JS Earnings Call Notes 7.23.2015 – Las Vegas Sands, American Express, Nasdaq, Graco, General Motors

posted in: Notes | 0

Jeremy S., an investment analyst here in Southern California, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Jeremy has read this week.

Las Vegas Sands (LVS) CEO Sheldon Adelson said the company saw its market share of the Macao casino market increase during the quarter

“In addition our gaming revenue market share in Macao reached 24.6 for the quarter, our highest market share in any quarter since quarter one of 2009.”

And the firm continues to try to secure the first mover advantage in various geographies

“At the heart of our company’s success, is having the right strategy at the outset. We have the courage of our convictions to build early and aggressively. We developed critical mass to scale and diversification and we offer products and amenities that are best positioned to capture long-term tourism and consumption growth in Asia  I remained steadfast to my belief that we will grow and prosper in the long-term, while continuing to contribute to the economic development of our host jurisdictions.

Las Vegas Sands (LVS) CEO Sheldon Adelson stated the company’s hotels remain a highly desirable destination for Asian tourists

“The scale of our hotel room inventory remains one of our key strategic advantages. It allows us to target higher value overnight visitors from Greater China and the rest of Asia and to grow the base of high value visitors from Macao.”

Las Vegas Sands (LVS) CEO Sheldon Adelson called out the weaknesses of his main competitors in the casino environment

“Take for instance Galaxy, they have little experience in their executive ranks.  SJM, I don’t see that they have the ability, they’re not used to living in a competitive environment all over.  And Wynn is used to competing but he is specialized as we all know, he has specialized and done an excellent job in the high end of the market.  And what’s the last one MGM, MGM the only thing they have ever developed was City Center and for those of us in the United States, particularly those of us who live here in Vegas it doesn’t need any further comments. So from our standpoint, we are very pleased we’ve worked in competitive environments all of our life. We have been never, not worked in a competitive environment.  But other people are making mistakes we’re not making the same mistakes.”

Las Vegas Sands (LVS) CEO Sheldon Adelson thinks there will be another opportunity to build a casino in a new country in Asia

“There’s a lot of conjecture about what a new development opportunity in an emerging market like Japan or somewhere else in the Far East, keeping our powder dry so we can go after that aggressively and we could build, what it takes to build to win the day, to win the competition. We are keeping our powder dry in our borrowing capacity.  We as I said earlier, we’re beginning to feel vibrations that a development opportunity is hopefully around the corner.”

 

 

 

 

American Express (AXP) CFO Jeff Campbell said a number of headwinds are impeding profitability and the company won’t return to earnings per share growth until 2017

“We also believe our outlook to return to positive earnings per share growth in 2016 and to be within our target range of 12% to 15% earnings per share growth in 2017 remains appropriate. As you recall this outlook does not contemplate the impact of any restructuring charges or other contingencies.”

The company’s termination of the Costco deal is starting to impact the business

“Another driver of the sequential change in billings growth the U.S. CS segment was our Costco US portfolio. Historically, Costco billings have tended to generally grow in line with the U.S. CS average growth rate, but in the quarter, while still positive, Costco co brand car growth rates slowed to well below the segment average. The slower growth is in part due to a decrease in new card acquisitions. As you would expect during a wind down period, we have agreed with Costco to reduce our joint marketing efforts.”

In contrast to competitors Visa & Mastercard, American Express makes loans to its customers and CFO Jeff Campbell said defaults are at historically low levels 

“you can see that our lending credit metrics remain at or near historically low levels with our write-off offering declining slightly versus last quarter and our delinquency rate remaining flat. As you can see on Slide 11, the steady lending credit performance as well as lower write-off and our charge card portfolio and benefits from FX helps drive a 4% decline in provision versus the prior year.  Moreover, as we discussed at Investor Day we did build into our multiyear financial outlook and assumption that we would see some steady upward tick in write-off and a modest build in reserves over the outlook period.”

American Express (AXP) CFO Jeff Campbell said the company is unique compared to other financials in that a rising rate environment is overall negative for the company

We of course are unusual in that raising rate environment in isolation if you hold everything out steady, is a negative for us and we put a number in our 10-K just use round numbers that says all else being equal, 100 basis point rise and all interest rates will cost us around $200 million a year, when you look at the outlook we provided, we built it, we’re trying to be realistic in that outlook and so we built a steadily rising rate environment into that outlook for that matter I remind you we also built a little bit of steady uptick in some of the provision costs as well.  In terms of how we think about offsetting the impact of those rising interest costs, if you look historically there is hugely some natural hedge here because as a general matter Central banks and the Fed tend to raise rates more when there is a little bit stronger economic environment and raise little less when the economic environment is not so strong and obviously the rest of our business benefits tremendously when there is a little bit stronger economic environment.”

American Express (AXP) CFO Jeff Campbell said the competitive environment with respect to cardholder rewards has increased and the company will have to spend more on rewards which will hurt profitability

The rewards environment in general has always been competitive and is pretty competitive right now, what we really try to focus on sure are a couple of things. Number one, ultimately this is about broad customer value proposition rewards is one component of that. We have a brand, we have a reputation for security and trust and service and try to leverage those things.”   

 

 

 

 

 

Nasdaq CEO (NDAQ) Bob Greifeld said that the company’s private company marketplace continues to gain traction as companies are staying private longer for a variety of reasons 

“Another good example of where our strong commitment to our clients has enabled us to drive new opportunities is Nasdaq Private Market. While we continue to experience one of the most robust IPO and listings environments in recent memory and we are the leading venue for IPOs with a 70% win rate, we also in addition to our continued strong progress in Nasdaq Private Market during the quarter, we added 25 companies to NPM in the second quarter expanding the user base by one-third. NPM now has over 100 customers worldwide, including leading companies such as Pinterest, DocuSign and Business Insider to name a few. And it is still very early days.”

Nasdaq CEO (NDAQ) Bob Greifeld reiterated that his firm plans to stand disciplined on acquisitions given what they see as currently high valuations 

“So one is we continue to see a deal market where the valuations are frothy. Some could argue are irrational, so we’re not going to participate at that level. But there is a lot of deals that we do look at. We have a firm discipline in place in terms of how we evaluate these transactions.”

Nasdaq CEO (NDAQ) Bob Greifeld said the exchange listing business is seeing momentum as more companies are going public more than just a few years ago

“With respect to the U.S., we are here at the market site today and it’s been a wonderful week. We had the PayPal spinout happen and then yesterday Blue Buffalo had obviously a very successful IPO. And we’re also very happy to win Pure Storage a week or so ago and as we said before, we have a 70% win rate. So we have a high degree of issuance. We have an increased win rate and that certainly is contributing to our performance.

 And they switched their listing pricing model to an “all in fee”

The most notable change really is at the top end of our fees where we are now allowing issuers to opt into an all-inclusive fee, which means that they will no longer be subject to any listing of additional shares fees or any other administrative fees and there is a maximum charge for a listing based on their shares outstanding is $155,000 a year.  And frankly a lot of support for that all-in all-inclusive fee.”

 

 

 

 

Graco (GGG) CEO Patrick McHale said China remains a weak geography

“We continue to experience difficulties in Asia Pacific in the Contractor business, with the region down high-single digits in Q2. This is driven by ongoing underperformance in China. We recently made some leadership changes in the region to try to get to back on track. We believe that the remainder of 2015 will continue to be challenging.”

 

 

 

 

GM CEO Marry Barra highlighted the firm’s intense focus on financial discipline and return on capital based metrics going forward

“We have also committed that each quarterly broadcast or earnings broadcast we will talk about our return on invested capital. Our trailing fourth-quarter average is 23.4% and I think it demonstrates our disciplined capital allocation is paying off as we look across the globe on how we invest.”

GM CEO Marry Barra said you can now connect any Android or iOS mobile phone to your car

I think another important area in this space is with our GM smartphone integration technology. It allows your smartphone, whether it be Apple or Android, to project certain things that you are very used to using on your phone on to the car, not everything, but some key areas. This is really listening to customers and putting them at the center. And you are going to see us expand this to global markets very quickly.”

GM CEO Mary Barra emphasized the importance of cyber security in cars

“Really when you look at cyber security you’ve got to look at levels of security, because you look at vehicles on the road today, they are on the road for 11 years.  And so as we move into a world that has more connectivity you’ve got to make sure not only do you have many layers of protection in the design of the vehicle, but then also what’s very important is our over-the-air capability as well. That if something happens you are able to quickly go in and prevent and correct if that’s necessary.”

Much like many other companies that reported this earnings season, GM has seen a materially slow down in their China sales 

“At the beginning of the year, we had a really planned for some industry moderation and increased price competition. Our initial assumptions as we entered 2015 were 6% to 8% industry growth overall and 3% price deterioration on a year-over-year basis. It has been clear to us for some time that the moderation is stronger and the pricing environment more challenging than we anticipated.”