Company Notes Digest 7.29.16

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: No One Ever Called This Expansion

Although there are a lot of reasons to be more optimistic about the global economy, CEOs this week found plenty of reasons to be pessimistic too. Even the companies that felt like they were executing well cited a slow economic backdrop, with “anemic” growth. At least it is growth though, and +1 feels good when you were running at -2 before.

Also in this week’s post, energy companies seem to be increasingly positive about the cycle despite the fact that oil prices have been sliding. Internationally, Brazil may be turning up, but China is still showing signs of weakness. Meanwhile, financial services CEOs are on the brink of tears over low interest rates.

The Macro Outlook:

Everyone’s pleasantly surprised by how the markets have performed post-Brexit

“I think we were all pleasantly surprised…by how the markets have performed post-Brexit…I think we’ve probably…settled down a little bit quicker globally than probably people originally anticipated given the surprise of the vote.” —Lazard CEO Ken Jacobs (Investment Bank)

A lot of people are finding things to be encouraged about

“Most recent data on the U.S. economy continues to be encouraging. Consumer spending remains strong and job creation, wage growth and unemployment trends point to a steady growth environment, although more likely in the 2% GDP growth range as opposed to the 3% plus that we would all like to see.” —United Technologies CFO Akhil Joori (Industrial)

But no one ever said this was an expansionary environment

“I don’t think we’ve ever referred to this environment as being expansionary. And the way I would describe the overall performance and why we say strong: if you take a look at the cash we generated, if you take a look at the operational margin rate improvement” —Honeywell CEO David Cote (Industrial)

It’s just that +1 feels good when you were running at -2

“I sure hate to brag about a sales number that’s around zero, but…the reason it feels better is we were plus 1% organically. For the whole company, we were plus 2% on a volume basis. And the quarters before that, four or five quarters before that, organically, we were kind of running a negative 2%.” —Du Pont CEO Ed Breen (Chemicals)

Confidence is still weak in many areas

“When we were sitting here a quarter ago, we were expecting sales in a range of $40 billion to $42 billion…We’ve taken that down…And the gist of that is just everything that we’re seeing in the economy today around the world…It’s not any one thing, I would say…we have sluggish economic growth throughout the world in general, but not enough to drive growth in our end markets. And the news we’ve seen over the last few months is definitely not giving us more confidence.” —Caterpillar VP Michael DeWalt (Construction)

Starbucks noted a “profound” weakening in consumer confidence

“What we did not and could not have fully anticipated was the profound weakening in consumer confidence in [Q2] that has caused sharp declines in QSR and restaurant traffic overall and has many of our competitors struggling with negative transaction comps…Starbucks is not immune to macro challenges that impact our competitors and retail overall.” —Starbucks CEO Howard Schulz (Beverages)

McDonalds cited a broad level of uncertainty among its customers

“clearly, it’s been fairly well documented on the consumer slowdown across most consumer segments…We’re not immune from what’s happening in the outside world…I think generally, there’s just a broader level of uncertainty in consumers’ minds…people are slightly mindful of an unsettled world. And when people are uncertain, when families are uncertain, caution starts to prevail and they start to hold back on spend.” —McDonalds CEO Stephen Easterbrook (Restaurants)

Venture Capital markets are still soft

“[capital raises] were dominated by a small number of very large rounds to late-stage private companies. At the same time funding to early stage startups…Concern over late-stage valuations and uncertainty in the markets continue to weigh on IPO prospects…As you can hear from our remarks our innovation market is still a little bit soft.” —Silicon Valley Bank CEO Greg Becker (Bank)

Hotel developers are slowing down their pace of construction

“I think in some respects that in a somewhat weaker market…we see that the construction pace has been expanding just a little bit. We are not seeing cancellations of projects however and I think generally what we’re talking about is projects that formally we would have expected to open probably in the fourth quarter of the year opening some time in 2017.” —Marriott CEO Arne Sorenson (Hotels)

There are signs that hiring has slowed

“clients remain cautious. There’s less sense of urgency…the U.S. economy is slugging along in the 1% to 2% GDP path that it has for some time, but as clients have gotten more cautious, our growth rates have slowed.” —Robert Half CFO Keith Waddell (Temp Staffing)

The industrial economy continues to weaken

“We’re seeing cautious customers, and a general reluctance to invest capital across most of our end markets…it really seems like the last six months things have slowed a little bit. I mean, again, it’s not dramatic, and I’m not predicting anything to fall off a cliff. But definitely in the last six months the environment has got a little softer from my standpoint rather than better” —Graco CEO Pat McHale (Industrial Components)

In some cases, business is down almost as much as it was in the Great Recession

“We were actually down 29% in the Great Recession. Excluding acquisitions, we are currently down approximately 20% from the rebound level. So, we’re not where we were in 2009, but we’re probably within about 10% of where we were in 2009 from a pure volume perspective…So, those numbers are in line with what we would have seen since 2009.” —Lincoln Electric CFO Vincent Petrella (Welding Tools)

Growth may be anemic, but at least it’s positive

“you will not be surprised that U.S. economic growth has been slower than we anticipated when the year began…I think as we guided a quarter ago we had an overly rosy view about the strength of GDP in the United States…But it is still positive GDP growth… when you look at the range of economic data that comes out including recent employment reports and consumer confidence reports and corporate profits and some of those sorts of things, it looks to us like it’s a reasonable good bet that the economy will continue to grow, albeit grow maybe somewhat anemically.” —Marriott CEO Arne Sorenson (Hotels)


So far companies aren’t seeing much impact from Brexit

“As I said, we have no strong signs of Brexit so far.” —Volvo CEO Martin Lundstedt (Automobiles)

Trade is functioning as usual

“Trade is still occurring and we’re executing for our customers. While the UK has new leaders in place, trade in some form or fashion will continue regardless of the direction that new government takes, so we aren’t really concerned from that perspective.” —CH Robinson CFO Andrew Clarke (Third Party Logistics)

Brexit isn’t causing any changes in strategy

“There is no reason for us to change the strategy in Europe based on the outcome of the Brexit. No reason for us to do that.” —3M CEO Inge Thulin (Industrial)

Deutsche bank intends to let clients guide them where they need to be

“We basically view this as something that will essentially be client-driven for us. So we wouldn’t intend to do anything ourselves other than we have to respond to our clients’ requirements…if our Eurozone clients in particular increasingly want us to be facing them from locations within the Eurozone, if that proves to be the case, then we are reasonably well-positioned” —Deustche bank CEO John Cryan (Bank)

Export oriented companies benefit from the weak pound

“With the recent weakening of the pound, exchange is forecasted to be a significant tailwind in fiscal 17.” —Diageo CFO Kathryn Mikels (Beverage)

“A weaker pound benefits our core earnings, not just through a stronger topline, but also in the operating leverage across the businesses. We continue to have a higher proportion of our costs in the U.K. than revenues.” —Glaxo Smith Kline CFO Simon Dingemans (Pharmaceuticals)

The British economy is really only a small portion of global GDP anyways

“the British economy is probably about 4% of the global GDP, so even if there’s a wobble inside that economy, it’s going to be really hard for us to be able to detect it.” —Texas Instruments (Semiconductors)

There may be some signs that Brazil is turning up

“I was on the phone with our guy who runs Brazil last week, and I think there are some early signs of optimism perhaps there that they’re expecting things to be a little bit better in 2017. And so we’ll see.” —Kimberly Clark CEO Tom Falk (Consumer Goods)

“In Latin America, specifically South America, Brazil, we’ve seen it flatten out now, no more downward pressure. It certainly seems to be maybe the Brazil is bottoming out” —Axalta CEO Charles Shaver (Paint)

“Brazil is still in a deep recession but interestingly, a modest increase in business confidence is beginning to show signs that the economy may be reaching a bottom.” —Mastercard CEO Ajay Banga (Payments)

The Chinese consumer may not be as strong as advertised

“China…no question, the overall consumer environment is weakening due to the economy’s economic transition… We always knew that for a country as large as China, transitioning to a consumer-led economy was going to have its challenges. Those may have turned out to be more than we expected in the short-term…[there are] strong affordability needs across the rural and blue-collar areas” —Coca Cola COO James Quincey (Beverage)

“We face some challenges in Greater China, as the economic environment has slowed down since the beginning of the year. This is reflected in consumer confidence and retail spending” —Apple CEO Tim Cook (Consumer Electronics)

Nothing is as bad as Venezuela though

“In Venezuela, severe shortages in certain raw materials resulted in us temporarily suspending production at the bottling partners’ plants during the quarters…the most extreme example perhaps is Venezuela, where there was no sugar.” —Coca Cola COO James Quincey (Beverage)


Low interest rates are bringing financial services CEOs to tears

“we have continued low interest rate environment around the world and it’s really gotten to the point that it could almost make your eyes tear.” —WR Berkley CEO Robert Berkley (Insurance)

Customers are trying to cut fees as much as possible

“Faced with political and economic uncertainty, historically low interest rates, and full equity valuations, asset allocators continue to move wealth into high capacity, low fee products” —Artisan Partners CEO Eric Colson (Asset Management)

In turn, the industry is trying to cut costs

“I would say financial services clients…are more focused on controlling their cost than any other sector” —Robert Half CEO Harold Messmer (Temp staffing)

Ultimately you have to accept that the investment environment is what it is

“15 or 18 years ago I wrote a memo called that is what it is, in which I said the investment environment is what it is, if we give in, we can’t change it and we can’t order up the new one, we have to work within it and this investment environment offers us lower prospects than ever…10-15 years ago 10% looked like a modest accomplishment, now it looks like nirvana… you have to be modest about your expected returns and modest about the amounts you can manage. The one thing you can’t do is say well, the capital market line is lower but I want the same returns I used to get with the same risk on the same amount of money.” —Oaktree Chairman Howard Marks (Asset Management)

But many investors have actuarial liabilities to worry about

“As you know, lower discount rates could have a significant impact on our pension expense for 2017 and beyond…as a reminder, every 10 basis points change in the discount rate is around a $30 million profit impact.” —United Technologies CFO Akhil Joori (Industrial)


In the future all food will be delivered

“we’re expanding our delivery business by tapping into growing digital channels, as well as other vendors, to offer added convenience to Chinese customers.” —McDonalds CEO Stephen Easterbrook (Restaurant)

“This is a unique opportunity for our brand and Buffalo Wild Wings was ranked fourth behind pizza and sandwich concepts as the company consumers most wanted delivery from…We have begun delivery in two restaurants and plan to diligently test and evaluate this opportunity.” —Buffalo Wild Wings CEO Sally Smith (Restaurant)

“We’ve come to believe delivery is the Usain Bolt of initiatives at Panera. It’s powerful, it moves very quickly and it’s getting out of the blocks fast…There are going to be a lot of people that view delivery as, shall I say, an opportunity to hop on the newest flavor of the month…and they will do modestly in it…There are others that are going to go at it in a mass-market way as Panera is” —Panera CEO Ronald Shaich (Restaurant)

Social Networks are running out of opportunity to increase ad load

“we anticipate ad load on Facebook will continue to grow modestly over the next 12 months, and then will be a less significant factor driving revenue growth after mid-2017. Since ad load has been one of the important factors in our recent strong period of revenue growth, we expect the rate at which we are able to grow revenue will be impacted accordingly.” —Facebook CFO David Wehner (Social Network)

“while the incremental benefits from ad load itself are more limited given where we’re at, there is a significant opportunity to increase yield over time by driving improvements in targeting, creative and measurement that Adam talked about.” —Twitter CFO Anthony Noto (Social Media)

Pokemon Go found its way to a number of conference calls

“On Pokemon Go, if you’re interested, unfortunately the average utilization of data of one hour of you chasing the monsters, so whatever you call them, is only 20 megabyte per hour. So, while it is a great thing to talk about and to do from a usage perspective, Pokemon Go will not change the future of Vodafone but we are all very amused by this thing.” —Vodafone CEO Vittorio Colao (Telecom)


The machines are learning deeply

“We’ve been piloting robotics and machine learning processes to automate work and eliminate repetitive manual tasks.” —Bank of New York Mellon CEO Gerald Hassell (Trust Bank)

“We’re also using machine learning in many other ways across our products and services, including recommending songs, apps, and news…Deep learning within our products even enables them to recognize usage patterns and improve their own battery life.” —Apple CEO Tim Cook (Consumer Electronics)

“We’ve been applying a lot more machine learning and deep learning to our on-boarding, so we can match people faster to their interests.” —Twitter CEO Jack Dorsey (Social Media)

“This quarter, we announced DeepText, a deep learning based engine that can understand the context of several thousand posts per second across 20 different languages.” —Facebook CEO Mark Zuckerberg (Social Media)

“we’re investing in…hiring very talented data scientists to help us take advantage of this. And then you think you move on from the structured data that we have to the unstructured data, and that’s a language processing and, where we can move the needle there is, again, something for the future that I’m very excited about” —HCA CEO Milton Johnson (Hospitals)

Du Pont’s scientists are using CRISPR to develop new products

“Our scientists today are utilizing the newest technologies like CRISPR-Cas gene editing to develop targeted applications to deliver enhanced solutions and greater choice for our customers.” —Du Pont CEO Ed Breen (Chemicals)

Smartphones sales are going to slow

“As far as the, how do we stimulate phone, smartphone growth? Look, I’ve been saying for over a year now that smartphone growth is going to continue to slow. And we have to look at other areas for that growth” —Verizon CEO Lowell McAdam (Telecom)

Global smartphone penetration is still only 42% though

““The iPhone demand is made up, as you know, of upgraders, switchers and new to smartphone. And so if you take it in reverse order for a minute and look at a new smartphone, smartphone penetration right now around the world at the end of December was 42%. ” —Apple CEO Tim Cook (Consumer Electronics)

Materials, Energy:

More oil companies are talking about seeing the bottom of the cycle

“In the second quarter, market condition worsened further in most parts of our global operations. But in spite of the continuing operational and commercial headwinds, we have now reached the bottom of the cycle.” —Schlumberger CEO Paal Kibsgaard (Oil Service)

Companies are counting on demand to push prices back up

“I still see the demand side…maybe 1.2 million to 1.4 million barrels per annum of additional demand. It will be a demand recovery, not a supply recovery.” —Anadarko CEO R. A. Walker (Oil and Gas)

Recent oil price weakness is largely being written off

“Over the last quarter, we have seen oil prices strengthen in anticipation of this rebalancing, with some weakening primarily due to the strong dollar in the last week or so. The longer-term fundamentals for the industry also remain robust.” —BP CEO Robert Dudley (Integrated Oil)

Companies are penciling in $60 oil

“I am now encouraged that a sustained $60 oil price environment is likely to emerge as we move into 2017. This price level should provide the necessary cash margins and resulting cash cycle improvements to encourage us to accelerate activity and achieve strong returns. In this scenario we would evaluate redeploying some of the incremental proceeds from asset sales towards our highest quality U.S. onshore assets later this year” —Anadarko CEO R. A. Walker (Oil and Gas)

Oil service companies may benefit most from an improving environment

“the current cost per barrel for the oil producers now appears to be significantly lower than what was the case seven quarters ago. However, this should not be confused with a permanent improvement in the underlying industry performance as there has been little to no fundamental change in technology, quality or efficiency…What has taken place over the past 21 months is, instead, a redistribution of the profit and cash flow shortfall from…oil producers to…the supplier industry…the market is also underestimating the potential reaction from the supplier industry, which has temporarily accepted financially unviable contracts to support the operators…It also means that, inevitably, service industry pricing has to recover” —Schlumberger CEO Paal Kibsgaard (Oil Service)

Miscellaneous Nuggets of Wisdom:

Curiosity and courage drives innovation

“To be among the world’s most respected and enduring companies, we must constantly look around corners and let our curiosity and courage drive innovation. With this mindset and purpose, I have no doubt we can continue to grow the company sustainably, and in ways that will continue to make us all proud.” —Starbucks CEO Howard Schulz (Beverage)

Things that really create value take hard work and perseverance

“I found over the many years in building Capital One, just about anything that’s really value creating involves digging a hole before the benefits come. If it weren’t that way, everybody would rush in and do it and actually would kill the opportunity.” —Capital One CEO Richard Fairbank (Bank)

Full transcripts can be found at

New York Times Earnings Call Notes

New York Times’ (NYT) Mark J. T. Thompson on Q2 2016 Results

More visual with video, virtual reality and live interactive journalism

“In the quarter, consistent with where we believe consumption is moving, we increased our efforts to make our report more visual with video, virtual reality and live interactive journalism. In the quarter, we produced our 12th and 13th virtual reality films, and have done more than 400 live streams using Facebook Live.”

Increasing digital-only subscriptions

“Combined at the end of the quarter, we have 1,424,000 digital-only subscriptions, an increase of more than 25% year-over-year. The acceleration in the number of digital subscriptions makes this not just a growing but an accelerating revenue stream.”

Digital advertising slightly below expectations

“Digital advertising was somewhat lower than we expected for the quarter, down 7% compared to Q2 2015. We continue to see large year-over-year increases in smartphone, branded content and programmatic, but these were not enough to offset declines in web homepage and other traditional display advertising.”

Decreased dependence on print advertising

“But it’s worth pointing out that print advertising only accounted for 23% of total revenue in Q2 2016. We are, in other words, far less reliant on it than we once were.”

Marriott 2Q16 Earnings Call Notes

Marriott’s (MAR) CEO Arne Sorenson Q2 2016 Results

Received regulatory clearance for starwood from everyone except China so far

“The big news this year for Marriott is the Starwood Acquisition. As you know we have received all of the necessary regulatory clearances throughout the world with the exception of China. We are in the second phase of China review and we have been working cooperatively with the regulatory authorities”

US economic growth has been slower than we anticipated

“you will not be surprised that U.S. economic growth has been slower than we anticipated when the year began. In fact over the last three quarters, room sales of our nearly 300 largest corporate customers have gradually weakened from 4% growth year-over-year in the fourth quarter to 2% in the first quarter and less than 1% in the second quarter.”

Strong dollar is impacting international guests

” with the stronger dollar we are seeing fewer international guests coming to our U.S. hotels. With the impact most pronounced in a few key gateway markets. We estimate the number of room nights occupied by international guests at comparable hotels in New York and Miami declined by 10% to 15% in the second quarter.”

Strength of the economy is the biggest question mark

“Obviously the strength of the economy is the biggest question I think in terms of forecasting how we are likely to perform in the coming quarters. And to some extent is the place maybe you can see this up a little bit over the second quarter. I think as we guided a quarter ago we have an overly rosy view about the strength of GDP in the United States particularly and as a consequence we continue to stick with our 3% to 5% REVPAR for the full year that we have provided at the beginning of the year.”

But it is still positive GDP growth

“But it is still positive GDP growth, I think to some extent the question you and we could ask of ourselves is we what more solid, more confident in the kind of guidance we are giving today than what we gave a quarter ago. And I think the best answer to that is that we now are making forecast based on essentially the current face of GDP growth in the United States which is weak not on a more rosy scenario.”

The economy should continue to grow but maybe somewhat anemically

“Is it possible the U.S. economy performs worse than that, of course it is. But when you look at the range of economic data that comes out including recent employment reports and consumer confidence reports and corporate profits and some of those sorts of things, it looks to us like it’s a reasonable good bet that the economy will continue to grow, albeit grow maybe somewhat anemically.”

Seeing construction projects take a little longer to complete

“And I think in some respects that in a somewhat weaker market, somewhat more anxious market that allowing the construction to take a little longer is a rational thing that some of our partners are doing. And as a consequence we see that the construction pace has expanding just a little bit. We are not seeing cancellations of projects however and I think generally what we’re talking about is projects that formally we would have expected to open probably in the fourth quarter of the year opening some time in 2017.”

Projects in China continue to move forward but slowed in Hong Kong

“We have been pleased with China on the development side year-to-date we obviously read the same newspaper that you do and there is some anxiety there as there is in many other markets around the world but it seems that people are continuing to move forward with projects that have strength. And then, on the negative side Hong Kong has been sort of tougher market mostly because Chinese visitation has, Mainland Chinese visitation has declined. Some of that is currency driven given that Hong Kong’s dollar is essentially pegged to the US dollar and so as a consequence has become more expensive as the US dollar has continued to appreciate around the world. We wouldn’t expect that Hong Kong is going to change for the better anytime real soon”

Oaktree 2Q16 Earnings Call Notes

Oaktree Capital Group’s (OAK) Jay Wintrob Q2 2016 Results

We are back to an environment that should reward credit selection and risk management

“At Oaktree, we consider these opportunities without attempting to time markets, instead focusing our efforts on volume up analysis. The past year validated this approach, the short term market durations, triggered by China growth concerns, energy and commodity prices, Brexit, and easy monetary policies of Central Banks including negative interest rates confounded forecasters. While it’s impossible to know what the future will bring in any of these regards, it appears we are back to an environment that should reward credit selection and risk management rather than aggressive behavior.”

It’s not an oaktree type market but we are finding some opportunities

“The areas that we’re deploying are largely energy related opportunities we’ve been seeing, power and then I mentioned the European NPL opportunity and while we continue to see those real estate also you’re seeing some interesting opportunities and also on the emerging market debt side there are some interesting things. Across all our strategies, there is some decent levels of deployment. It’s not an Oaktree type market, life with opportunities everywhere but we are seeing selected pockets and sectors that look interesting.”

Direct lending is something we’re doing more of

” It is something we are doing more of, we believe there is an opportunity there for the reasons that most people do, which is the banks not being as aggressive always involved in the small middle market space. And in fact direct lending adultery is nothing new. Basically the way, they think about us and we are having a separate dedicated direct lending fund, we actually engage in that through a number of our current strategies, certainly strategic credit looking well down in the capital structure, and also higher up in our middle market sponsored driven mezzanine strategy will be the two biggest.’

Howard Marks

The investment environment is what it is and we have to work within it

“15 or 18 years ago I wrote a memo called that is what it is, in which I said the investment environment is what it is, if we give in, we can’t change it and we can’t order up the new one, we have to work within it and this investment environment offers us lower prospects than ever but of course makes our products more important than ever to our clients and you know I dare say that most people have given up on getting the 7.5% that they require from main streams stalks and high grade box, well what does that leave? I think it leaves us in a pretty good position”

10 looks like nirvana now

“plus we have adjusted to the change in the environment over the last I would say roughly six or seven years by continuing to bring out an increase or suite of products designed to produce returns around 10 which you know 10-15 years ago, 10 looked like a modest accomplishment, now it looks like nirvana and you know we have a number of products ranging from strategic credits which Bruce mentioned and direct lending to European Credit solutions to [indiscernible] to enhance income to real estate debt, all of which we think will produce high single digits or 10 or so if things break right and you know as I said before now people say I don’t 9% wouldn’t that thing right”

You have to be modest about the amounts you can manage

“remember that Fund 7B was $11 billion and Fund 8 was $5.5 billion and Fund 10 is 3 and change, so we raised our standards and to have high standards in a low return world you have to be modest about your expected returns and modest about the amounts you can manage. The one thing you can’t do is say well, the capital market line is lower but I want the same returns I used to get with the same risk on the same amount of money.”

There’s nothing special about a hedge fund

” think that people have grown appropriately skeptical about well, I mean there was never anything about the term hedge fund that produced instant magic, you know hedge funds just a form of delivery and maybe a form of composition but all investment accomplishments still go back to superior judgment, you may not know Alex that I wrote a memo on hedge funds in 04 and you know what I said then is that when I first learned about hedge funds is probably in the 70s there were 10 hedge funds run by 10 geniuses and in 04 I said the day there are 5000 hedge funds and I don’t think they are run by 5000 geniuses and today we are up probably to 10000 and you know the performance of the greatest hedge funds run by geniuses and their closing created a huge umbrella over this industry which permitted the other 9990 hedge fund managers to start hedge fund and command hedge fund fees.”

I think clients are becoming more comfortable in taking liquidity risk

” if you want to get high returns in a low return environment you have to take some risk and the risk comes on a menu. And you can take data risk, you can take liquidity risk, you can take manager risk, you can take quality risk, there are many forms of risks to take and I think that clients are becoming – feeling better and better that if they have to risk they will just take it on the liquidity side.”

Bruce Karsh

Brexit didn’t generate the opportunity we thought it would but it’s still early

“Brexit did not generate the buying opportunity we thought it might from our distress related strategies, but it’s relatively early in this less positive part of the credit cycle. We still see European non-performing loan pools as an important part of the opportunities at and we continue to be active purchasers as banks look to rebuild our balance sheets.”

David Kirchheimer

We’re still targeting a 15% hurdle rate in this environment but it’s ratcheted down

“we have adjusted downward our client’s expectations and our own expectations as to what our strategies can provide. As I recall Bruce, when we started off at 1988, we thought the stress could do 25 to 30, and then we’ve had occasions since then, when we said 30 or more. And we are not saying 30 anymore or 25 or 20, but we are hoping for example to get 15, and we are targeting 15 in the investment decisions that we make, and we still believe we can make 15 and we may fall a little short of that. But that’s a goal that’s what we are underwriting to. We still think, we will clear the hurdles and it would be perfectly logical to go to the clients and say look 10 years ago, five year yields a six, today it yields one, the hurdle should be lower but we don’t want to have that conversation, the client still need the levels of return in excess of our hurdles and that’s what they come to us for and we still think we can get it, but of course as the capital market line comes down, achievement of any given return gets harder and that’s the world we live in but you know I don’t know want to go in there saying well how about if we start getting incentives at five on this spread and so forth and I don’t think that’s a necessary conversation and we just haven’t had a desire or felt the need to have that conversation.”

HCA 2Q16 Earnings Call Notes

HCA Holdings’ (HCA) CEO Milton Johnson on Q2 2016 Results

Health exchange admissions were a factor last year

“Sheryl, one thing I might just add and that is as we all know the health exchange admissions really grew last year, they get small piece of the company, but if you look at what they added to admission growth last year the second quarter verses this year, while we’re still so that’s also one factor to keep in mind when you start talking about last year.”

Clinical data warehouse is an area of opportunity in controlling costs

“Let me add one comment to that. I think it’s about other area of opportunity for HCA. Our clinical data warehouse, the number of our quality initiatives have sort of supply cost utilization, drug utilization, bad practice identification and so forth attached to it. As we engage our positions more than we’ve done in the past, they’re understanding of how it helps them, how it helps their facilities, how it helps their patients is another opportunity that I think we’re in the early stages of execution on our supply costs”

There’s a lot we can do with this data

” If you think about what’s happened over the last several years with electronic health records and investments that HCA and other providers have made in moving now to a digital medical record, it’s not like stealth one; now we have all this clinical information in a digital format, and what do we do with it? And there’s a lot we can do with it.”

We’re investing in data scientists to help us take advantage of this

“some things that we’re doing around acceptance care and really dropping mortality rates in our hospitals from sepsis and saving lives. It’s really happening; it’s happening today in our facilities. And so there’s examples like that. So it’s, again, we’re investing in not only in terms of the technical side of that but the human resource side of that with hiring very talented data scientists to help us take advantage of this. And then you think you move on from the structured data that we have to the unstructured data, and that’s a language processing and, where we can move the needle there is, again, something for the future that I’m very excited about.”

Samuel Hazen

Growth in visits through ER slowed

” growth in emergency rooms business in our hospital base units slowed as compared to the past few years. As a result downstream growth in inpatient admissions through the ER was not as strong as compared to recent quarters. We believe most of the softness can be explained by three factors. First, a slowing in demand growth to more normal rates, second new competition in several markets and third in a couple of our Florida we have experienced the change as how certain Medicare advantage payer classified the patients between inpatient admissions and observation status.”

Capacity constraints did not play a broad based role in softening

“I don’t think though in the second quarter, capacity constraints played a broad based role in the softening. There are pockets where we know that difficult day in and day out to manage the capacity challenge and that could in fact squeeze out few patients here or there but in total I don’t think that was a material impact in the quarter.”

William Rutherford

By recent standards wee see growth slowing

“by recent growth standards, we see it slowing. We went through over past 5 or 6 quarters that was exceptional and we saw demands in our markets growing and we suspect although as you know our market share data lacked about 6 months but we suspect we were going to see some flow in demand in many of our markets and that’s why we are seeing it show up in our numbers. That being said we still have a great outlook and a very optimistic outlook for the long term in our markets.”

Mastercard 2Q16 Earnings Call Notes

MasterCard (MA) Ajay Banga on Q2 2016 Results

US economy holding steady

“The United States economy is still holding steady. Consumer confidence up slightly, stable job growth, lower inflation, and frankly, prior to the Brexit vote, many parts of Europe were showing steady signs of improvement in both consumer confidence and unemployment. And you know, while it’s still too early to predict the full impact of Brexit, we will obviously watch that situation very carefully.”

Outlook in Asia remains cautious

“The outlook for Asia remain cautious. We’ve got a prolonged slowdown in China, a weaker than expected recovery in Australia. India continues to be a bright spot. Both consumer and business sentiment there remains strong.”

Brazil may be reaching a bottom

“In Latin America, Brazil is still in a deep recession but interestingly, a modest increase in business confidence is beginning to show signs that the economy may be reaching a bottom. In Venezuela, economic conditions continue to deteriorate but Mexico is in a steady growth path.”

Terrorism does affect cross border trends, but actually up so far in July

“Interestingly, in the UK, we’re actually seeing an increase of inbound cross-border spend. So it’s kind of bouncing around but specifically in a couple of countries that got impacted by terrorism, there’s no doubt that it causes some angst in cross-border trends. Having said that, remember what Martina said, right now, our cross-border volumes for the first few weeks of this quarter, it’s only a few weeks, are up compared to where we were last quarter. And in fact, Europe is one of the contributors to that being up.”

I’m not sure I understand the deal between Visa and Paypal

” I can tell you that I’m not clear that I understand enough about what exclusivity Visa signed with PayPal, because we’re not encountering any difficulty while talking to PayPal in that space. So I don’t know exactly what the nature of that exclusivity is. You got to ask PayPal or Visa, because I’m pretty clear that we’ve got enough good conversations going on, not just now but for a little while.”

Martina Hund-Mejean – Chief Financial Officer

Numbers through July 21

“The numbers through July 21 are as follows. Starting with processed volume, we saw global growth of 11%, slightly lower than the 12% we saw in the second quarter. In the US, our processed volume grew 8%, down 1 PPT from the second quarter, with slower growth in credit but higher growth in debit. Gas had less than a 1 PPT negative impact on our July growth, and that’s very similar to the second quarter. And processed volume outside of the US grew 15%, up a bit from the second quarter, primarily driven by Europe and Latin America.”

Cash has a cost of transaction

“because quite frankly, no card payments are a heck of a lot cheaper than what you have to do with cash, right.”

Europe outside of the UK is still an emerging market in terms of card acceptance

“What we haven’t seen yet as much as movement is on the smaller merchants, and that’s obviously where there’s a lot of work that we still have to do. And we’re hoping that that will continue to allow us to change the secular trend in Europe which, outside of the UK, right, in the UK a lot is already electronic side, but in the rest of the Europe, in the Continent, I always call it that this is still an emerging country for us. That will help us on the secular trend from cash and check to electronic forms of payments and will help our numbers over time.”

Baker Hughes 2Q16 Earnings Call Notes

Baker Hughes’ (BHI) CEO Martin Craighead on Q2 2016 Results

The industry will remain in continued uncertainty until there are more foundational changes to supply and demand

“looking back over the past few months, it’s clear to me that the movement of oil prices has been driven more by one-off events such as temporary supply disruptions and not by changing the fundamentals underpinning supply and demand. Therefore, I believe the industry will remain in a period of continued uncertainty at least through the end of this year until more foundational changes to supply and demand create a more stable environment for our customers to plan against.”

We don’t expect to see a meaningful recovery in the second half of the year

“As we said in early May, we don’t expect to see a meaningful recovery in the second half of the year, and that’s still the case. While we’ve seen production edge down, particularly in North America, that has been offset by additional production elsewhere. While our customers have substantially slowed, reduced, or all together canceled a large number of exploratory and field development campaigns, I’ve yet to see an economic catalyst that will create a step change to demand, that would lead to materially higher oil prices. In addition, U.S. crude storage levels are at record highs and there is a significant backlog of crude in the form of drilled, but uncompleted or so-called DUC wells.”

Demand growth is only modestly higher than expectations at the beginning of the year

“On the demand side, growth is only forecasted to be modestly higher than expectations at the beginning of the year. In fact, the economic impact of recent events such as the Brexit vote leading to a stronger dollar and significantly weaker British pound has created more uncertainty and historically there’s been a strong correlation between a strengthening dollar and a weakening oil price, which could continue to be an unfavorable headwind.”

Many customers are planning to ramp activity at $50 but oil prices in upper $50s are required for a sustainable recovery

“Many of our customers, I speak to are standing pat at today’s oil prices. And yes, many say they will ramp activity as oil prices reach the $50 mark. However, like in past cycles, service sector costs will rise with increased activity and that will erode incremental cash margins for the operators. Accordingly, I believe oil prices in the upper $50s at a minimum are required for sustainable recovery in North America.”

Expect rig count to increase modestly in 2H16

“Despite a backlog of drilled but uncompleted wells to work through, we expect the North American rig count to increase modestly in the second half of 2016 driven by seasonal gains in Canada and a slight uptick in the U.S. market. I describe it as a slow grind upwards for North America. Internationally, we expect rig counts to continue slight declines in most countries for the second half of 2016.”

Dr Pepper Snapple Group 2Q16

Upcoming FDA requirements on calorie and sugar labeling will not have major impact and are preferable to local and state regulations

“I think, we’re glad to see that it’s going to be more of a federal labeling instead of having 20 different ones out there to where it really drives the cost up of packaging and then distribution. So we were happy with that. And we think the FDA and our guys all did a great job there on helping get that through. But I don’t see any significant impacts that I’m too concerned about on.” Larry D. Young – President, Chief Executive Officer & Director


DSP believes it shelf space is secure

“a lot of these brands always come in and they try to get in different places, and they’ve not very – been very successful at it. I mean, there’s been ones that wanted to get into the coffee, they want to get into the dairy, they want to get into the juice aisle, that want to get in the CSD aisle. But most of your retailers, and most of the customers want them in a block. They keep them in the same area. And so we’ll have to watch it, but we’re not that concerned with it.” Larry D. Young – President, Chief Executive Officer & Director


Pricing is not an viable strategy to revitalize declining 7UP brand

“Yeah. That’s not sustainable, and you just rent volume when you do it with price.” -Larry D. Young – President, Chief Executive Officer & Director


DSP has a disciplined policy when it comes to acquiring brands

“it’s never say never. But our history has been to be very prudent about how we use our capital. And when you say buying brands, that’s a sort of a generic question. I mean, brands come to us all the time early stage. They’re not selling. And actually, at early stage, if they were, they would want such a – in our view, a large sum of money as to make it just a non-starter for us. We’re just not going to get involved in those sorts of risky investments. We just don’t feel we need to do it.” –Martin M. Ellen – Chief Financial Officer


DSP focuses on supply chain and delivery through Rapid Continuous Improvement (RCI )initiative

“So though we’ve made great – we talked even last year, we’ve closed voids through RCI lean tracks on Snapple, on Canada Dry. I mentioned the specific activity around Dr Pepper. We look at velocity, points of distribution and velocity all the time internally, but there’s no way I could share with you for modeling purposes how you can model growth, for example, between new points of distribution and velocity from existing points of distribution.” Martin M. Ellen – Chief Financial Officer

Fiat Chrysler (FCAU) Q2 2016 Earnings

Fiat Chrysler (FCAU) CFO Richard Palmer highlighted their partnership with Google

“FCA entered into an important collaboration, the first of its kind for an auto manufacturer with Google, regarding the integration of Google’s self-driving technology into the Chrysler Pacifica, which is an important move I think for FCA showing our being evolved upfront in this type of technology application.”

Allocating more manufacturing space to trucks and SUV’s while de-emphasizing lower margin cars

“Our NAFTA capacity realignment, we’ve spoken about before, regarding reorganization of some of our manufacturing footprint in the U.S. is proceeding on schedule. And will result in us having increased capacity allocated to Jeep and Ram from the middle of next year.”

Impact of Brexit on the business is minimal

“I think our exposure in the U.K. is fairly limited, on the balance sheet very limited. In terms of volumes, we sell about 100,000 cars and LTVs in the UK, obviously the 8% I think weakening, something like that, sort of stabilize that, sterling to euro, we’ll have an impact if it sits there through next year. This year we do have some hedges in place et cetera. So I think that the impact for this year is going to be minimal. So in terms of the localized impact related to the UK, not that significant.”

Fiat Chrysler (FCAU) CEO Segio Marchoinne explained his thinking on not yet committing a large amount of capital to an autonomous driving methodology

“I can only give you my views and I think it’s up to you and the markets to judge as to what is the wiser course. But I’ve stated this publicly and I’ll repeat it here again, that I think that it’s a world that is rapidly changing, and where preferences which are being expressed by existing or potential intruders into the auto space, keep on changing at the speed of light. And I think that one of the worst things we could do is to commit capital in a very certain unequivocal fashion to a particular technology choice, or a particular strategic platform without exploring potentials for development with a variety of actors. And I think we remain open as we have been, as we stated in private discussions with some of these so-called intruders and even in public assertions that the group has made. But the fact that we are willing to explore alternatives without expending a phenomenal amount of capital for us to try and understand what the ultimate economic model looks like. Because it is not just a question of exploration and capital permits when it’s a question of understanding what the economics look like after we finish. We are and have been historically manufacturers of cars out of a very traditional industry. This is a completely different way in which the market is going to be potentially developing. And I think we need to be open and not prejudicial in making choices. And so the Google experience hopefully will not be the last experience with a so-called intruder. I think it’s way too early to call today and it’s way too early to make large capital commitments for something which we have limited knowledge of and we understand little of in terms of future development.”

The Jeep brand is admired in the Chinese market

“I think the acceptance of both the Cherokee and the Renegade in China so far has been quite good. And I think it is confirming our expectations, that the Jeep brand has phenomenal traction in that country. We now having achieved local production, I think we are in a position to be fully competitive in the Chinese market. I think, we need to wait. I think that our ambitions to sell 500,000 jeeps in China by 2018 remains unchanged.”


The Match Group (MTCH) Q2 2016 Earnings Call

The Match Group (MTCH) CEO Greg Blatt said Tinder is now the 5th highest grossing app in the world (excluding games)

“And you look at the graph on the bottom right there, on a global basis excluding games, Tinder is now the number five grossing app in the world, behind only Netflix, HBO, Spotify, and LINE. Really getting into some heavy company there and really just on a fantastic roll.”

Tinder app is getting good traction in Asia

“Again Japan and India are actually our two fastest growing geo’s for Tinder. Of a relatively small base, so I don’t want to make too big a deal of it at this point, but showing real traction there and we’re trying to feed the fuel there. I think South Korea is another place where Tinder in particular we’re seeing a lot of growth, Brazil etc. So, I think there’s a lot of opportunity for growth within our existing businesses. We’re always looking at geographic expansion.”