Company Notes Digest 10.2.15

Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

The Macro Outlook:

The auto industry had another strong month

“industry SAAR that we would expect to be around 18 million…This would mean that then the total vehicle industry…was likely up about 13% in September…We view the September’s industry performance as another strong sales month…it was good from beginning to end one of those really special strong months.” —Ford (Automobiles)

Vail Resorts isn’t seeing any softening of demand

“I mean again at this point, we are not seeing any softening in consumer interest…we are not seeing that in our bookings or in our pass sales.” —Vail Resorts (Ski Resorts)

Paychex is still seeing steady hiring among small businesses

“we’re seeing continued — particularly in the small business under 50, we’re seeing continued better employment growth than prerecession levels of 2004 and so — and it’s down a little bit from last year, but it’s consistently above that level. So we’re feeling like a steady improvement in small business formation and employment hiring” —Paychex (Payroll Processing)

Valuations are still high, but maybe this correction will help create acquisition targets

“I think it’s a tough market. I think everybody says that, it’s a tough market. Valuations are high but maybe that could change with this current ongoing correction, who knows but I think it is a difficult market but we are looking for things that fit our profile.” —Diamond Foods (Packaged Foods)

Inventory cycles eventually work themselves out

“I think the buying side of the market has been a little conservative in terms of how they procured PC parts over the last three to six months and I think it’s at this point, this could be interesting to watch how the next three or four months plays out in terms of the consumer and corporate behavior, because at some point they are going to start to replenish.” —Micron (Electronic Components)


Companies will probably revise FX impact higher this quarter

“FX obviously is a large headwind on a reported basis…it’s gotten slightly worse on the operating income line as we’ve upped the negative impact on the total company to 4% versus the prior three.” —McCormick (Spices)

Putin assured the UN that Russia has no ambitions for world domination

“I must note that such an honest and frank approach of Russia has been recently used as a pretext to accuse it of its growing ambitions, as if those who say it have no ambitions at all. However, it’s not about Russia’s ambitions, dear colleagues, but about the recognition of the fact that we can no longer tolerate the current state of affairs in the world. What we actually propose is to be guided by common values and common interests, rather than ambitions.” —Vladimir Putin (President of Russia)


Some parts of the lodging industry may be battling over-supply

“I think one of the benefits that we have obviously is other parts of the travel industry one of the things they are struggling with is not just the demand side, but the supply side. And so as people build new rooms obviously that starts to bring down some of their metrics and one of the benefits we have right now is that there has not been any new supply added to the mountain resort industry” —Vail Resorts (Ski Resorts)


Organic ingredients are fundamentally more expensive to produce

“raw material themselves are undeniably more expensive than regular spices and that’s reflected in the premium price that organic products command in the market place. It’s not just a scarcity issue, it costs more money to produce organic ingredients and products” —McCormick (Spices)

Retail has gotten increasingly competitive in the last five years

“you’re absolutely right the competition is certainly more intense than it was four or five years ago with some smaller chains rolling out nationally and the pure e-com players that you referenced…So listen you’ve got to be – in this sort of environment you got to be on your game all the time. Your product has to be spot on, your marketing has to be spot on” —Pier One (Home Furnishing)

Established retailers really want to believe that physical stores are a competitive advantage

“the physical stores remain central to serving our customers and provide us a tremendous opportunity to be close to them. The ability to consult with our knowledgeable and solutions-oriented sales associates coupled with our in-store services, encourage customers to visit and spend time in our stores. Options such as reserve online, pickup in-store, buy online and return to store and online appointment scheduling highlight various points of interactions we have with our customers across our channels.” –-Bed Bath and Beyond (Home Furnishing)

Pier One said that its operating-level margins from e-commerce sales are higher than in store sales

“I think what we have said consistently Denise, is that the contribution from operations level or fulfilled sales has a higher margin than the store sale” —Pier One (Home Furnishing)

Costco hopes that there’s room for everyone

“There is room for all of us. We’ve got to keep, it’s a big play out there in terms of market share and we think that we’ll be able to take our share of that. Some little departments you lose a little, others you make a little, certainly we want people to still come into our warehouses.” —Costco (Warehouse Retail)


PC Markets are weak, but a recovery wouldn’t take much

“Well I think the PC is about where it’s been. I can’t advertise there’s been a major uptick in PC demand. The only data point that I would say that is new for us is that as we sit today the relative channel inventory in PCs is not a huge burden to a recovery.” —Micron (Electronic Components)

Blackberry’s CEO feels like he has stabilized the company but now needs to stabilize revenue

“Remember, we all said about a year ago, we were talking about stabilizing the company, the business, and focusing on cash flow from operation. I think we have accomplished that. This year, as we said, we’re going to stabilize the revenue, and unfortunately, we have a really low point here.” —Blackberry (Feature-phones)

Materials, Industrials, Energy:

IHS expects energy customers to make modest budget cuts in 2016

“There are some smaller players in the U.S. upstream that will be under pressure, but we do think most of the big companies have made most of their cost reductions and the IOCs and major independents are in the process, while they’re in the process of deciding their capital budgets for 2016 and we expect some modest trimming.” —IHS (Consultant)

Electric utilities have not added much capacity this cycle

“The electric utility market in the U.S. remains sluggish but we have benefited from strong international opportunities and a solid backlog.” —AZZ (Electrical Equipment)

It is really difficult to be a small manufacturer in a down cycle

“We are still noticing that the dealers are struggling as well and they are definitely not wanting to stock any of our inventory. So we do anticipate that the sales that we have, we need to have inventory on hand in order to capitalize on those sales.” —Arts Way Manufacturing (Farm Equipment)

Miscellaneous Nuggets of Wisdom:

Be mindful of economic volatility, but focus on what you can control

“we’re very mindful of the macroeconomic volatility in the marketplace. But we continue to really focus on the things that we can control” —Nike (Apparel)

Never underestimate someone who you are negotiating with

“no doubt you are dealing with rough and cruel people, but they’re in no way primitive or silly. They are just as clever as you are, and you never know who is manipulating whom” —Vladimir Putin (Ex-KGB)

Full transcripts can be found at