American Express (AXP) Q2 2016 Earnings Call

American Express (AXP) CEO Jeff Campbell saw a slowdown in spending in the U.K. post-Brexit

“To turn to EMEA in particular, given the recent Brexit vote, I would remind you that the EMEA region constituted approximately 10% of our worldwide volumes in Q2. Our U.K. business constitutes 3% to 4% of worldwide billings and it has been growing in excess of 10% in recent quarters. We did see a noticeable slowdown in this growth in the first several days immediately after the Brexit vote. But that growth has since rebounded to its prior strong levels.”

American Express (AXP) CEO Jeff Campbell said low airline prices hurt overall cardholder spending

“Lower gas and airline ticket prices remain headwinds across our U.S. businesses and had a similar impact to the prior quarter.”

They benefit from lower rates

“Looking forward, given all the recent uncertainty around forward interest rate expectations, I’d remind you that unlike most other banks, we benefit from lower interest rates and are negatively impacted by rising rates, due primarily to the presence of our charge card portfolio.”

Spending a lot of money on marketing in order to acquire new cardholders

“Marketing and promotion was up 4% versus the prior year as we continue to invest in growth initiatives. As we’ve discussed, new card acquisitions has been one of the key areas of focus for our investments and we were pleased that these efforts drove 2.1 million new card acquisitions across our U.S. issuing businesses this quarter and 3 million on a worldwide basis. As I mentioned, Costco cobrand card members signing up for new cards has been a key driver of the increased acquisitions in recent quarters.  While we had previously expected our total spending on growth initiatives during full year 2016 to be similar to 2015, we now expect to spend at a somewhat higher level. The increased spending will support a range of initiatives across the company including some of the potential opportunities within the U.S. marketplace that I mentioned earlier. Our ultimate investment level will, of course, be driven by the opportunities that we see in the marketplace but we now anticipate that marketing and promotion expenses during 2016 will be at least $200 million above the 2015 level of $3.1 billion.”

Seeing loan growth coming from several areas

“And that loan growth is coming from many different areas. We have a nice loan portfolio that’s been growing steadily in our U.S. small business franchise OPEN. We have a range of consumer products targeted at attracting more of our customers’ borrowing behavior.”

Corporate clients remain an area of weakness

“The wild card is in the largest corporate clients where, as we pointed out at our Investor Day, that is not particularly a growth segment for us. And that continues to be a tough segment. I don’t think there’s many of the Fortune 500 who are going on calls like we’re having right now and talking about growing their T&E budgets. And for us in that large segment, we predominantly still have a T&E franchise.”

American Express 1Q16 Earnings Call Notes

These notes were compiled by Remy Gill, an undergrad at UCSB

 

American Express 2016 Q1 Earning Call Notes

 

Jeffrey C. Campbell – Chief Financial Officer & Executive Vice President

 

Management seeks to capitalize on lower stock price with share repurchases

“We again leveraged our strong capital position to provide significant returns to shareholders. Over the past 12 months, we have repurchased 69 million shares, which reduced our average share count by 6%.”

 

Despite Costco and declining discount rates, AXP continues to deliver revenue growth

“Turning now to revenue performance on slide 8. Reported revenues were up 2% and grew by 4% after adjusting for changes in FX. The growth was driven by higher volumes, partially offset by a slowdown in Costco related revenues and a larger than usual decline in the reported discount rate.”

 

When adjusted for Costco and JetBlue, loan growth remains strong

“To understand the underlying trends… we have excluded the Costco and JetBlue portfolios and adjusted for FX. This shows a modest sequential acceleration in worldwide loan growth to 11%. And as we disclosed in our regular monthly credit stats 8-K last week, adjusted U.S. Card Member loans were up 12% versus the prior year, which continues to outpace the industry.”

 

Discount rates will continue to decline as AXP seeks to increase volume, particularly small and medium sized merchants.

“As you are aware, expanding merchant coverage is a key priority for us, and we continue to make progress on growing our merchant footprint this quarter. I’d also remind you that while growth in OptBlue does drive a decline in the discount rate, that impact has been more than offset on the bottom line by the benefits from incremental volumes and lower operating expenses from reduced incentive payments to merchant acquirers.”

 

Despite larger than normal expense growth in Q1, 2016 expense growth will match 2015.

“In recent years, our marketing and promotion spend was low during the first quarter and then ramped up for the year beginning in Q2. Going forward, as part of our effort to optimize investments, we intend to spread more evenly the spend across all four quarters. We continue to expect that the total full year spending on growth initiatives during 2016 will be consistent with 2015 levels.”

 

AXP is focused on retaining Costco cardholders and on new card acquisitions.

“we are pleased to see that these efforts drove 2.1 million new cards acquired across our U.S. issuing businesses during the current quarter, and nearly 1 million more from our international issuing businesses…These results include new cards from Costco co-brand Card Members who have signed up for another American Express product.”

Miscellaneous Earnings Call Notes 3.10.16

Uber CEO Travis Kalanick Fireside Chat

Uber CEO Travis Kalanick said he is being forced to raise money in order to compete with an irrational competitor

“We’re profitable in the USA, but we’re losing over $1 billion a year in China. We have a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share. I wish the world wasn’t that way. I prefer building rather than fundraising. But if I don’t participate in the fundraising bonanza, I’ll get squeezed out by others buying market share.”


Linkedin CEO Jeff Weiner Bloomberg Interview

Linkedin (LNKD) CEO Jeff Weiner said turnarounds are hard

“Turnarounds are arguably the most difficult thing you can do in business.”


Sprint’s (S) Management Presents at Deutsche Bank Media, Internet & Telecom Conference

Sprint (S) CFO Tarek Robbiati said they are increasing focus on how their marketing dollars are spent

“I can find a lot of things at Sprint that were superfluous. One example is I never liked sponsoring race cars in telephone industry. That makes absolutely no sense. There is no car relations between the branding for the race car and our customers, so there’s no more sponsorships that don’t bring us any sort of result. We are also more targeted in the way we advertise.”

Sprint (S) CFO Tarek Robbiati said the 4G network is already past its prime and they are now focusing on building out the 5G network

“We are not building a network that is 4G, 4G is almost a thing of the past. We are building a 5G network for the future, and 5G networks are funded fundamentally different to 4G networks. They’re all around high capacity, and the more spectrum you have the more capacity you have. The more spectrum you deploy, the more you can connect customers and the more speed you can give customers across your network. And there is a simple engineering law that governs this, the higher frequency spectrum is more efficient to handle very large capacity of traffic and that’s the world we’re moving towards with 5G.”


American Express Investor Day

American Express (AXP) CEO Ken Chenault is confident they have the right business model going forward

“Is the American Express business model fundamentally broken? I can tell you with complete confidence, the answer is no.”


AT&T’s (T) Management Presents at Deutsche Bank 2016 Media, Internet & Telecom Conference

Saw a slowdown in the handset upgrade cycle

“I think you saw in the fourth quarter, it was a slowdown in the handset upgrade cycle or the total sales. I wouldn’t be surprised to see that continue”

The DirecTV assets were as advertised if not better

“The DIRECTV assets were as advertised if not better. Good quality products, good people, a good organization. Two, from a more mundane perspective, we are focused on systems integration, we are focused on everything from general ledger reporting and payrolls and vendor management and so forth. We are going through all of that heavy lifting.”


Enterprise Products Partners’ (EPD) CEO Jim Teague on 2016 Investor Day

Oil and gas markets are being forced to adjust to the staying power of US shale

“Because of U.S. shale and slowing economies much different than President Carter said, now we’ve got too much oil and global markets have another problem. They are being forced to adjust to the magnitude and staying power of U.S. shale. Over the last few years, the largest consumer of hydrocarbon now has enough to production to be a provider to international markets and different from sovereign producing countries, the U.S. producer is a pure capitalist.””

In a crisis you’re trying to survive

“Is this a crisis or is it a cycle? Well they are different. In a crisis you’re trying to survive”

Low prices are the cure for low prices

“So we see this as a challenging year but we see a sunrise with all of the demand growth that’s coming. And I think, Tony, you’re going to speak to that. Really the cure for low prices are low prices, just like price creates supply, guess what? Price creates demand. ”


Bancolombia S.A. (CIB) Q4 2015 Results

Risks to the economy are biased to the downside, but we don’t expect a sharp deceleration

“Risks to economic activity are biased to the downside. And in that sense with today’s information, I think that the likelihood of having the 1.8% growth scenario for this year is becoming more likely. But I would also say that basically what we think is that — I mean if you compare the situation to previous ones, what we think is that, I mean we are not in — I mean it’s not very likely to see a sharper deceleration but instead to have a long period of low growth, basically because first, the external shock that the economy has received has proved to be more prolonged than we expected before; and secondly, because we don’t see that there is a scope for countercyclical policies and/or monetary or fiscal side.”


Vail Resorts’ (MTN) CEO Robert Katz on Q2 2016 Results

People are skiing

“Our Colorado resorts continue to deliver very strong results, with solid growth above our record prior year. Our U.S. destination visitation has remained strong throughout the year at all of our mountain resorts, as we saw the benefited from the appeal of our resorts to high-end leisure travellers; we are reaching through our more sophisticated marketing efforts and the strong U.S. economy.”

International visits have declined, but drop has moderated

“While we have continued to see a decline in international visitation, it has moderated since the Christmas holiday, in large part due to the strength of Australian visitation which is up considerably over last year due to the success we’ve had in driving visitation to the U.S. among our Epic Australia Pass holders. Visits from Mexico have been stable relative to prior year which we view as a strong success given the currency headwinds and as expected we are seeing declines from our U.K. Canadian and Brazilian markets.”

American Express 4Q15 Earnings Call Notes

American Express’ (AXP) CEO Ken Chenault on Q4 2015 Results

Ken Chenault on the call

” I’m joining the call today as I thought it was important to share my thoughts on the financial outlook and the evolving operating environment. Before Jeff begins, let me acknowledge that the performance we’re discussing today is not what we or you are accustomed to say from American Express, and that we are taking significant actions to change the trajectory of our business going forward.”

Changes are reshaping the payments industry

“our performance comes against the backdrop of changes that are reshaping the payments industry. These include a reset in co-brand economics, regulatory and competitive pressure on merchant fees and intense competition for customers.”

Economic headwinds have lasted longer than we expected

“A number of cyclical factors in the broader economy also weighed on our 2015 performance and influenced our outlook for 2016 and 2017. As Jeff said, the economic headwinds we cited last year including the stronger U.S. dollar and lower gas prices have lasted longer than we previously said.”

Took decisive actions in the go-brand space

“Over the past 12 to 18 months, we took decisive actions in the co-brand space, accelerating contract talks with partners, we focused on those where we can earn attractive returns and provide strong customer value, which led us to deals with Delta, Starwood, Cathay Pacific, British Air and Charles Schwab.”

Our closed loop system is an advantage

“Our integrated payments model runs about $1 trillion in spending through our closed loop each year. That rich data enables us to create value for card members and build the business for our merchant partners. This is a major advantage and that’s one reason why other card issuers are trying to cobble together a closed loop on their own despite only having a portion of the essential data.”

We recognized early that the economics of the co-brand marketplace were changing

“we recognized early that the economics of the co-brand marketplace were changing and certainly that competitor pressures throughout the industry were likely to increase”

Good growth opportunities with small business and international

“The second thing that I would say is that the nature of just focusing on specific customer segments and just focusing on one geography in the U.S. so what’s interesting is when you look at small business and I think you know this in 2014 $4.8 trillion were spent by small businesses, but only 10% of that was on plastic and where we are the market leader in small business. So I think that it’s not just the payment industry dynamics that we’re competing with in this case, we’re competing against cash checks and the fact that only 10% of 4.8 trillion is on plastic suggests there’s a strong opportunity, I can do the same thing in middle market. Then I go to international and I look at a range of markets where the penetration against plastic is relatively low and we’ve actually achieved pretty good growth rate, so 12% in billings growth in a number of markets we’re growing faster than the market.”

We think it’s increasingly important to have direct relationships with consumers and merchants

“On the merchant side, let’s be very clear Visa and MasterCard have different models at this point in time those models are working pretty well for them, but as I look at our opportunities going forward, I think there is a sea change going on in payments and commerce. So certainly they provide an important part of the payments process, but I think increasingly it’s going to be very important to have direct relationships with consumers and merchants and we think direct relationships in the inside, the information that we have from card members and merchants is going to be even more valuable as the convergence of online and offline commerce continues.”

We’ve been disappointed in corporate segment. Decline in T&E spending has tended to be an early indicator for a slowdown

“I think we’ve been very clear throughout the year that I would say the segments that I’ve been most disappointed in has been the corporate segment. And I think you have heard me say this before through the years that the easiest expense category to cut is T&E that’s the first thing you see. Then you start to see people cutting on technology investments. And we hope that we’ll see some improvements in that in 2016. But as I evaluate 2014, that was an area that in the beginning of the year we started off in a better place, and we saw a pretty consistent decline. And certainly what we’ve seen in my 30 plus years experience with the Company is cut backs in T&E tends to be an early indicator for a slowdown.”

We still see accelerating spending in 2016

“FX while still a headwind for us is not as big a headwind as you get into the first quarter. We’ll see what happens with oil prices. A couple of weeks ago I would have told you I think they’re going to — we’re going to get to a lapping point on oil prices although those have gotten a little bit of tougher. And then when you just look at some other things going on in our business including Costco Canada, the areas that we have been focused on throughout 2015 in terms of spending and the trends we’re seeing, we do think that as soon as Q1 you should see some acceleration in the year-over-year volume trends that you’ve been seeing. ”

We’re not seeing decelerating trends, but we’re not seeing an economic catalyst either

” what I would say, Bob, is we are not seeing decelerating trends. We’re certainly not seeing in the overall economic catalyst that would say that we think there are going to be improvements in GDP growth.”

Jeff Campbell

We have not seen the revenue acceleration that we needed to overcome the Costco loss

“as we have gone through 2015, we have not seen the revenue acceleration that we had expected to see. If you go back to our Investor Day in March, if you go back to the original conference call we did last February when Ken and I talked about our decision to walk away from the Costco agreement, we said we’re going to have to see how much other volumes ramp-up and what the pace is of that ramp and exactly what the final outcome is of when the Costco portfolio goes away and in what way, well we have those answers now and when you put all of that together with the evolving environment that we are in we concluded we need to be much more aggressive about all aspects of our cost base.”

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

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.”

American Express FY 4Q14 Earnings Call Notes

Impacted by FX and change in cobrand partnerships

“our solid core underlying performance was impacted by the discrete impacts from the strong dollar and FX along with the changes in our cobrand partnerships.’

Credit quality is great

“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.”

A rising rate environment is negative for us

“We of course are unusual in that raising rate environment in isolation if you hold everything out steady, is a negative for us ”

We came into 2015 expecting to maintain our partnership with Costco

“We went into 2015 as we began the year in January with an assumption that we would be continuing our very long-term partnership with Costco and we set marketing plans, then we set budgets, then we set the management teams off to execute on that plan. When we change that plan in February, and decided to go down a different path and concluded that we think in the long run we can generate more value for our shareholders with the past we’ve now gone down.”

JS Notes: PPG, BLK, UNH, AXP

We’re excited to announce that 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.

PPG CEO Chuck Bunch believes the European region’s economic numbers have bottomed due to monetary policy and increased consumer confidence 

“I would say that remember we should still see earnings growth improvement in Europe primarily related to our industrial coating segment. So we have not yet seen strong improvement on the construction side of or the performance coating side of the business. But we think there will be some modest growth there and we’re obviously working on these restructuring actions that should help us late in the year.” ($PPG)

PPG CEO Chuck Bunch said the company took advantage of low rates in Europe to issue bonds at attractive rates

“this quarter, we issued about $1.3 billion in long-term euro-denominated debt at an average interest rate of 1.1%.” ($PPG)

While the company experienced strong auto paint coatings demand for automobiles in China

“I think our strongest of markets in China were automotive OEM which is a domestic market in China, those sales have continued to grow slightly above the what their overall GDP growth has been stated as so high single digits for automotive growth. ” ($PPG)

 

 

Blackrock CEO Larry Fink on the increasing role big data is going to play in investing over the coming years

“I do believe you are going to see shifts … towards smart beta factor-based investing. And I am not suggesting fundamental is going away, it’s not.  I believe we are positioned at BlackRock to benefit from that re-looking at the scientific or model-based equity. We intend to be announcing some very substantial hires in this area. I talked about data management. We believe other sources of information like big data is going to be an important component to how one looks at investing and so we are investing in these areas.” ($BLK)

 

UnitedHealthcare CFO Dan Schumacher says the medical insurance business is going through a transition from medical care providers being reimbursed based on quantity of patients treated to results oriented & outcome based payments

“I think we’ve done well as an organization through our focused medical cost management initiatives and also I think we’re seeing benefits from greater consumer responsibility as well as, as we continue to drive greater concentrations as Dave mentioned in value based reimbursements.” ($UNH)

 

American Express CFO Jeff Campbell said the company saw significantly slower consumer spending during the quarter

“Our U.S. consumer and small segment growth also decelerated slightly to 7% in Q1. This performance was impacted by the more than 30% decline in gas prices year-over-year as well as slower retail sales growth, consistent with industry wide trends in the U.S.” ($AXP)

While Campbell added the company is seeing significant growth in Asia 

“We saw improved growth in the JAPA region which was again the fastest growing region in the quarter, up 16% on an FX adjusted basis. This solid performance continued to be powered by strong growth in China and Japan.” ($AXP)

In order to stay competitive with rival firms offerings, American Express costs are rising at a faster clip than their revenue

“Cost of card member services increased significantly year-over-year by 18%.  For the remainder of 2015, given the Q1 of last year also included elevated costs in cost of card member services, we would expect to see an even higher level of growth for this line item.” ($AXP)

American Express expects a weaker Q1 GDP number than most economists after analyzing their customers spending 

“When we look at our own experience and some of the external data around retail sales and we look at what’s happening to gas prices, when we look at some of the immediately somewhat anecdotal stories we hear in our corporate card business, it suggests to us that it was certainly not the most robust of quarters for economic growth.” ($AXP)

American Express 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Sounds like a pretty good quarter

” Our performance this quarter reflected higher spending by our Card Members, solid growth in loan balances, credit indicators at or near historical lows, disciplined control of operating expenses and a strong balance sheet that enabled us to return a substantial amount of capital to shareholders in the form of share repurchases over the past year.”

Concur purchase will create 700m gain for AXP

“During September, SAP announced that they would be acquiring Concur in a deal that valued the company at $129 per share. If this proposed transaction is completed, it would result in a sizable gain for American Express of approximately $700 million”

It will take time for Apple pay to catch on

“We’re participating in the wallet, because we want to be everywhere our customers are and millions of them are devoted Apple users. Now, mobile wallet can have the potential to change consumer behavior for some years, but it’s unlikely to be an overnight shift. It will take time, even with Apple’s innovative technology and customer base. The pace of consumer and merchant adoption will depend on the benefits, protection and overall value proposition that participating issuers and networks can provide. That plays to our strength.”

It’s anyone’s guess what the events of recent days will do to GDP this year

“just remind you that for our business, the real correlation is with year-over-year GDP growth. We went into this year with the consensus forecast in the U.S. for GDP growth to approach 3%. The latest consensus is down at about 2.2% year-over-year for all of 2014, and it’s anyone’s judgment who’s listening to this call what events of recent days might mean even to that number.”

American Express at Barclays Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Head of US consumer business describes why he came to Amex from being CEO of Skype

“What attracted me to the role at American Express is when I thought about what I found so rewarding at Skype and it was a great experience for me. It occurred to me that there were really three things that drove that. The first was a global brand that touches almost everyone in a meaningful way. So, for me, I get a lot of energy when I go to lunch or dinner with people and they want to talk to me about my products and about my brand. And it was very important to me that I work for a company that has that kind of impact on people’s lives.

The second is in a major trillion dollar industry that’s in the midst of transformation. And the third element were I believe we’re positioned to lead not follow”

Technology is just a tool to get things done

” coming from Silicon Valley, I think it’s important to recognize that technology is just a tool to get things done. ”

I don’t think swipe is necessarily broken

“So, there’s been a lot of energy and discussion for several years now around NFC. It’s my opinion that the swipe isn’t especially broken. And in fact, if you look at several years ago, we changed our policy so you don’t need to sign anymore for small dollar transactions. I think we probably removed more friction in that policy change than would happen if you go from a swipe to a tap. And yet you didn’t see a lot of press around it because there was no tech involved, it wasn’t very sexy. But in fact, it did cut the time for transaction by more than half.”

Points program about customer retention

” we know that when customers engage with our rewards program, they like us more, they spend more with us and they stay with us longer. So, we believe that getting customers to redeem rewards is a very good investment for us, and we make it with the bottom line in mind as well as the customer experience.”

Opportunity with Mass Affluent who think Amex wouldn’t accept them

“I feel a real opportunity for us was the mass affluent in the United States. There’s quite a number of people out there who meet our underwriting standards, so we would be very happy to have those customers. And one of the biggest challenges is they think that American Express is not attainable. They think we wouldn’t accept them.”

Use of Tina Fey in advertising

“And if you think about our use of Tina Fey, it’s someone who’s very approachable. If you’ve been following our advertisements, we’ve been using Tina Fey for the ads and she’s someone who resonates with this audience as someone they like, they respect, they admire, but who they feel is approachable to her, probably does do her own grocery shopping for example. I feel very good about how that campaign is going.”

Financial crisis gave an opportunity to segment customers

“when we look back at what happened in the crisis, we’ve been able to identify the segments of customers who were profitable to us through the entire cycle and really leverage that in all of our underwriting criteria, so we’re able to be laser-focused now on finding those people who we believe will be profitable through cycles and exhibit lower volatility.

The opportunity with big data, the opportunity with digital acquisition to now both create segmentations that are rich and powerful and then identify those people in the market and design specific products and market specifically to those is an area that we’ve been investing in and we think is driving at least some part of our performance.”

Wallets have not been that successful because they don’t solve a problem

” we have had wallets in the market for quite some time and there has been fairly limited adoption of those wallets. I think fairly limited is generous for many of them. And it’s because the problem that they’re solving is helping to pass my payment credential from me to a merchant. And that’s just not a problem customers want solved.”

People aren’t just going to use NFC because it’s a cool piece of tech

“What I want to say is that we need to actually do something powerful for customers in order to make that happen. There’s a significant investment merchants need to make in new terminals, billions of dollars. There’s a real change customers need to make in behavior, and they won’t do that just because this is a cool new piece of technology. We’ll do that because it does something new and interesting for them. ”