Lyondell Basell 2Q17 Earnings Call Notes

Bhavesh Vaghjibhai Patel – LyondellBasell Industries NV

Operating rates at 95-99% of capacity

“Slide 5/6 illustrates our strong second quarter performance, with operating rates of 98% of nameplate capacity across our U.S. and European ethylene crackers. Our polyethylene production operated at 95% of capacity. And I’m particularly pleased to report the rebound in performance at our Houston refinery, where crude throughput rates increased to an average of 99% of capacity during the second quarter.”

Ehtylene prices have decreased

“During July, spot ethylene prices have decreased due to strong industry supply and increased inventories. After relatively light spring maintenance season, consulting services are predicting a return to typical levels of per-planned maintenance for September and October. Polyethylene markets are balanced, while polypropylene demand is relatively strong. No major maintenance is planned in our olefin system for the remainder of 2017.”

Markets are still relatively balanced

“Yes, I think markets are still relatively balanced here in the U.S. and globally. And so, as evidenced by initial reports of the rollover on polyethylene price here in July, I won’t hazard a forecast on the future. But I think we’re going into the second half of the year with pretty balanced markets and demand growing at a good pace globally. So I think that whatever lies ahead we’re going into it with very strong operating rates and very constructive markets.”

UPS 2Q17 Earnings Call Notes

David P. Abney – United Parcel Service, Inc.

Industrial production and retail still growing but slower pace than projected

“The latest U.S. GDP forecast for the balance of the year remains unchanged. Industrial production in retail are still growing, although at a slower pace than originally projected. Online purchases, as a percent of retail, grew once again in the latest forecast. Growth rates in Europe are expected to continue to be resilient, with most economies rising. And in Asia, the outlook for China has improved, with growth in that market now exceeding the previous forecast.”

Richard Peretz

Industrial production forecasts were higher three months ago than today

“As we looked, though, at the current data, what we also noticed is although we are seeing some positive trends in many of the different industry types in B2B, we’re a little challenged because the number of stores that are closing is having an impact on growth in the B2B. And so the forecast for B2B, if you go back earlier in the year to today, is not quite as strong because of retail sales and also because industrial production forecasts were higher even three months ago to where they are today.”

Amazon 2Q17 Earnings Call Notes

Brian T. Olsavsky – Amazon.com, Inc.

Explanation of Whole Foods purchase

Sure, Colin. First, as far as Whole Foods is concerned, as Darin mentioned, it’s not included in this guidance since it hasn’t closed yet, but we are excited about that acquisition and looking forward to working with the team at Whole Foods. We think they are very customer-centric, just like us. They’ve built a great business, focus around quality and customer. So we’re really glad to join up with them. On your larger question about what the place of Amazon Fresh, likely Prime Now and some of our other efforts, I would say we believe there’ll be no one solution, so we’re experimenting with a number of the formats from physical pickup points in Amazon Go to online ordering and delivery to your door through Prime Now and Amazon Fresh.

Intel 2Q17 Earnings Call Notes

Brian M. Krzanich – Intel Corp.

Bought Mobileye

“We expect to close the acquisition of Mobileye in the third quarter, several months earlier than expected. Autonomous driving is a massive compute workload that will disrupt industries and save lives and we are investing to win in this important segment”

PC TAM down 15% vs four years ago

“We’re executing well to our strategy to transform from a PC-centric company to a data-centric company that powers the cloud and billions of smart and connected devices. The PC TAM is down more than 15% versus four years ago. Despite that headwind, our revenue is up more than 15% and our operating profit has grown more than 30%. More than 40% of our revenue now comes from our data-centric businesses outside the PC sector”

Look, enterprise is going to continue to decline

“look, enterprise is going to continue to decline. We estimate, and again, this is just based on what we get from our customers, talking to the industry. It’s going be in the high single-digit decline. I think you’ll see quarters like Q2 that was 11%. You’ll see quarters like Q1 that were 3% or 4%. We’ve seen quarters higher than the 11% over the last couple years. So it’s going be lumpy as we see this shift, but the overall macro shift of enterprise to cloud or traditional on-prem systems to cloud is going to continue.”

Move to 3D X-Point

” And our real goal is then to move more and more of the business towards the 3D XPoint as we move into next year because that really differentiates us again as we really change the hierarchy between memory and storage as the data center DIMM memory systems come out.”

Starbucks FY 3Q17 Earnings Call Notes

Kevin R. Johnson – Starbucks Corp.

physical + digital

‘The evidence is clear that the pace of retail transformation is accelerating with a common theme: extending the in-store experiences to include relevant digital scenarios. It is the driving force behind combinations including Walmart’s acquisition of Jet.com, the combination of PetSmart and Chewy.com, and last month’s announcement of Amazon’s intent to acquire Whole Foods. Each of these combinations demonstrate that pursuit of enhancing the physical retail experience with a relevant and complementary digital experience.”

Matthew Ryan

Deceleration in restaurant spend but we’re outpacing the industry

“in the U.S. and just about any other market we’ve studied, there’s been a decades-long trend for growth away from home, food and beverage consumption, driven by demographics and people just want more convenience. And we’re strongly bullish on the long-term continuation of that trend.

However, in the past year, we’ve seen some pullback from that trendline, as we have from time to time, with consumers in the U.S. shifting some discretionary spend to other categories. We look at all sorts of sources of data here, including corroborating credit and debit card spend data. But we think the best source of industry comp intelligence comes from the APT index, which is a metric developed by Applied Predictive Technologies, that’s the name of the company, that aggregates and tracks actual comp data from a broad set of more than 100,000 retail restaurant and QSR competitor locations on a weekly basis, allowing us to understand just how well we’re doing versus important benchmarks.

And for Q3 overall, the APT index showed decelerating and negative comp for QSR and restaurant industries, while Starbucks’ own metrics accelerated comp to 5%. In fact, the differential between Starbucks and the industry increased significantly in Q3 compared to the past several quarters, and that’s just on the comp stores. It excludes the effect of any further market share gains we have as a result of our strong pace of new store openings.

Within the quarter, we did see some deceleration in month-to-month comp performance for both industry benchmarks and Starbucks, but Starbucks steadily outpaced the competition.”

Howard Schultz

New relationships will elevate brick and mortar

“I would just add, as Kevin had in his prepared remarks, what we’ve seen over the last few months with Walmart and Jet.com and PetSmart and Chewy and most recently Amazon and Whole Foods, I think this is just, we’re in the nascent stage of these kinds of commercial relationships that are going to elevate the experience of a brick-and-mortar retail company. And having said that, Starbucks is probably best positioned, given our national footprint, the demography of our customers, and where we’re located to have those kinds of conversations. I think it would be premature to kind of get into who they are, but clearly, we are a very viable partner, given the change in the industry.”

Cliffs Natural Resources 2Q17 Earnings Call Notes

C. Lourenco Goncalves – Cliffs Natural Resources, Inc.

Section 232 investigation should help us

“The fact that we are in the United States. The American business environment is predictable, and we operate in a very mature economic and legal environment. The most recent example of our country taking real action was the implementation during the last year of the Obama administration of several anti-dumping and countervailing duties, imposed against illegally traded steel from several different countries. While some countries and some players within the United States did not get the underlying message of these three cases and continue to find ways to cheat the system, the next thing is a Section 232 investigation, self-initiated by the Trump administration. The Department of Commerce recognized the importance of steel to our national security, not just on defense-related products, but on a lot of other things, from infrastructure to energy. While the 232-final determination has been delayed for reasons completely unrelated to the issue itself, we remain confident that some level of restrictive measure will be recommended soon.”

I continue to see a lot more reasons for iron ore prices to go up than down

“Unlike the vast majority of the experts and commodities desk, I continue to see a lot more reasons for iron ore prices to go up than to go down. There will be always volatility, even extreme volatility, as we have seen during the last six months. But I definitely recognize the conditions for iron ore prices to trend upward. Goldman Sachs got to this conclusion during the night today. That’s good to know.

China will continue to need iron ore to meet their production and employment needs, not even consider the impact of the one-belt, one-road initiative. And last but not least, with all the geo-political issues we see in the world right now, iron ore becomes that much more important, as it pertains to several countries’ defense and military endeavors. Again, I will be more than happy to elaborate on that in the Q&A, if you feel like doing so.

The only thing that I could see causing iron ore prices to go down, is if BHP keeps the same failed playbook that they have been operating under for way too long. ”

The big iron ore companies are just selling to traders

“what these guys are doing, these guys mean, for abundance of clarity, Fortescue, BHP and Rio Tinto, Vale and even the midget, Roy Hill, they sell to traders. And these traders do not have blast furnaces. They buy because it’s cheap to borrow money in Chinese banks. Then they put that iron ore in the ground, not in a blast furnace, at the port. And then they go back to the banks, and say, hey, I have collateral, can I borrow more? And the banker say, yes, and they borrow more, and they buy more for the same idiots. And then their port site keeps growing because there is no blast furnace over there. But they need to open space for more. It’s not because they want to sell anything. They’re in the business of buying more, borrowing more because they use money for other things besides iron ore. But they need to open space. Then they go ahead and sell for any price to the blast furnace, the same blast furnace that the miners would sell to. That’s my problem with the business in Australia. Then comes the question, will this be happening forever? Yes or no? Of course, the answer is no. One day, this bubble will burst. And on that day, people will say, oh, we are surprised that we are not seeing iron ore inventories going up. ”

Oaktree 2Q17 Earnings Call Notes

Jay Steven Wintrob – Oaktree Capital Group LLC

Investors remained in a bullish mood

“Investors remained in a bullish mood in the second quarter buoyed by a relatively resilient U.S. economy, low interest rates around the globe, a surfeit of liquidity driven by accommodative monetary policies and low, expected and actual levels of volatility. The S&P 500 MSCI World and MSCI Emerging Markets indices were up 3%, 4% and 6%, respectively in the quarter and have appreciated 18%, 19% and 24%, respectively over the last 12 months.”

Exercising a high degree of caution

“So in short, it’s been a risk on market for most of the year and relatively high prices for almost every asset class reflect that. In this environment we continue to focus on obtaining attractive financing for, or selling mature assets in our portfolios, while exercising a high degree of caution in our security selection and deployment of dry powder.”

Living in a low return high risk world

“Markets normally respond to elevated uncertainty with lower asset prices and compensatorily higher returns. But that’s not what we are encountering today. We are living in a low-return, high risk world and an environment where most investors are happy to bear risk. Against this backdrop, Oaktree will continue to follow its 2012 mantra, move forward but with caution, and given today’s conditions, with even more caution than in the recent past. If one is going to invest at times like this, investment professionalism, knowing how to bear risk intelligently, striving for return while keeping an eagle eye on the potential adverse consequences is the most important thing.”

Markel 2Q17 Earnings Call Notes

Richard R. Whitt, III – Markel Corp.

Insurtech space

Sure. Couple; just quick examples. We, like a lot of people, are starting to look at the Insurtech space. And the State National, I think they are ideally situated to sort of be the go between the Insurtech folks and sort of your standard insurance carrier types. It’s a clash of cultures there, I would say. The Insurtech folks are used to things happening lightening fast and with minimal regulatory issues and all that and that’s not insurance. So there almost needs to be a translator between Insurtech folks and standard insurance folks. And that is a role that State National plays wonderfully. And we see them helping us with our Insurtech initiatives sort of being that translator between us and those folks, and we think a lot of other people do that as well.

National Oilwell Varco 2Q17 Earnings Call Notes

Clay C. Williams – National Oilwell Varco, Inc.

Seeing a resumption of demand in pressure pumping

“The good thing for us is that over 900 rigs running in North America – or in the U.S. right now are consuming a lot of that at a much higher rate than the 350 or so that we bottomed out at last year. And so the rate of consumption has stepped up and that means they have less opportunities to cannibalize inventories and consumables of off idled rigs and have burned through inventories. And so we’re starting to see a resumption of demand.”

Glimmers of hope in international markets

“. We saw some glimmers of hope in the international markets. As two-and-a-half plus years of this downturn have gone on, the stuff that we’ve had out in the marketplace is slowly getting consumed. Those inventories are diminished and depleted and folks have to step back to the table and start ordering more of our products, even at very low activity rates. So we’re seeing some positive signs that give us some optimism in some sustainability of those businesses even in a flattening rig count environment.”

Group 1 Automotive 2Q17 Earnings Call Notes

Earl Hesterberg – CEO, President & Executive Director

Poor performance in energy impacted markets

“Although we had another record performance in U.S. FNI per unit retail and a further rebound in Brazilian profitability, these factors were not enough to offset continued weakness in vehicle sales in our U.S. energy price-impacted markets. Combined new and used retail unit sales dropped 7% in Texas and Oklahoma during the quarter. Our largest market, the U.S. energy capital of Houston, had an industry new vehicle sales decline of 10% in the first half of the year and a very weak close to the second quarter with June sales down 24% from June 2016 levels. T”

A lot of high paying jobs were lost in Houston

“I think for us, Rick, the key is when the energy companies start to hire people again. And those — actually markets like Huston have replaced most of the lost jobs. That really is not a net job loss, but the new jobs tend to be in the restaurant, hotel, hospitality industry. The jobs we lost are energy and construction jobs, high paying jobs.

So not only are there fewer customers buying a car, there is a probably a mix issue there too. The new jobs are probably supporting lower mix and more used cars or low end volume brand cars and have probably been hit disproportionately in the midline imports and luxury brands. But I think it’s just a function of hiring again in the energy industry.”

I think the market will continue to head toward electric

“These statements by Volvo by 2025 in the U.K., by 2040, those were just seemed to be statements of strategic intent and very much in tune with the consumer psychology at the moment. It’s driven by all this negative press about diesels. But clearly, things are headed that direction and as there is more offerings from the powerful OEMs, I think it will continue to head toward materiality in our business.”

John Rickel

Opportunity to downsize dealerships

“Well, you’re preaching to the choir on that one, David. No, it doesn’t require much of the brick-and-mortar we have today. We actually have one of the top OEM Executives with us last Saturday who toured all of our different brand dealerships in Houston and we made the point to him that the 2 most important things to us today, and I think OEM dealers, are a service bay and a parking space. Everything else is interesting, but we always need more parking spaces which are very costly when you’re in metro areas where the land is expensive. And a service bay, is valuable and generates gross profit. And showroom size and offices and all those things are interesting, but we can sort those out on our own. So we hope we’ll enter an era soon of more realism in that area. But I can’t say we’re there yet.”