at where we’re heading we said we were transforming into an auto and a mobility company because it’s really important that we don’t lose sight of our core business” —Ford CEO Mark Fields (Automobiles)

Advertisers are still under-indexed to mobile

“In terms of monetizing time spent, it’s certainly the case that consumers have shifted to mobile and businesses need to catch up…If you ask even our largest clients, our largest clients, if they drew a pie chart of where their consumer spend their time and money and whether they spend their time, we’re still under-indexed.” —Facebook COO Sheryl Sandberg (Social Media)

Technology:

Sprint has lowered its churn to the lowest level in its history

“If you look at what we have done in churn, it had been three consecutive quarters in which we have had the best churn in the Sprint’s 20-year wireless history.” —Sprint CEO Marcelo Claure (Telecom)

Under Armour is partnering with IBM to help analyze data produced by their connected apparel

“we announced our partnership with IBM and their Watson platform to help build the insights capability for Under Armour Record. Wearables have been effective in telling you how many steps you took or the hours you slept, but they haven’t been effective in giving you proactive information on how to utilize that data to make your life better. Put simply, there was no call to action until now.” —Under Armour CEO Kevin Plank (Apparel)

Tim Cook doesn’t think that VR is a niche

“Yeah. In terms of virtual reality, no, I don’t think it’s a niche. I think it can be — it’s really cool and has some interesting applications.” —Apple CEO Tim Cook (Consumer Electronics)

Tim Cook does not think that smartphone penetration has peaked

“as I look at your…question on saturation, the metrics I see would strongly suggest otherwise. For example, almost half of the iPhones that we sold in China last quarter were to people who were buying their first iPhone. And certainly if you go outside of China into the other emerging markets, our share is much lower and the LTE penetration is so low, I mean in some cases, it’s zero, that it indicates to me that there’s still a lot of people, a tremendous number of people in the world, that will buy smartphones and we ought to be able to win over our fair share of those.” —Apple CEO Tim Cook (Consumer Electronics)

Qualcomm said it saw strong volumes (its stock was down a lot though)

“QCT chipset shipments were near the high end of expectations, with low tier strength across OEMs particularly in China, offsetting some weakness in thin modem sales at a key customer. QTL revenues were higher than expectations on strong 3G/4G device volumes and ASPs ” —Qualcomm CEO Steve Mollenkopf (Semiconductors)

Healthcare:

Medical devices and prescription drugs represent 18% of total healthcare spend

“Here in the United States, prescription drugs represent approximately 12% of total healthcare costs and medical devices represent around 6%.” —Johnson and Johnson CEO Alex Gorsky (Diversified Healthcare)

Pharmaceutical companies will probably think twice about raising prices in this political environment

“I would say the political discourse that’s taking place and the congressional inquires relative to pricing practices, I think are obviously going to have people at least pausing perhaps to consider whether now is the right time to take price increase.” —McKesson CEO John Hammergren (Pharmaceutical Distributor)

It’s difficult to get M&A done in the hospital space because there are so many not-for-profit hospitals

“Of course, we do a lot of in-market acquisitions. But as far as the big ones you’re speaking to, things like say Kansas City that happened in 2003, those opportunities are really hard to find. They’re going to come out of the not-for-profit sector. And typically, we may engage in conversation, but many times, these organizations decide ultimately not to sell.” —HCA CEO Milton Johnson

Industrials:

The domestic steel industry may be building some positive momentum

“Well, I think there’s positive momentum, generally. I’m sure Dick can speak to some of it, but the inventory overhang, there’s continued destocking there and it’s becoming balanced. It’s still relatively high, particularly in hot band. But in coated products, in coated sheet, I think it’s getting into a good position. And you speak to a seasonal uptick. I think we’re seeing that as well…On cold roll sheet and coated, I sense a tightness forming in that arena.” —Steel Dynamics CEO Mark D. Millett (Steel)

Washington has helped the industry by placing duties on imports

“I have been generally pleased with the preliminary duties coming from Washington on the steel trade case, especially the extremely punitive percentages placed on China…The impact of the trade case will be real and it has already been started to be realized by the order books of the clients, our clients at least, and we expect that only to improve.” —Cliffs Natural Resources CEO Laurenco Goncalves (Iron Ore)

Industrial companies are excited about the internet of things

“if you take an air-conditioning contractor today, they have a lot of mechanical tools they have to utilize to measure pressure, humidity, temperatures and so this is a patented sensor that we have. It allows you to diagnose and troubleshoot the conditions of that air-conditioning unit much more rapidly…We’ve been very pleased with the initial sales. And that’s a really good example of taking a traditional market and using Internet of Things to make it even better.” —Parker Hannifin CEO Tom Williams (Industrial Components)

“What we are aiming at is quite a bit different than others. I would say we’re aiming at the internet of Caterpillar things, so that when we think about what we’re doing with digital technology, what we’re doing with site preparation and technology, machine guidance technology, machine health technology, it’s all about our installed base of the 3 million machines and engines. Rail, construction, mining the things we do.” —Caterpillar CEO Doug Oberhelman (Construction Equipment)

Materials, Energy:

Energy companies are facing a “financial crisis”

“The worsening market conditions added further pressure to the deep financial crisis throughout the oil and gas value chain and prompt the operators to make further cuts to the already low E&P investment levels. For many of our customers, available cash and annual budgets were exhausted well before the half way point over the fourth quarter, leading to unscheduled and abrupt activity cancellations, creating an operating environment that is increasingly complex to navigate” —Schlumberger CEO Paal Kibsgaard (Oil Service)

This has been the most challenging downturn since the 80s

“Now this has certainly been the most challenging downturn that I’ve seen in my many, many years in business. We expect the market will continue to remain challenged in 2016 and that it will be the first time since the late ’80s that global upstream spending will decline for two consecutive years.” —Halliburton CEO Dave Lesar (Oil Service)

Companies don’t even know what their own Capex spending is going to be

“I’m talking almost every day with the CEOs of our customers and I would say that it’s a real challenge out there….there is sort of a constant revision of budgets going on…clearly with a downward bias…right now, our customers don’t know what they are going to spend, where they are going to spend it and when they are going to spend it…which is why I made the comment earlier we really are trying to run the business on literally a week-by-week, crew-by-crew, unit-by-unit basis until our customers see some stability in pricing where they can then put a stake in the ground.” —Halliburton CEO Dave Lesar (Oil Service)

2016 is going to be a tough slog through the mud

“2016 is simply going to be a tough slog through the mud” —Halliburton CEO Dave Lesar (Oil Service)

Schlumberger doesn’t think that 2017 will be worse, but isn’t ready to say that 2016 will be the trough

“I don’t currently think that 2017 is going to be worse. I think — but with that said, I’m still not ready to say that we are troughing in 2016. I’ll be focusing in on executing basically quarter-by-quarter. I’m still optimistic, and I would hope that 2016 is the trough, but I’m not ready to rule on it yet.” —Schlumberger CEO Paal Kibsgaard (Oil Service)

Core Labs thinks that crude supply and demand should balance by 2H16

“Core believes that the worldwide crude oil supply and demand markets will balance in the second half of 2016.” —Core Labs CEO David Demshur (Oil Service)

Spare capacity in the Middle East is near zero

“on the Middle East, we see spare capacity there across the Middle East at a very low amount. Actually long-term spare capacity, we see near zero. You could probably generate another million barrels or 1.5 million barrels on a short-term basis. But on a long-term basis, we would put spare capacity nearing zero.” —Core Labs CEO David Demshur (Oil Service)

The longer recovery takes, the sharper it should be

“Now there are a number of moving parts in North America and my experience has taught me not to bet on the exact timing of a recovery. But we do expect that the longer it takes, the sharper the recovery will be.” —Halliburton CEO Dave Lesar (Oil Service)

Miscellaneous Nuggets of Wisdom:

Better valuations do not make bad companies into good ones

“one thing about down cycles is better valuations do not make bad companies into good companies. So, our perspective is we haven’t seen good companies to acquire that fit our three segments. So, this recent change in valuation really hasn’t changed that. So, we don’t see acquisitions really adding to this at this moment.” —Core Labs CEO David Demshur (Oil Service)

Make products that your customers don’t even know they need yet

“we focus on creating products you don’t know you need yet; but once you have it, you won’t remember how you lived without it” —Under Armour CEO Kevin Plank (Apparel)

There are no brave old people in finance because they get wiped out when they are younger

“what I figured out is that there are no brave old people in finance, usually it get wiped out by being brave when you are younger.” —Blackstone CEO Stephen Schwarzman (Private Equity)

There may not be a lot of brave people, but disciplined people make it to the finish line

“Our credit quality is healthy because we stay true to our principles and lending disciplines and all market cycles” —Cullen Frost CEO Dick Evans (Regional Bank)

“It has been an enormous privilege and honor to serve this wonderful company for 45 years including almost two decades as Chairman and CEO. This will be as all of you said my final earnings call and I thank our shareholders, our loyal customers and dedicated employees for their support.” —Cullen Frost CEO Dick Evans (Regional Bank)

Full transcripts can be found at www.seekingalpha.com

JS Earnings Call Notes – Canadian National Railway (CNI)

Canadian National Railway (CNI) Chief Operating Officer Jim Vena said they were able to wring out more productivity out of their employees

“Our gross ton miles per crew hour worked increased by 3%. Therefore, each train handled more freight, moved faster, and our employees were more efficient in getting them from origin to destination. So a great job by the team on moving the trains.”
Canadian National Railway (CNI) Chief Operating Officer Jim Vena also highlighted his team’s cost efficiency 
“Our engineering and mechanical departments both delivered results in line with the overall results on a productivity and cost efficiency basis which helped us deliver a car velocity improvement of over 16% in the quarter and in the year of 13%.”
Their business tied to oil & energy fell off of a cliff
The crude market caused a 32% drop in crude by rail carloads and a drop of 43% in frac sand for drilling. And steel is suffering the cutback of the energy sector capital program. This same segment would be a major headwind for this year.”
Yet they have continued to increase prices in excess of inflation
We continue to produce pricing above inflation which, at this point, we would define as 3% inclusive of the impact of the negative Canadian grain cap. We are in position to support those shippers for whom the weak Canadian dollars has become a cost advantage like the manufacturers, like the service industry that are selling into the U.S. market, for example the forest product industry and the Canadian port terminal industry.”
The company also benefitted from lower fuel cost
The fuel expense stood CAD 304 million or 42% lower than last year. Fuel price was 38% lower versus last year, while volume reduction accounted for CAD 19 million betterment, as fuel productivity came in 2% better.”
They have the lowest exposure to hauling coal of any of the North American Class 1 railroads
Coal was in retreat. And in 2016, that will continue. Coal was only 4.5% of our fourth quarter of total revenue, the lowest of any railroad.  We have a very low exposure to coal, while our network allows us to serve key U.S. consumer projects. This, along with a stronger U.S. currency, provides us with a natural hedge that helps to mitigate the weak commodity environment.
Canadian National Railway (CNI) Chief CEO Claude Mongeau wants his company and his director competitor, Canadian Pacific Railway, to remain disciplined on pricing their services rather than chasing volume
It’s quite remarkable you have CN that is leading the industry, achieving new records in terms of efficiency. You have CP which, over the last four years, has done a remarkable turnaround and is in every core respect in terms of operating metric, is getting very close to our level of efficiency. There’s something to be proud here. We have two Canadian railway road really leading the way in terms of performance.  I hope that going forward, we will protect that profitability and use it to generate a capacity to invest in our networks and to grow the business, grow it through innovation and not chase volume for the purpose of chasing volume. It’s precious that we are able to achieve the efficiency level, and it’s incumbent on us to manage for the long term.”

Miscellaneous Earnings Call Notes

McDonald’s (MCD) CEO Steve Easterbrook on Q4 2015 Results

Our turnaround is starting to take hold

“I am confident in the actions we are taking and attraction is beginning to take hold. Most importantly, customers are noticing a difference. Our customer feedback systems are showing improvements in many important aspects of the customer visit, including food quality, order accuracy, speed and friendliness.”


Zions Bancorporation’s (ZION) CEO Harris Simmons on Q4 2015 Results

Paul Burdiss

Don’t expect credit deterioration in anything besides energy

Well I mean, I guess the short answer is until we see the non-energy economies start to really fray, but we’re not seeing that we — and I don’t think we’re going to venture a guess as to when the cycle really starts to et cetera, we’ll actually do that but I think suffice to say that at the moment we continue to see improvement and even in markets like, in a market like Texas the non-energy portfolio remains very healthy. We are looking at a lot of indicators in each of those portfolios to kind of watching for problems and so far it is not really showing up.”

Michael Morris

All domains continue to perform well and metrics are all solid

No, I can’t add anything to that, all domains consumer, retail, mortgage, small business, large commercial they all continue to perform well and metrics are all solid.


W.W. Grainger (GWW) Q3 2015 Results

Macroeconomic conditions are well understood

“The macroeconomic conditions faced by our industry in 2015 are well documented and largely understood.”


DuPont’s (DD) CEO Ed Breen on Q4 2015 Results

There is always cost saving

“Look, there is always cost savings. I mean I am a believer that they occur every year in a few percent range, as you keep streamlining your company, I would say. So, you are never done with it.”

Dow is already on IT systems that we were implementing

“we’re on a very fragmented IT system. One of the benefits it looks like we obviously get here with the Dow merger is Dow is on the IT platform that we were going through the global — actually latest revision of the SAP platform”

Fourth quarter was actually our best organic quarter of the year

“It’s interesting to note though that — and I don’t want to say there is a trend here, but our fourth quarter organic revenue was actually our best of the year. We had been running kind of minus 3% through the first nine months of the year and we are minus 1% in the fourth quarter. And if you kind of look at it around the geographies, it was kind of flat in Latin America, flat in North America, pretty flat in Asia and our one down market was Europe which was down about 2%. So, we’ll see how the trend goes here in the first half of the year but that was little bit encouraging that we saw that lift.”


Brown & Brown (BRO) Powell Brown on Q4 2015 Results

Small businesses still trying to understand ACA

“We define small employee benefits as employers with less than 100 employees. For this segment we are continue to see companies be very focused on managing their costs and trying to understand the implementation complexities of ACA, specifically how they manage costs via exchanges and/or private plan.”

Do expect rates to remain under pressure. A lot of activity in M&A but prices remain high

“We do expect rates in ’16 to remain under pressure and are watching the economy very closely for signs of further expansion or contraction. From an M&A perspective there’s a lot of activity out there. We’ve seen a number of announcements in 2015, maybe the most active year of acquisitions ever. We can tell you that prices remain high, some at levels that don’t make sense to us. However, we continue to look for partners that fit culturally and make sense financially”


AK Steel Holding’s (AKS) CEO Roger Newport on Q4 2015 Results

“the steel industry continues to face significant challenges as we enter 2016. These challenges include continued pressures in the global steel industry as the result of the massive oversupply steel primarily from China, that direct and indirectly impact others oversupply in all regions of the world and otherwise AK Steel is not a major player in the oil country tubular goods business, the significant downturn in that market is contributing to the excess capacity in those markets in which we do compete and to the overall steel market. As we have been stating for several quarters now, the steel market in the United States has been flooded with what we believe are unfairly traded imports. While the import levels have indeed began to decline for many of those countries where preliminary duties are being levied, we still face significant ongoing import pressures.”


Tupperware Brands (TUP) CEO Rick Goings on Q4 2015 Results

Turkey very weak

“Turkey, very disappointed. It was down 25% and much like France it’s been heavily impacted by externals, particularly the terrorist attacks, military activity, there is political instability which has just been almost bipolar from the President almost being voted out of office in June to getting a majority back again just over the last two months. So that’s we’ve seen weakened concurrency and there is a lot of change in consumer behavior in spending.”

I might be concerned if I were selling cars in China, but I think we’re ok

“Also I would say in China for all the news you really hear about that, I think if I was selling cars I might be concerned, but at the lower, we’re again a multi-local business, I think we’re in good shape there.”

It isn’t business as usual out there

“we don’t look at it as a crisis but isn’t business as usual out there”


Qualcomm’s (QCOM) CEO Steve Mollenkopf on Q1 2016 Results

Qualcomm talking about strong volumes

“QCT chipset shipments were near the high end of expectations, with low tier strength across OEMs particularly in China, offsetting some weakness in thin modem sales at a key customer. QTL revenues were higher than expectations on strong 3G/4G device volumes and ASPs and we continue to make progress in signing up Chinese licensees, although there is still more work to be done on that front.”

Lots of industries are looking to leverage mobile technology into their products

“At the Consumer Electronics Show earlier this month, it was clear that many industries are looking to leverage mobile technology into their products and businesses are looking to the leaders in communications and computer systems, such as Qualcomm, to make the world more connected and smarter. Our many announcements at the show reflect our progress extending Qualcomm technology into adjacent and new areas, including automotive, IoT and networking.”


PulteGroup’s (PHM) CEO Richard Dugas on Q4 2015 Results

The volatility does change the way management teams think about their businesses at the margin

“All that being said we are well aware of the volatility in the world today. From concerns of our global economic conditions to the swoon in oil prices, to gyrations in the stock market, the day-to-day swings can be violent. The reality is however that we can’t control any of these factors, what we can do is focus on running our business, consistent with the goals we have established and disciplines we’ve demonstrated. This means acquiring well-located communities that we believe can deliver high returns on investment. It also means hedging our bets by using more land options, where possible and focusing in on smaller, shorter duration projects, where we can get our capital back quickly. It also means, not over leveraging the balance sheet and keeping one hand on the lever to slow investment if housing demand begins to change. And finally, it means having the discipline to systematically give excess funds back to shareholders, rather than trying to force investments in the system. ”


Ford Motor’s (F) CEO Mark Fields on Q4 2015 Results

We are a mobility company

“Well to answer your question Joe when you look at where we’re heading we said we were transforming into an auto and a mobility company because it’s really important that we don’t lose sight of our core business as I mentioned on our remarks upfront.”

China is going from an industry led economy to one that’s consumer led

“In China obviously as we mentioned, when you look at the stock market volatility, that’s endemic of the country that’s moving from an investment and industry led economy to one that’s consumer led. And actually when you look at the components of GDP growth there, the services in the consumer portions of that are actually growing while some of the industry ones are coming down and we view that as a good sign.”

Marion Harris

Not seeing any uptick in delinquencies in the US

“Colin, this is Marion. No, we’re really not. I know there is a lot of discussion about this, but with the exception of the trend in longer term financing we’re not seeing any weakness in the consumer alone. In fact delinquencies which are a leading indicator were at an all time record low for us.”


Las Vegas Sands’ (LVS) CEO Sheldon Adelson on Q4 2015 Results

Adelson thinks we’ve seen stabilization in Macau

“We do see stabilization in gaming revenue trends. In the mass gaming segment, our non-rolling drop was down just 1% over the prior quarter, despite new competition that has predominately focused on the mass market. Our VIP rolling volumes were actually up 5% over the prior quarter outperforming the 2% sequential increase in the Macau market.”…”I thought we had either hit bottom in the mass market or we are bottoming out. Ever since I said I’ve been reading the issues, I’m been reading from analyst reports and from other Sands China reports that I get daily, other clippings that people are starting to believe that and some of the numbers put out and experienced through December and January indicate to me that that’s the case.”


Steel Dynamics (STLD) Mark D. Millett on Q4 2015 Results

I think there’s positive momentum

“Well, I think there’s positive momentum, generally. I’m sure Dick can speak to some of it, but the inventory overhang, there’s continued destocking there and it’s becoming balanced. It’s still relatively high, particularly in hot band. But in coated products, in coated sheet, I think it’s getting into a good position. And you speak to a seasonal uptick. I think we’re seeing that as well.”

Theres tightness forming in cold roll sheet

“On cold roll sheet and coated, I sense a tightness forming in that arena. I think it’s a combination of – the automotive arena is strong. So, the integrated mills got a relatively good order book. Construction continues to come back. There’s some destocking going on. And we have some relief from the trade cases and erosion of import levels.”


United States Steel’s (X) CEO Mario Longhi on Q4 2015 Results

Automotive continues to be a good market, appliance and construction markets should also grow

“Now I would like to give a brief summary of what we are seeing in our markets and our guidance for 2016. The automotive market continues to be a very good market for us and we expect it to remain strong throughout the year. We also expect growth in demand in the appliance and construction markets compared with last year. Industrial equipment market is mixed with a slight improvement in demand for construction equipment, steady demand in the railcar markets and weakness in mining equipment. In the energy markets, low oil prices and rig counts remain a significant headwind. At this time, we do not see any catalysts other than increase in oil prices that would drive significant improvement in tubular demand and pricing with impacts to both our tubular and flat-rolled segments. We continue to expect slight growth in the automotive, appliance and construction markets in Europe as compared to last year but tin mill products may be facing increasing challenges from imports.”

Abbott 4Q15 Earnings Call Notes

Abbott Laboratories’ (ABT) CEO Miles White on Q4 2015 Results

Foreign exchange impact on bottom line will be more pronounced in 2016

“foreign exchange will again be a growth headwind in 2016. We’re now entering the fifth year of this dollar bull cycle, while we actively worked to mitigate the impact of currency on our results, the impact of exchange on our bottom line would be more pronounced in 2016 due to the mix of currency movements and certain timing effects.”

Underlying dynamics remain strong in a lot of these emerging markets

“The frustrating thing and I think it’s frustrating for a lot of multinational companies that are U.S. based is the underlying market dynamics remain strong in a lot of places. Every morning we get up, we see CNBC. Everybody brings their hands about China, but whether China is 7% growth or 6% growth, 6% is way bigger than the rest of the world. It’s a fundamentally strong market for us as our practically all of these emerging markets.”

The oil based economies, that’s a little different

“Now, the oil-based economy, the ones we were extremely dependent on oil, take Venezuela – okay, there are different stories. And the volatility, unreliability and sustainable market there is different than just about anywhere in the world. So okay, there was an outlier”

Last year we were almost involved in a deal that went through at a price that was plain un economic

“we’ve watched those valuations over the last year when deal heat turned and I can tell you that there was still one particular one that we were involved in an auction for and the valuation that that property went for, we did not win it. But the valuation that property went for was non economic. I mean just plain non economic. I would challenge the buyer to explain where the economic return was in that particular deal. They obviously have their reasons and they obviously saw something rest of us didn’t appreciate. I’d say is an understatement but the evaluation are at a level in some cases that you have to question prudence.”

I think some of the prices that people are offering for sale are not prudent

“I think right now, first of all I don’t see a lot that people are offering up for sale in effect and you know the old maxim; everything is for sale at some price. Well the price of some of these things would be for sale at isn’t prudent, it just isn’t prudent. So I think you have to step back and say we’re not in that zone. We’re not going to be that irrational in some cases and that’s me, I mean I hate that I’m going to see some of this in print later but I think that.”

Not looking to do M&A in our nutrition business

“we are not looking to do anything with regard to M&A in our nutrition business today. I mean if something came along opportunistically we would look at everything but the fact is that business is – that’s an organic business for us and all of our performance objectives and things we want to do in the nutrition business globally are organically driven and we think we’re in a good position for all of that.”

In the med device space there are a bunch of big companies or a bunch of small companies. Not much in the middle

“I think the current medical device space broadly defined today, there is either a bunch of big companies or bunch of little companies. There is not much in the middle. And the couple of things in the middle are extremely highly valued relative to their current performance. And I think there is a lot of speculation or question about whether or not that kind of value will play out.”

Blackstone 4Q15 Earnings Call Notes

The Blackstone’s (BX) CEO Stephen Schwarzman on Q4 2015 Results

We do not see a recession in the US but do believe global GDP growth is slowing

“It’s always possible that a market correction becomes something more significant, we at Blackstone do not see a recession in the U.S. We do believe that global GDP growth is slowing, we’ve seen a slowdown within certain sectors and regions in our global portfolio as a result.”

Stock price decline is not indicative of the fundamental value of our assets

“our stock price decline is reflective of what’s happening in the public markets and the mark-to-market movement of certain of our assets, which we do not believe is indicative of their fundamental value as measured by their operating results and their prospects. This temporary decline in value should normalize overtime.”

Right now you’re getting Blackstone on sale

“right now you’re getting Blackstone on sale. As I’ve shared before, we’ve done an implied stock price analysis for the next 10 years. Based on what we believe to be conservative assumptions of AUM growth of 8% to 12%. By the way, last year was 16, but we just like — we’ve some numbers for you, at 8% to 12% as well as lower than historical returns for our drawdown funds in the mid teams instead of higher and mid-single digit returns in our liquid strategies which has historically has been much higher. The implied total value for Blackstone shares over that 10 year period would be in a $100 to $125 per share area. That is including distributions and using what I believe is a reasonable yield of 5% to 6% on our cash flows. That $100 to $125 per share value equates to a multiple of money to U.S. investors of between four and five times today’s stock price.”

We’re not doing buybacks because I like cash

“the question is why aren’t we doing a massive stock buybacks now and one of the reasons is that I like cash, I like it like a lot of entrepreneurs like cash whether it’s the Microsoft people or the Google people or the Apple people, you like cash because it gives you the opportunity to take advantage of opportunities and what happens is”

There are no brave old people in finance because they get wiped out when they’re younger

“And for us to actually buy something there has to be a fit of values and culture and risk aversion because what I figured out is that there are no brave old people in finance, usually it get wiped out by being brave when you are younger. ”

Purchase opportunities come in adverse market cycles

“we found some really terrific opportunities and more of this stuff comes out of the woodwork when you have adverse market cycles than when you are at tops. At top everybody is self confident and happy and then when the tide goes out you see who is wearing bathing suits or whatever and maybe I was like, to have to be wearing them, but we are seeing some activity now, we will see what happens with it.”

I think the concerns about China are a bit overdone

“I think it’s sort of the — it’s always hard to know what everybody thinks, but sort of from trying to feel the consensus has been very negative towards China.”

” if you have half of your economy growing at 10+ and the rest is a mixed picture, you’re not in a world of hard landings other than the fact that people have lost confidence in some of the policy directions in the market place. So, I think that’s a bit overdone.”

It’s not the end of the world

“it’s not the end of the world. If you look at the stock market, I mean, you have to conclude, it’s like the world is ending. Well, I don’t think the world is ending. I think we’re going through an adjustment and people like ourselves who own long-term things and add enormous value end up at the end of the day being mega winners'”

Tony James

The longer oil prices stay low, the higher they will be in five years

“we could survive these prices for several years with the investments we are making and still we expect prices to be 65, 75 in four or five years and we will make some very, very nice returns. So, when we look at energy investing we look at surviving a long time where prices are today and then still getting very, very nice returns if we get back to prices 60 or above which are well below prior peaks. And ironically, the lower prices go today the higher they will be in five years from now because the more other new drilling and what not get shut off. So yes, we think it’s a very interesting time to put money out now, there is a lot of companies that desperately need capital, you can come at the top in some cases top of the risk stack, top with capital stack and still have equity like return and other cases great companies with good assets just have no alternatives. And actually, I think as the cycle unfolds it will get better and better and better because the prices start to move up the activity level will pick up quite quickly and so I think it will actually even get better as prices move up, it is the way to deploy capital.”

People are over reacting to the stock market

“I think people are over reacting to the stock market. I mean, we had whatever a seven year ball market without a correction. We were like just statistically got to be a way overdue for correction. And the backdrop of the S&P companies’ net income is weak, it’s been zero. So, fees have got high, I mean. And people look at the average S&P, that’s kind of a distortion. Look at the median company in here because the average has dominated, because it’s market evaluated by Apple and a few huge names. Look at the median P, and P is high. So, we had a correction, big deal. There’s enough going on. I think people are overreacting to that.”

Caterpillar 4Q15 Earnings Call Notes

Doug Oberhelman

Cat financial asset quality has stayed strong

“Actually in 2015 they hit a very high market share number for what they financed. The quality of that asset portfolio is very good, past due has actually improved a little bit from 2014. ”

Want to create the internet of Caterpillar things

“What we are aiming at is quite a bit different than others. I would say we’re aiming at the internet of Caterpillar things, so that when we think about what we’re doing with digital technology, what we’re doing with site preparation and technology, machine guidance technology, machine health technology, it’s all about our installed base of the 3 million machines and engines. Rail, construction, mining the things we do.”

Lots of sensors across our machines

“We have knowledge of our machines. Our idea is to make a ready platform, lots of sensors across our machines and other brands to make sure that our customer gets the most out of their construction equipment in his or her fleet. I suspect that in the next year or two, five [ph] this will be a tremendous and we’ll be talking a lot more to you about it in our investor meetings and so on as we get there.”

MichaelDeWalt

Done pretty well with material costs

“Hey, Rob this is Mike, I’ll start this out. I’m going to start a little bit with material costs. We’ve done actually very well over the last, I don’t know three, four years on material cost. I think we in combination taken out over $1 billion. So over that timeframe and last year ’15 was a good chunk of that. So it’s been a combination of actually lower commodity prices have helped some. But all the work we’ve done on lean, resourcing, engineered value change, our investments in R&D, our partnerships with suppliers, that helped generated a pretty good chunk of that cost reduction as well.”

Under Armour 4Q15 Earnings Call Notes

The next generation entering the workforce doesn’t know a world in which we didn’t exist

“This year, 2016, is Under Armour’s 20th year in business. It is an incredible milestone for any Company and for us, it means a few things. It means that the next generation entering the workforce doesn’t know a world where Under Armour didn’t exist. This generation doesn’t recognize us as the underdogs but as the always was. It means that we’re not a passing fad or a flavor of the month. The interlocking UA logo has become a globally recognized symbol for being aggressive, young and fearless.”

We’re just starting to see what partnering with an athlete like Steph Curry can do

“The sell-through on the Curry Two was like nothing we’ve ever seen before. The same words that people tend to say after watching Stephan play live. We’re just beginning to see what partnering with the right athlete, like Stephen Curry, can do for our business. It is difficult to underestimate the power of having the best sell-through of any signature basketball shoe this past season. It clearly lifted our brand in the mall channel and positioned us for aggressive growth, not only in signature but overall with this most important consumer base.”

Cam Newton is our guy too

“with the Super Bowl just over a week away, we will see yet another UA MVP, Cam Newton, compete at the highest level his sport while representing our brand. Cam has been a critical driver of our footwear success, with the Highlight Cleat. The Super Bowl will introduce him to a brand new set of consumers. It is a platform where companies pay $5 million to air a simple 30-second TV spot during the broadcast, while our guy will wear his UA cleats throughout the entire three plus hours of the game.”

Record equipped shoe

“Finally, we launched our first smart shoe, with the Gemini 2 RE which stands for record equipped. This shoe tracks every step and uploads data including time, date, duration and distance directly into our platforms. This cutting edge footwear provides an untethered experience and allows the athlete to run device free. There is no start or stop button. When the shoes are on your feet, it is ready and tracking. One of the coolest features of this shoe is that it tracks it’s own lifespan and will send a notification when it is time for a new pair.”

Partnering with IBM to help generate insights on health data

“we announced our partnership with IBM and their Watson platform to help build the insights capability for Under Armour Record. Wearables have been effective in telling you how many steps you took or the hours you slept, but they haven’t been effective in giving you proactive information on how to utilize that data to make your life better. Put simply, there was no call to action until now.”

We focus on creating products you don’t know you need

“At Under Armour, we focus on creating products you don’t know you need yet; but once you have it, you won’t remember how you lived without it”

Relentless pursuit of innovation

“Our relentless pursuit of innovation is just that, relentless. It never stops. When I first began Under Armour 20 years ago, I didn’t set out to make just another t-shirt. I set out to make a better t-shirt, one that solves a problem and gives whoever wears it an advantage. With our Connected Fitness business, we’re not releasing just another fitness app or tracking device, we’re building a complete ecosystem to manage your health and fitness with actual insights to make you better.”

Our largest competitor has 24k points of distribution, we have 11k

“So let me take a second and just talk about North America. I want to level set the context of how our distribution is aligned. So often, we’re compared to our competition. Well, our largest competitor in North America has approximately 24,000 points of distribution just in North America. At Under Armour, we have 11,000. We have the ability to expand that but we haven’t. We have stayed committed to our sporting goods, to our mall, to our department stores channel.”

HCA 4Q15 Earnings Call Notes

HCA Holdings (HCA) R. Milton Johnson on Q4 2015 Results

big acquisitions are hard to find because most come from the non-profit sector

“Of course, we do a lot of in-market acquisitions. But as far as the big ones you’re speaking to, things like say Kansas City that happened in 2003, those opportunities are really hard to find. They’re going to come out of the not-for-profit sector. And typically, we may engage in conversation, but many times, these organizations decide ultimately not to sell.”

Samuel N. Hazen – Chief Operating Officer

Strong markets yield 2% growth just from population

“when you think about HCA’s growth strategy, and we’ve spoken to this numerous times, we think, first and foremost, we have incredible markets where we do business. And those markets are yielding, on a composite basis, across the company approximately 2% increase in demand growth just coming from population growth, as well as aging baby boomers, increasing employment and so forth.”

Don’t generate as many downstream referrals from urgent care as ER

“we do generate downstream referrals from our urgent care centers to both our physicians who are connected to HCA system as well as our emergency room and then on into the inpatient activity. The volume of downstream referrals is not nearly as large as our freestanding emergency room, which produce a larger downstream flow to our hospitals. But the components that we’re trying to build here between physician clinics, urgent care centers, freestanding emergency room and then hospital-based emergency room is all part of having a system-wide approach to creating convenience, ease of access, user-friendly solutions for our patients, and then building out the geographical footprint of the HCA network”

William B. Rutherford – Chief Financial Officer & Executive Vice President

We are seeing some exchange volume move to uninsured

“Well, first, put in perspective that our exchange volume is roughly 2% of the total company volume. So the exchange activity by itself is relatively small going forward on that. So, as we look at kind of the activity within the exchanges, we did mention in the third quarter we were seeing some previous exchange volume move to uninsured. It was 400 admissions for HCA in the third quarter. It was roughly the same in the fourth. That’s on 460,000 admissions for the company.”

Applied Industrial Technologies FY 2Q16 Earnings Call Notes

Applied Industrial Technologies (AIT) Neil A. Schrimsher on Q2 2016 Results

A continuation of headwinds

“Our second quarter results reflect a continuation of the economic and market headwinds that have been affecting our business, including reduced demand in oil and gas and other industrial end markets, as well as negative impact of foreign currency translation”

January is running similar to December

“I’d say broadly across the company, we would have said or see October and November sales were consistent with the September quarter and then the sales per day decline in December was more consistent with what you’d expect with seasonal trends and holiday timeout. So, for us, looking forward into January, it’s running similar to December. ”

Not expecting a second half improvement to occur

“We know traditionally we do see a second-half improvement, but we’re not counting on that to occur.”

Mark O. Eisele – Vice President, Chief Financial Officer & Treasurer

We’ll have a clearer picture of January as we do reviews, but different people are giving different color

“we’ve got a round of operating reviews that we will be going through right at the end of January, just to understand. But as we watch it, some guys are caught a little bit more with weather than others. Some are caught as we look at some end customers taking perhaps some extended timeout from end of their calendar year to start their calendar year. And I think we’ve got customers that are looking at their own capacity or their manufacturing footprints. And they’re not necessarily taking all capacity out, but where they’re going to do what, I think customers are making some choices right now as depending on the end markets they serve and kind of that overall industrial outlook or market that we’re participating in right now. So we think that’s all into that January-type result that we’re seeing so far.”

Alibaba FY 3Q16 Earnings Call Notes

Alibaba Group Holding (BABA) Daniel Yong Zhang on Q3 2016 Results

We see increased consumption in the Chinese economy from urban areas and younger generations

“We believe Alibaba has a significant opportunity that will be realized by the growth of the Chinese consumption economy. Specifically, we see increased consumption from the two key segments: number one, an expanding middle-class, particularly those living in urban areas who are undergoing lifestyle change and upgrading to higher-quality products and services; number two, young people who have strong appetite for spending but little interest in saving compared to their parents.”

Rural development will be a key to our success

“The future of our retail businesses will be driven by three key growth engines. Number one, rural development. Approximately half of China’s population live in rural areas. Our platform can reach rural villages very efficiently. So far, we have expanded our rural service centers to 12,000 villages. Our strategy is to sell goods from urban areas to village, as well as help farmers sell farmer products to people living in the cities.”

When times are not good advertisers will spend more on our platform because it’s more effective

“And as you said, today is a tough time in terms of macroeconomy and it’s not that good. And the brands are usually more cautious about spending marketing dollar. And that’s also the good time for us because when people are cautious, people care more about the effectiveness of the marketing dollar usage. So that’s why we can – they continue to spend more dollar on our platform because that’s one of the few platforms they can find to get the close-looped consumer track and to consumer interaction. Thank you.”

Chung Tsai – Executive Vice Chairman

The Chinese economy is undergoing a structural shift from high growth to moderate growth, investment to consumption and manufacturing to service

“I wanted to give you a few thoughts on the macroeconomic conditions in China since I know it is something that you are watching very closely.

The Chinese economy is going through a structural shift from high growth to more moderate but more sustainable growth. China is still one of the fastest growing economies in the world and we have no reason to think anything different in the foreseeable future. We are witnessing two significant trends consistent with Chinese government reforms that provide the secular drivers to Alibaba’s business.

First, China is moving from an investment-driven economy to a consumption-driven economy. Consumption-driven growth is clearly more sustainable and this plays to the strength of Alibaba with more than 400 million Chinese consumers shopping on our platforms.

Second, China is moving from an industrial manufacturing economy to a service economy. While the manufacturing sector lost jobs in 2014, the service sector added 17 million jobs. Job growth is taking place and it is driven by the services economy. People now have more employment opportunities in technology, commerce, logistics, entertainment, leisure, travel and finance. This is good for Alibaba because our platforms enable millions of small businesses and service providers to capture the growth of this new economy.”

Retail sales are going against the grain of a decelerating economy

“Chinese retail sales grew 10.7% in 2015. And it’s actually a higher growth rate than the prior year. So retail sales is going against the grain of what many consider to be a decelerating economy. And that’s because the shift of the Chinese economy is going from investment-driven to consumption-driven. So consumption, as a shared GDP, is becoming higher. So we benefit from that.”