LVMH (LVMHF) Q3 2017

Chris Hollis

Growth everywhere

“Organic revenue is up in the double digits across all of our business groups in the third quarter and nine-month period with the exception of Wines & Spirits.”

Jean-Jacques Guiony – CFO

But is not expected to continue in cognac

“…the type of growth we have had over the last two years, I would say is not something that we can replicate forever; the more normalized growth in volumes for cognac is more something like 3% to 4%, exceptionally 5% but nothing really more than that….we have had two tough years in terms of supply. We had hail in 2016 and we have drought in 2017. So, altogether, what we put in our sellers at cognac was lower than what we anticipated. So, all in all, this created a little bit of constraint for the business for the quarters to come I would say. It’s hard to quantify and to know exactly what will happen, but it’s pretty sure that the type of growth we have had for a number of quarters will not be replicated in the future.”

Price influence on growth negligible

“as in the preceding quarters, if not all but a big, big chunk of the growth was made of mix and volume numbers, the price increases were negligible. So the bulk of it was mix and volumes.”

But this may change next year

“…we will probably be able to pass limited price increases to customers. But as you know, we do it end of Q1, early Q2. So, it’s way too early to discuss. But obviously, we’ll think about it and that will be an element of our policy for next year.”

Delta Air Lines’ (DAL) Q3 2017 Earnings Call

Ed Bastian – CEO

Recovered quickly from hurricane irma

“We generates 6% topline growth, a 16% operating margin and $1.6 billion of operating cash flow while facing pressure from rising fuel prices and $120 million headwind from Hurricane Irma. We rebounded quickly from Irma and were the first airline to resume service in most of the key airports in Florida”

Glen Hauenstein – President

Businesses expected to increase corporate travel

“Based on advance bookings, leisure yield, and demand strength continues and we are seeing further improvements in business fares. Indeed our last survey of corporate travel managers showed more than 85% project their spend will be maintained or increased in the fourth quarter and into 2018. This is a 9 point improvement from last year’s numbers and the best fourth quarter result since our survey debuted in 2011. It is also consistent with the trend we’ve seen in our corporate contracted revenues where fares and volumes have recently been in positive territory concurrently for the first time in three years”.

Business and leisure travel outlook

“I think the transatlantic has been on the strength of business demand and really that plays to our strong suit, given our concentration in the business centers in Europe. Leisure has been a different story. It’s been more about incremental traffic and lower yields and I think that will continue through the fall and winter….Europe is coming out of a multi-year recession. US economy is strong and people are traveling for business, which plays to the strength of carrier that’s embracing the business model as opposed to the leisure model.”

Blackrock 3Q17 Earnings Call Notes

Laurence Fink – Chairman and Chief Executive Officer

market environment has improved

“Over the past year, the market environment has improved considerably. We’ve seen greater political stability in Europe. China is continuing to show economic strength, and after a long period of stagnation, we’re seeing consistent growth in Japan.

Overall, the world has become much more resilient. However, large cash balances remain on the sidelines, and many global institutions are invested in assets with return profiles that are not expected to meet their liabilities over time, which is creating significant demand for asset allocation and investment strategies across multiple asset classes.”

Shifts in wealth mgmt

“In the U.S., there are two major shifts converging in wealth management. First, in one of the largest asset movements, fee-based advisory assets are expected to double by 2020 in the shift from brokerage to fee-based accounts. The second digital technologies are disrupting traditional wealth advisory practices, which create competition for client assets and provides leverage for fast-growing advisory practices. These trends have several major implications for our entire industry.

Value for cost is critical to advisers and asset allocation decisions. Advisers are increasingly focused on managing risk and constructing portfolios. Chief Investment Officers are taking more control over asset allocation decisions. So there’s a heightened focus on repeatable systematized practices that can be scaled.

Against this backdrop, wealth managers are concentrating their business with fewer asset managers. Demand is increasingly for a strategic partnerships beyond anyone specific investment product. They’re looking for partnerships with BlackRock that we can have ability to bring tremendous value to our relationships to our clients.”

Scale is a competitive advantage

“And as Gary said, as our scale has increased, it gives us even a greater competitive advantage. And we do believe data, technology, risk management is going to continue to drive hopefully better financial literacy that gets back to my, once again, my whole concept of financial literacy for better outcome investing.”

JP Morgan 3Q17 Earnings Call Notes

Mariane Lake

We are constantly under attack

“not to diminish the importance of any individual breach or situation, is that we are honestly under constant attack, both in a more general side but also from a fraud perspective, and so while we always react and learn lessons from every individual situation, this is not the first breach nor will it be the last breach, so as a result we have been constantly evolving and refining the way we think about fraud prevention, detection, underwriting, continuing to move to multi-factor protocols around customer identification, looking to leverage all of our data to better inform our underwriting decisions.”

Nothing really has happened much since last quarter

“obviously apart from the rate hike in June, nothing has really happened much since last quarter, and so the landscape is looking pretty similar, and not because that’s surprising, so I’ll come back to that in a second, which is to say that there’s been very little to no movement in the re-pricing of deposit account”

Tax reform a factor but not a driving factor

“Tax reform, so fiscal stimulus, the reality right now is although I think everyone, and ourselves included, are hopeful, obviously that tax reform is done for the right reasons and that the economy responds accordingly, at this point it’s not front and center in the dialog we’re having with our clients about whether they should or shouldn’t do a strategic deal or take an action, so I would say it is neither holding up business nor spurring business, but that could change. So at this point, I’d say it’s a factor but not a driving factor, and that could change.”

Not seeing any deterioration in credit

“although we absolutely expect at some point that we’re going to see normalization of credit, we haven’t seen that yet – I just want to make that clear. We are appropriately cautious and staring at everything, but we’re not seeing any deterioration or any thematic fragility in our portfolio that we’re concerned about at this point.”

Company Notes Digest 10.6.17

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.

The economy has strong momentum and there are increasing signs of production bottlenecks in various markets. Given the fundamentals it’s increasingly surprising that inflation expectations aren’t rising and that the 10 year treasury yield is still only 2.35%. In every decade before 1980 we would be on high alert for inflation by now and the Fed would be hitting the brakes. However, in the modern economy inflation appears to be a thing of the past. Either that, or the conditions are right for a big surprise.

The Macro Outlook:

The economy has momentum

“I think we are absolutely seeing that continued momentum, particularly in the upper end of the economy” —Vail CEO Rob Katz (Ski Resorts)

Bottlenecks are appearing

There is more demand for homes than supply

“right now, with the shortage of inventory and all the positive things I mentioned first time buyers coming out, wage growth, employment growth, all these good things are going on and there is more demand out there right now than there is supply.” —KB Home CEO Jeff Mezger (Homebuilder)

The memory industry is undersupplied

“Moving on to the demand and supply fundamentals, we expect the industry to remain moderately undersupplied for the rest of 2017 for both DRAM and NAND…The DRAM industry supply demand balance is expected to stay healthy throughout calendar 2018, driven in part by ongoing strength in data center and cloud computing trends” —Micron CEO Sanjay Mehrotra (Semiconductors)

Auto inventory is balancing

“we feel good about our inventory position…we would certainly be looking into leaning into giving some more production at this point over the next six-month period and now less just based on our current day supply.” —Ford VP Mark LaNeve (Autos)

Bottlenecks = pricing power

Labor shortages are leading to wage growth

“The often discussed labor shortage in many sectors of the economy is translating into wage growth. And while much of the data collected by the government doesn’t seem to reflect significant wage growth, the customers visiting our Welcome Home Centers are reflecting an optimistic sentiment and an ability to afford today’s more expensive homes.” —Lennar CEO Stuart Miller (Homebuilder)

Used vehicle pricing is stabilizing

“The used vehicle pricing has been very stable over the last I guess call it 8 to 10 weeks now Colin and in fact ticking up slightly depending on the segment very, very stable.” —Ford VP Mark LaNeve (Autos)

Home prices are increasing too

” With this market dynamic ongoing, we remain focused on maintaining our healthy pace and increasing overall price where appropriate across the broad range of opportunities in our built-to-order model, including base price, lot premiums, structural options and studio options.” —KB Home CEO Jeff Mezger (Homebuilder)

International:

Inflation is also back in the UK

“Market conditions have been challenging with the return of inflation, but we’ve been able to protect our customers from more of this pressure than others by working closely with our supplier partners.” —Tesco CFO Alan Stewart (Retail)

Consumer:

Consumer brand companies are speaking like they’re tech companies

“as we target doubling our direct connection to consumers, we are ramping up investment in digital capabilities ranging from data science and analytics to machine learning to augmented reality to image recognition and personalization. We will continue to use our unrivalled resources to ensure that NIKE is built to win now and for the long-term.” —Nike CFO Andy Campion (Apparel)

“today, we have a team of roughly 200 e-commerce professionals supporting our businesses to capture growth in the rapidly emerging e-commerce channels…For example, using big data and predictive analytics to shape real-time marketing messages, dynamic merchandising, and tailored offers, our team is enabling us to drive greater purchase instrumentality and higher basket size for our customers online.” —Pepsi CEO Indra Nooyi (Beverage)

Materials, Energy:

Vanilla bean prices are $200 per pound

“I’ll also say that we have taken several moves on vanilla as the cost of vanilla beans has moved from single digits per pound to well over $200 a pound and that’s been well understood in the industry and so their price increases have been accepted.” —McCormick CEO Lawrence Kurzius (Spices)

Full transcripts can be found at www.seekingalpha.com

Tesco’s (TSCDF) Q2 2018

Alan Stewart – CFO

Inflation is back in the UK

Moving to the headline results of our UK and Irish segment. We’ve seen positive like-for-like of 2.1% for the half. Market conditions have been challenging with the return of inflation, but we’ve been able to protect our customers from more of this pressure than others by working closely with our supplier partners.

Bad debts way below pre-crisis levels

“Our bad debt-to-asset ratio has increased slightly to 1.3% but remains well below pre-financial crisis levels of 3% to 4% and is something that we continue to monitor very closely.”

Dave Lewis – CEO

They have increased prices by less than the market

“we have to keep the ability to flex as we need to. But clearly, we inflated by 1% less than the market, so that’s sharped our pricing and we continue to look for opportunities how we can sharpen the pricing.

Micron FY 4Q17 Earnings Call Notes

Sanjay Mehrotra

Expect industry to be undersupplied in DRAM through 2018

“Moving on to the demand and supply fundamentals, we expect the industry to remain moderately undersupplied for the rest of 2017 for both DRAM and NAND. We see DRAM industry supply bit growth of about 20% in calendar 2017 and expect it to grow at relatively similar levels in calendar 2018. The DRAM industry supply demand balance is expected to stay healthy throughout calendar 2018, driven in part by ongoing strength in data center and cloud computing trends”

New CEO

“As I begin my first new fiscal year as CEO, I would like to outline our strategic priorities. First, we are focused on driving our cost competitiveness to best-in-class levels, primarily by accelerating the percentage of our output on leading edge technology, in both DRAM and NAND. Second, we will drive execution excellence, delivering solutions to customers quickly, predictably and in line with their product launch windows. Third, we will accelerate our transition to high value solutions.”

Demand trends remain strong

” we remain very bullish about the DRAM market environment through the 2017. We think it will be undersupplied. And given the demand trends, we think we will have healthy demand supply balance in DRAM throughout 2018 timeframe as well. And in terms of NAND as it’s well-known that average capacities are increasing certainly in mobile devices, but even more importantly, SSDs are displacing HDDs at the rapid pace with the attach rates continuing to be projected to be going up over the course of next several quarters. And of course, there is a strong value proposition for SSDs in the cloud and hyperscale data center environment as well given all the trends of artificial intelligence, machine learning, all of this is driving big data analytics. So, all these trends are related to artificial intelligence, bit growth in data customers wanting to offer differentiated value to their end customers, all of this is driving need for memory and storage solution and overall, we remain pretty bullish about the demand trends. I mean, if they look at DRAM as well as NAND even in autonomous vehicle, the demand requirements for flash, I mean data is being generated. So much data is being generated by autonomous vehicles that it requires fast processing both within the vehicle as well as on the cloud. So, I think demand trends for the foreseeable future continued to be strong and that bodes well for our industry.”

Secular trend of SSDs replacing HDDs in notebooks only 35% penetrated right now

” I mean it’s not that this demand is perishable, I mean this demand in terms of the trend of SSDs replacing HDDs in client notebook computers where the attach rate continues to increase in 2017 attach rate of SSDs to PCs is around 35%. That attach rate over the course of next few years continues to grow to around 50% in 2018 and by 2020 timeframe expect it to go to around 75%. So, these demand trends are secular in nature. ”

SSDs also taking share in server

“It’s the same thing on the enterprise side, again on the cloud side that the attach rate of SSDs as well as the average capacity requirements on our per-server basis continued to go up as well.”

Nike FY 1Q18 Earnings Call Notes

Trevor Edwards

Continue to see incredible results in China

“Finally, in Greater China, we continue to see incredible results with revenue growing double digits for the quarter. The breadth and depth of our relationship with the Chinese consumer doesn’t just continue our success in this geography, it accelerates it.”

Andy Campion

Ramping up investment in digital capabilities

“Finally, as we target doubling our direct connection to consumers, we are ramping up investment in digital capabilities ranging from data science and analytics to machine learning to augmented reality to image recognition and personalization. We will continue to use our unrivalled resources to ensure that NIKE is built to win now and for the long-term.”

Accelerating direct to consumer business

“So our measure of success in North America in fiscal year 2018 will primarily center around accelerating our direct-to-consumer businesses, and also accelerating the work that we’re doing with our strategic partners to reshape the broader marketplace. But given all of these dynamics just one quarter into the year, it’s unclear and I wouldn’t say precisely where North America will end for the full fiscal year.”

Focus on increasing manufacturing speed

“But let me just say that the obsession or the fixation we’ve had on the opportunities around man rev continue to be a central point for us, but we are seeing the effect on the bottom line as well, product cost reductions, more efficiencies in manufacturing we’re taking that to scale, and then we’re seeing some of those really showing up in our cost reduction or product cost reductions as well. And then a lot of this has to do with our Speed initiative, our 2X Speed. So the investments we’re making in manufacturing revolution are really helping to support our Express Lane efforts. So there’s a cost benefit, but there’s also a speed to market benefit. And we’re looking at optimizing both directly and then obviously through our relationships with partners like Flex.”

McCormick 3Q17 Earnings Call Notes

Lawrence Kurzius

Vanilla bean prices have risen to $200 per pound

I’ll also say that we have taken several moves on vanilla as the cost of vanilla beans has moved from single digits per pound to well over $200 a pound and that’s been well understood in the industry and so their price increases have been accepted.

KB Home FY 3Q17 Earnings Call Notes

Jeff Mezger

Housing market conditions remain stable

“Overall, housing market conditions remain stable and positive with strong employment, wage growth and healthy demand from first-time buyers driving overall demand for new homes. Resale inventory remains constrained averaging 4.2 months across the country and far below that level in most of the markets that we build in, filling that deficit of existing home supply. With this market dynamic ongoing, we remain focused on maintaining our healthy pace and increasing overall price where appropriate across the broad range of opportunities in our built-to-order model, including base price, lot premiums, structural options and studio options. ”

Going to be pressure on labor materials in Florida and Houston

“we know there is going to be pressure on labor materials in Florida and Houston, we don’t know to what degree and that there isn’t a lot of funding to start repairs. What we have been doing as a company is procuring the materials for our deliveries we have already procured into the second quarter and it’s a benefit of being in our built-to-order model and knowing your starts and you have visibility in your production. So, we are going to our subs and lock them down. We are going to our suppliers and locking them down now. ”

Strong market in California

” Right now, there is a very strong market in the Bay Area. There is a shortage of product on the market. Prices are still moving up. And as they move up, it moves buyers a little more in them, because there is strong demand to be a homeowner and they will go where they can afford to buy a home. So, we saw price in both Northern and Southern Cal in the inland areas in the the third quarter.”

There is more demand than there is supply

“right now, with the shortage of inventory and all the positive things I mentioned first time buyers coming out, wage growth, employment growth, all these good things are going on and there is more demand out there right now than there is supply.”