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FedEx FY 4Q17 Earnings Call Notes

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Frederick Smith – Chairman & CEO

Amazon is a great company, but there’s way too much focus on that

“I mean, Amazon is a fantastic company, and it delivers things to all of us. And there is — we deliver a lot of things that are ordered over the Amazon website. We move things for Amazon and so forth, but there is far too much focus on that as opposed to the larger part of FedEx’ business. ”

Rajesh Subramaniam

Moderate growth in the global economy

“We see moderate growth in the global economy. We expect U.S. GDP growth of 2.2% in calendar year ’17 and 2.5% in calendar year ’18. Consumer spending is solid. Investment and trade are rebounding, and measures of business confidence remain high. We see industrial production growth of 1.9% this year and 2.5% next year. For the global economy, we forecast GDP growth of 2.7% for calendar year ’17 and 2.8% for calendar year ’18.”

Continue to experience growth in demand for large, heavy packages

“”We also continue to experience growth in demand for large, heavy package delivery as a growing array of items are now being sold online. Furniture, mattresses, sports and exercise equipment are increasingly moving to the FedEx Ground network for residential delivery. This trend has accelerated over the past 12 months, and we have made adjustments to facilities and investments in sortation technology that enable outstanding service for these larger packages. We’re continuing to analyze pricing and surcharges for oversized packages to ensure that we have appropriate pricing for the service provided.”

Alan Graf

Seen wage and benefit increases offset by automation

We have a great balance between wage and benefit increases offset by productivity gains resulting from investments in IT and automation and volume increases. So not an issue for us at the moment.

Robert Carter

We see applications for blockchain

Well, in addition to finance, we see broad applicability of block chain to handle things like identity management, authenticity, pedigree and custody. So we’re deeply engaged in block-chain technologies, understanding their implications for custodial control and for many of the things that we do. It’s an exciting set of breakthroughs in technology, and we’re staying very close to the leading edge of that.

FedEx FY 3Q17 Earnings Call Notes

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Fred Smith – Chairman & CEO

DOT should mandate safety tech in fleets

“Let me make an editorial comment based on what Mike said about our reaching 80% of our FedEx Freight having these new modern technologies in the tractors. Similarly, Ground has been providing incentives and soon all of our independent service providers will be required to have these same types of technologies and quite frankly, the Department of Transportation and the Congress should mandate these technologies. It is simply unacceptable to have vehicles on the road that don’t have these modern technologies that can prevent so many accidents that take place historically because of the inability to stop in time or to change lanes precipitously and so forth. So, every truck load carrier in the United States every LTL carry ground parcel, it should all be mandated and we’re trying as hard as we can to push this technology into every vehicle we have as fast as we have, as we possibly can do it.”

The real story is everything behind the mobile phone

“I think there is one more point to make here and that was Allen’s comment a few minutes ago, the vast majority of FedEx business is business to business. 85% plus of our business has nothing to do with e-commerce. So, Amazon is a wonderful company and they certainly have revolutioned the e-commerce world and we’re not sure what Amazon is going to do one way or another. But the FedEx system that consists of thousands of facilities and the ability to pick up transport and deliver it in one to two business days between any two addresses in the United States has been decades in the making and we think that we have a not great risk of being disrupted to use the term and we obviously as Raj and Dave Bronczek and others are putting a lot of effort into making sure that there is no opportunity for somebody to disrupt us on a substantial scale.So, I think again people focus on the e-commerce because everybody looks at this from their mobile phone forward where the real story is everything behind the mobile phone and that’s what FedEx has in enormous quantities; airplanes, trucks, facility, team members. So hopefully that answers your question.”

Dave Bronczek – President & COO

TNT is largest in FDX history

“The TNT acquisition as I’m sure you know is the largest in FedEx’s history and we have discussed this with you previously. This provides extensive benefits to FedEx, including rapidly accelerating our European and global growth around the world, substantially enhancing our global footprint and leveraging TNT’s lower cost road networks in Europe, Middle East and Asia, producing improved results for the entire corporation. Our global integration teams are working to bring TNT and it’s 54,000 employees and their operations across 200 countries and more than one million shipments daily into the FedEx Express system. The integration of TNT and FedEx is on track with significant progress thus far in fiscal 2017.”

Alan Graf – EVP & CFO

E-com is still the smallest piece of our volume

“Allison, a couple more points, the vast majority of the volume that we carry at FedEx Corporation is business to business and while e-commerce is the fastest-growing piece, it’s the smallest piece. And secondarily, as we discussed many times and we can discuss that at infinitum, we can’t afford the same capital intensity for peak e-commerce volume, which is why we have been backing away from some customers and raising our prices significantly. So that balancing act will continue for us going forward.”

Rajesh Subramaniam

Moderate growth in the global economy

“We see moderate growth in the global economy. We expect U.S. GDP growth of 2.3% and CY ’17 driven by robust consumer spending and stronger business investment. Industrial production growth should rebound to 1.5% this year. GDP and industrial production are expected to grow by 2.5% and 2.4% respectively in CY ’18. For the global economy, we forecast growth of 2.6% for CY ’17 and 2.8% for CY ’18.”

Customers want different delivery locations

“First, we recently announced a long-time alliance agreement with Walgreens or FedEx On-Site. FedEx On-Site is a nationwide network of alternate delivery locations, which is a direct response to our customers setting us they want access to more choices for package delivery and drop off. FedEx On-Site locations include some Albertsons and some Kroger grocery stores as well as select Office Depot, OfficeMax and FedEx authorized ship centers. Adding Walgreens will dramatically increase the number of FedEx on-site locations. Walgreens is an ideal partner. They’re well-respected brand with whom we had a long relationship and are well known for their convenient locations. We already started the rollout and expect nearly 8,000 Walgreens locations with FedEx On-Site in time for this year’s peak season.”

Also offering fulfillment for small and medium businesses

“Second, we also announced the launch of FedEx fulfillment in February. This is an e-commerce logistics solution for small and medium-sized businesses. The strength of the FedEx portfolio allowed us to bring to market a fulfillment solution with advanced warehouse management, the latest same-day cut-off times, two-day ground shipping throughout the United States and a seamless return process.”

Amazon is far from being our largest customer

” Let me just say that Amazon is a long-standing customers of ours and while Amazon does deliver a portion of their packages, they still rely heavily on USPS, UPS and FedEx for delivery and it’s definitely worth mentioning that no single customer represents more than 3% of our total revenue and Amazon is far from being our largest customer.”

FedEx 1Q17 Earnings Call Notes

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FedEx’s (FDX) CEO Frederick Smith on Q1 2017 Results

TNT’s express freight capabilities were a key attraction

“The attraction of TNT was many-fold but I have to tell you that one of the key attractions was their unduplicated express rate network in Europe. And of course Europe is a high density of population and their ability to move these pallets very fast throughout Western Europe was a tremendous advantage.”

Thoughts on effects of autonomous vehicles

” In terms of UAVs in particular, we have five separate, I think it would be not fair to call all of them projects but work streams or projects in both aviation and automated vehicles. The difference with us and a lot of other people we’ll just prefer to keep working those issues and tell you about them when they make a meaningful difference in the company. I will say this much. I think our philosophy and we know a lot about these technologies. After all, our auto pilots in our 777 airplanes are among the most sophisticated robots in the world. They can take off, land the plane and taxi to the gate and turn themselves off if that’s what we chose to do so. But it’s very difficult in the foreseeable future to substitute for the well trained pilot or driver or person. And we look at the use of automation more as an opportunity to improve the productivity of those types of experts within our system to make their job more comfortable and easy and above all to increase safety. So those five work streams are underway. You’ll hear a lot about them I’m confident in the next few years. But important in our philosophy maybe slightly different than a lot of other people that think that right over the horizon, everything is going to be an automated vehicle or some sort of UAV. We think that is unlikely and that this technology like most technologies particularly aviation technology will evolve incrementally over time with a great emphasis on safety first.”

T. Michael Glenn

Moderate growth in the global economy

On the economic front, we see moderate growth in the global economy. Our U.S. GDP growth forecast is 1.6% for calendar ’16, 20 basis points lower than our last forecast in the last quarter and 2.3% for calendar ’17 led by gains in consumer spending. Our global GDP growth forecast is 2.2% for calendar ’16, 10 basis points below last quarter and 2.6% for calendar ’17. We expect industrial production to decline 0.7% in calendar ’16, 10 basis points lower than last quarter and increase 2.2% next year.

Raising rates by 3.9%

” we will be raising rates effective January 2, 2017. FedEx Express rates will increase by an average of 3.9%. Rates for FedEx Ground and FedEx Freight will increase by an average of 4.9%. We will also change the dimensional weight divisor for FedEx Express and FedEx Ground from 166 to 139.”

Shift in peak delivery to Mondays

“Beyond just the dramatic rise in volume, there are several other shifting industry dynamics. Holiday promotions and buying patterns have increasingly shifted which has resulted in heavy demand for package delivery on Mondays during the peak. The intensity for demand on Monday has accelerated in recent years, as more and more retail locations have started serving as fulfillment centers for e-commerce orders. We expect each of the four Mondays during the upcoming peak period to be among the busiest in our company’s history.”

Increased demand for larger and heavier packages

“We have also experienced increased demand for transportation of larger and heavier packages. As e-commerce grows, there is demand for online ordering and delivery of everything from large screen TVs to mattresses and trampolines. We’ve engineered our network’s sortation and delivery capacity for these larger packages, including entire temporary facilities dedicated to the sortation of oversized packages, which will be critically important this upcoming peak season.”

Adding 50,000 seasonal workers

“Across the FedEx portfolio, we expect to once again add more than 50,000 seasonal positions to help the holidays arrive. Based upon growth expectations and network expansion, many of these seasonal team members will have an opportunity for full-time work at FedEx after the holidays.”

Alan Graf

Earning projected at $12.35 in FY 17

“According to our corporate outlook based on the moderate economic forecast that Mike discussed and the momentum we have, we project adjusted earnings to be $11.85 to $12.35 per diluted share for FY ’17, which excludes TNT integration, outlook restructuring costs, TNT intangible asset amortization and year-end mark-to-market pension accounting adjustments.”

David J. Bronczek

TNT’s crown jewel was the best ground network in Europe

Yes, this is Dave again. The jewel in the crown always at TNT was the very best ground road network in all of Europe. It’s great service. They have great people, great cost structure. So with that now in our portfolio around the world, customers have always asked us for a solution for e-commerce to move across the world and mainly into Europe. Now we’ll have that opportunity to do that very successfully. Thank you.

FedEx FY 4Q16 Earnings Call Notes

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Fred Smith

Our goal is not to maximize margins in every segment every year

This is Fred Smith. Let me take that question on a broader front, because this is one of my hot buttons as you probably know. We don’t manage FedEx Corporation trying to maximize each segment margin each year. If we did that, we would never be able to take advantage of this broad portfolio in the cross-selling that’s available to us.

Millenials are not going to stop going to stores

“We know from research that the millennial generation, the largest generational cohort in American history is not going to stop going to stores. In fact, we had a wonderful presentation about just a couple of weeks ago at our Board Meeting. So, e-commerce is fantastic and its going to continue to grow and we intend to be a major player in that space. But as Mike just said, it’s not going to — in our opinion and in the research from very credible sources, going to eliminate retail. What it may do is change the character of retail.”

B2B is the backbone of FedEx network

remember of all retail e-commerce is now about 10%, growing fast, taking share, but it’s going to be a long time before retail is threatened. And B2B meaning the underpinnings of the business world medical production, automotive, and things like that that in the main is not going to be diverted to e-commerce anytime soon and that is the backbone of the FedEx networks.”

Not a lot that doesn’t concern us with the election

“I would say, we would have a hard time putting up a list of the things that don’t concern us giving the two candidates position, but obviously we’re concerned about the anti-trade rhetoric a lot of the anti-business positions and it’s very worrisome. But hopefully after the election cooler heads will prevail.”

Mike Glenn

Continue to see moderate growth in global economy

“On the economic front, we continue to see moderate growth in the global economy. Our U.S GDP forecast is 1.8% for calendar ’16, which is 40 basis points lower than our forecast last quarter, and we forecast 2.4% for calendar ’17, led by gains in consumer spending.”

Ecommerce would not be possible without our networks

“Now I’d like to take a few minutes to further discuss and address the growth of e-commerce which continues to outpace GDP growth both in the U.S and globally. E-commerce has become a [indiscernible] for consumers acquiring goods around the world, but the success of e-commerce continues to be dependent on transportation companies ability to reliably and quickly make residential deliveries around the world.

One of the most profitable e-commerce companies today

As we noted during our last conference call on earnings, more than 95% of e-commerce packages in the U.S are delivered by FedEx, UPS, and the United States Postal Service, with whom we have a strategic relationship to transport their priority mail. E-commerce would be impossible without these companies and our expansive networks. If you were to isolate the FedEx e-commerce business, it would become clear FedEx is one of the most profitable e-commerce companies in business today.”

Continue to get questions about Amazon

“One additional point as we continue to get questions concerning Amazon in the evolution of their transportation capabilities and needs. Amazon continues to be a valuable customer and they’re among the large e-tailers that we stay in close dialogue with throughout the year to understand their transportation needs as they continue to experience significant growth and generate demand for FedEx transportation.”

FedEx FY 3Q16 Earnings Call Notes

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FedEx’s (FDX) CEO Fred Smith on Q3 2016 Results

We do things that increase earnings cash flows and returns

“We buy airplanes because they increase earnings, cash flows and returns over a period of time. We add automated ground facilities because they do the same thing. So there is no motivation inside FedEx to do anything other than to achieve those results at the corporate level and sometimes we decide to be aggressive in one segment because we are achieving our corporate goals”

TPP is going to be harder to pass with the leading candidates against it

“I don’t think there is any question about the fact that TPP is going to be harder to pass given that the leading republican and democratic candidates were presenting United States are against it. Free trade and opening markets has been American policy since 1934 when Roosevelt and Hull passed the trade agreement act that overturned the absolutely disastrous Smoot-Hawley Tariffs, those were two republicans that in 1930 put in a lot of tariffs to protect America. So trade contracted by 66% and the Roosevelt Hull action in 1934 turned it around but there is no question that those tariffs created with a big part of the cause of the depression.”

Trade makes everyones standard of living better

the thought that trade is not been a great thing for the world and America is absolutely belied by facts. Now have they been in merchant list, of course they have Japan and China in particular. But to lump in all trade with the trade practices of a couple of trading partners is like putting leaches on you and bleeding the way they used to do during the old days and think you’re going to get better. I mean it’s a self inflicted problem and in the case of Mexico, the NAFTA agreement has added hundreds of billions of dollars which is traded with Mexico, yes we do have a modest trade deficit with Mexico but the benefits of trade are always dispersed, lower iPhones, lower TVs, lower priced T shirts, lower automobile cost, on and on down the line which makes everyone standard of living better whereas the pain is always localized”

The key to the delivery business is route density and revenue per delivery

“the essential thing in the delivery business is route density and revenue per delivery stock. And that is why he said virtually the same thing that we have said that in all likelihood the primary delivers of e-commerce shipments for the foreseeable future will be UPS, The U.S. Postal Service and FedEx because input costs even though you might have a local operator over the thousands, it might talk about are trumped by the delivery density and the revenue per stop characteristics of the big carriers.”

It’s Metcalfe’s law

“And remember, we are not delivering from 50 fulfillment centers or 100 stores or 60 stores, we have the capability to pickup, transport and deliver an item from 95% of the human beings on the planet much less every business on the world within one to two business days, door to door customs cleared. So that’s known as Metcalfe’s law, everybody understands this in the telecommunication business, it’s the number of nodes on the network squared. If you run the hub-and-spoke system, it’s in times and minus one. So whether you’re a big box retailer or you’re an e-tailer that puts their fulfillment centers which is a surrogate for the store delivers the items individually or how you come into the store, the economics are the same. It’s network density and revenue per delivery stop that are the determinant of who is going to deliver these packages in the years to come.”

Doubling up packages leads to greater revenue per delivery stop

“The postal service delivers to a 140, 154 million addresses every day and so like way the e-commerce packages are perfect for the postal service because they can put them in with a mail and deliver on two residents”

This misunderstanding is leading people to misunderstand the future evolution of the markets

“it’s that misunderstanding that the drivers are network density and revenue per delivery stop that have led to a lot of the misunderstanding about the future evolution of the markets.”

Mike Glenn

2015 peak season was historic

“The 2015 peak season was historic by many measures and it was driven by the continued growth of e-commerce. Demand for residential deliveries across the industry surpassed expectations as consumers increased online shopping in record numbers, not only with their higher volumes, but the types of goods purchased online increased.”

E-commerce is now enabled as a full scale retail revolution

“It is very clear that e-commerce is now enabled the full scale of retail revolution. There are several important trends worth noting. First, referring to a specific peak day is quickly becoming a thing of the past. As evidenced this year, there were multiple days where volumes exceeded 25 million packages as consumer buying habits are changing. We view this as a positive as Mother Nature can sometimes play habit with last minute e-commerce shoppers. Smoothing sales throughout peak season is a trend that will benefit retailers and transportation companies alike. We believe online shoppers will have increasing incentives to order earlier in the holiday season”

More and more retailers shipping from store

“Second, more and more retailers are fulfilling e-commerce orders from individual stores or what we call store to home delivery. FedEx is well positioned to service this growing market in the years ahead with our broad portfolio of services including metro delivery and same day services.”

Seeing more non-traditional items purchased online

“Third, we are seeing a significant increase in non-traditional items now being purchased online, mattresses to new swing sets and big screen TVs just to name a few. ”

It would be a daunting task to try to replicate existing delivery networks

“Large retailers have long had their own transportation capabilities, primarily to enable movement and positioning of inventory across their store and fulfillment locations. While recent stories and reports of a new entity competing with the three major carriers in the United States grabs headlines, the reality is it will be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks like FedEx.”

Amazon’s strategy is to build distribution closer to the end customer

“I think Amazon’s strategy is clear, the more distribution facilities they put up the more they would like to be close to the end consumer which by definition makes more deliveries on a local basis. Having said that, all of the conversation about new entrants into the local delivery market, I mean there are hundreds and thousands of local delivery companies in every market in the country delivering parcels.”

Dave Bronczek

China not causing any problems because for the most part multinational customers

Yes thanks Fred, and thanks for the question David. Obviously, China is a very important to us, but they are not more important than all the rest of the world. I mean they are a part of the rest of the world for us. There’s a lot of multinational companies that are in China that we do business with in China and exporting out of China. So, I would say that we’re always watching how the economy is in China, but it is not causing us any problem or any concern right now because our customers there are for the most part multinational customers.

Alan Graf

Fuel prices ticking up could work against us

“You never know, fuel prices are ticking up a little bit and so that could possibly work against us on a year-over-year basis, so we’re watching that very carefully.”

FedEx Fy 2Q16 Earnings Call Notes

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Fred Smith

Oversized packages are increasing in e-commerce

“A couple of developments in e-commerce are worth noting. First, oversized packages are increasing, and second, a number of e-commerce shippers continue to use extremely cubed inefficient packaging, loaded density and over-the-road ground trailers is therefore declining because of these trends.”

Congress should have allowed larger trailers on highways

“we are extremely disappointed that Congress did not approve the use of Twin 33-foot trailers on the nation’s highways versus the current 28-foot standard. 33 is already permitted in 18 states and we have safely driven them almost 1,500,000 miles in Florida along, drivers tell us they are more stable than the 28-foot trailers, with similar handling and turning. Our industry estimate this change would, one, eliminate about 6.6 million trips annually and thereby improve safety due to fewer accidents per year, the 33’s would materially reduce congestion, third, it would save over 200 million gallons of diesel and reduce carbon emissions by 4.4 billion pounds per year.”

A big part of ecommerce is being able to handle returns

” a big part of e-commerce is handling returns. So some years ago as we saw the market evolving, we decided it would be a very, very good thing for us to have a supply chain capability to offer a broader portfolio of value-added services to our e-commerce customers, because this was a huge part of the marketplace. It wasn’t just planning on how to get it to the end customer but how to efficiently process the returns and merchandise.”

Postal trucks were not designed to deliver packages

“I have to tell you, I feel for a lot of our postal folks out there. They operate their parcel delivery system with 200,000 jeeps, which were basically designed for mail delivery and watching them it looks like a submarine. These people are — they got at least, packages on the left-hand side of the truck, they have to stop, they have to pull them out, resequence them before delivery and at my house, I can promise you we’re getting a lot of very lightweight cube items coming from retailers through SmartPost or directly from an e-tailer.”

We work really closely with our good customers to manage peaks

“So our good customers that work with us in a partnership basis we can do an excellent job of anticipating what their needs are and provide the equipment in the right place and the sortation equipment. The people that have the real problem in the e-commerce business by and large are those that view the transportation companies as some sort of utility or a vendor and they make some really, really bad decisions. I mean, they are — we’ve just watched an amazement several of them just really dig themselves into a whole. But our good customers, we work very closely with them.”

Mike Glenn

Experienced record breaking demand

“we’ve experienced record-breaking demand during this peak season largely driven by the rapid growth of e-commerce. Our busiest days during peak have exceeded our forecast and more than double our average daily volume and should be noted that our busiest days this year are approximately double what they were just about eight years ago.”

Return rates are double digits in e-commerce

“Returns is a particularly big part of any e-commerce value proposition because they tend to be double digits whereas the traditional brick-and-mortar retailer is in the mid-to-lower digit return rate. ”

We think it would be very hard for someone to try to displace our network (i.e. Amazon)

“I do think it’s important to point out however that FedEx is a highly integrated global transportation network. In fact, one of only two operating at a significant scale in the United States today and only one of three major delivery networks in the U.S., the other two being UPS, the United States Postal Service. That’s not likely to change in the foreseeable future as these networks are very capital intensive and information intensive.”

Peak season is very highly planned

‘Well, I just want to add that, I think, it’s important to note that peak season is a very highly planned period of time. I mean we literally will start working with customers in late January, preparing for next peak season.”

Dave Bronczek

International shipping growing, but more modest

Transpacific, Transatlantic. It’s generally the same economic environment that Mike talked about at beginning around the world. It’s growing but it’s more modest. So I wouldn’t say — I think it is actually growing more out of Europe because of the currency exchange, a little bit less out of Asia but around the world we’ve balanced our network.”

JS Conference Call Notes: FDX, WFC, IBM, GM

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FedEx (FDX) Chairman Fred Smith said the company is performing well given the economic landscape

“FedEx Corporation is performing solidly given somewhat weaker than expected global economic conditions, especially in manufacturing in global trade.  Weather foreclosures, lower oil CapEx and weak export from the strong dollar, slow production early in the year due to the strong imports we saw and inventory buildup in the first half of calendar ‘15 which will be a drag on IP in the near-term.”

And they’re raising prices with an emphasis on charging more for packages with odd dimensions

“As we announced yesterday, we’ll be raising rates at FedEx Express, Ground and Freight by an average of 4.9% on January 4, 2016.  In addition to the rate changes, FedEx is also increasing surcharges for unauthorized packages in the FedEx Ground network that exceed the size and weight limits as outlined in the FedEx service guide. And we’re also updating certain fuel surcharge tables at FedEx Express and Ground effective November 2, 2015.”

They’re starting to see wage pressure which hurt the company’s bottom line

“Looking at Freight, operating results declined in the first quarter as salaries and employee benefits expense outpaced lower than anticipated volume. Salaries and employee benefits increased 10% from planned initiative and increase staffing levels to handle higher than realized shipments.”

FedEx (FDX) CEO David Bronczk highlighted the customer’s flexible network which is able to adjust to rising or falling parcel volumes

“Our network around the world are base powerful network we have in place is balanced around the world. We adjusted our networks several quarters ago. So right now, we have a very flexible network that when the volumes go up, we can add cost. When the volumes go down, we take out cost, which is why we’ve done so well in our profit improvement program.”

 

 

 

 

Wells Fargo (WFC) CFO John Shrewsberry reminded investors of the bank’s unique culture

“Our vision is built around this unwavering focus on our customers. We want to help them in every way that we can. It’s the heart of our culture, which is the most important part of our success and it’s a significant contributor to our long-term performance and stability.  Banking is necessary, but banks or not. That’s a tough thing to say in the room full of bank investors.”

And he said the company continues to adapt and position itself for a low interest rate environment

“Obviously, the subject of interest rates remains very topical and in our own view it has evolved over the last year to more of a lower for longer expectation than in prior periods for both short-term and for long-term rates. As a result, we’ve been adding duration to our balance sheet. Over the last few quarters, both through the purchase of securities as well as the use of interest rate swaps and some of our floating rate portfolios. We still remain asset sensitive and we’ll benefit from higher rates, but we stopped waiting for higher rates in order to grow net interest income.”

Their customer default rate is at a multi-decade low

“Our net charge-off rate declined to 32 basis points for the first half of 2015 and with 30 basis points in the second quarter, our lowest level in at least 20 years.  Non-performing assets have declined for 11 consecutive quarters and are down $17 billion or 54% from their peak in 2010. Our performance has benefited from the significant improvement in residential real estate.”

While their oil & gas loans remain a small fraction of total loans outstanding

“Since energy remains top of mind with some investors, let me remind you that our oil and gas business or that loan portfolio accounts for 2% of our total loan portfolio, slightly more than half of these loans are to businesses in the exploration and production sector driven by the drop in energy prices and the results of our spring re-determinations.”

The firm continues to benefit from low funding costs on their customers deposits   

“Turning to deposits, growth has remained very strong over the past five years. Average deposits were – are $1.2 trillion up $83.8 billion or 8% in the second quarter. We’ve been able to continue to reduce average deposit costs to 8 basis points down 2 basis points from a year ago and down 20 basis points from five years ago.”

Wells Fargo (WFC) CFO John Shrewsberry highlighted some of the firms competitive advantages

“We believe that our strong distribution, leading market share, diversified revenue sources, low cost deposit base, strong risk culture and experienced management team are very durable advantages for Wells Fargo.”

 

 

 

 

IBM’s Senior Vice President of Analytics, Bob Picciano, cited helping companies scale their operations globally as one of his firm’s greatest strengths

“For the programmatic era of computing, it was very clear that IT created value for businesses by helping them codify their business processes.  What does it means to open an account, to process a claim, what does it mean to manage the case, what does it mean to create an electronic medical record. Those sorts of things were codified processes that allowed an organization to scale the way they did business in a unique way and really move from individual operations to regional, to national, to multinational, to globally integrated and the essence of those brands formed up through a set of applications. And that was incredibly valuable and IBM enjoyed a great deal of success in helping our clients really scale that environment.”

IBM’s Senior Vice President of Analytics, Bob Picciano, said his company is increasingly coming into competition in the analytics space with other IT giants such as Microsoft & Oracle

“There are some folks that have been in this competitive space with us for some time. You see some traditional data providers in this space like an Oracle or a Microsoft that are trying to use their data capabilities to branch into other aspects of business intelligence and analytics.”

 

 

 

 

GM North American Chief Financial Officer John Stapleton said they have dramatically reduced fixed costs in the business

“Right now, our breakeven is between 10 million and 11 million units. So, we have taken a considerable amount of fixed cost out.”

And the company has been able to raise prices over the last few years

“From a new model perspective, when we launch a new vehicle, we are fortunate to be able to take price. I think everybody realizes that.  When you get a brand new product, you can actually take price.”

They continue to believe their OnStar platform will be an incremental revenue opportunity

“So, insurance companies would love to have more data on the car, how the customer is driving the vehicle. If the customer permits it, we could actually give the insurance company data that would say this customer is a very safe driver. It’s a benefit for the insurance company. It could be a benefit for the customer and a benefit for General Motors, because we will sell the data.”

GM North American Chief Financial Officer John Stapleton said one of the biggest areas of cost savings has been materials costs

“Material cost optimization, in 2015, we have been fortunate and we publicly disclosed material cost optimization for the company globally of about $2 billion.   We are generating it by bringing suppliers in very early into our vehicle development process. We are actually working hard to take mass out of the vehicle and talk is interesting, but on the Chevy Malibu, we pulled 300 pounds old Malibu to new Malibu out, less weight, in most cases, equals less cost. We are reducing our build combinations. In the past, we had a lot of options and a lot of part numbers. If you reduce build combinations to what actually sells at the highest rate, you improve the terms for the dealers you reduce our number of part numbers, and ultimately, improve the scale of buy.”

GM North American Chief Financial Officer John Stapleton mentioned that the company dominates the SUV segment

“And finally large SUVs, again this is a great contributor to General Motors relative to profit. Chevy and GMC, we dominate this segment.  We have 72% market share, so Chevy alone has 50% market share.  Our average transaction price has increased roughly $2,400 from an MSRP perspective.”

 

FedEx FY 4Q15 Earnings Call Notes

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See moderate growth in global economy

“We see moderate growth in the global economy. Our annual U.S. GDP forecast is for 2.3% growth in calendar ’15 and for 2.9% growth in calendar ’16. We expect industrial production growth of 2.2% this year and 3.2% in calendar ’16. We expect global growth of 2.5% in calendar ’15 and 3% for calendar ’16.”

Pricing environment is rational

” I would characterize the pricing environment is very rational, in terms of Ground pricing obviously the change that we’ve made with the dimensional weight surcharge is now in full effect and we expect those trends to continue. So I just would characterize the pricing environment is rational.’

It’s very capital intensive to build a network

“first of all, let me just say that setting up a transportation network is an extremely capital intensive network, requires very sophisticated information technology and takes a very long time to build out to scale, to be able to provide the type of service that customers expect.’

The cost of pickup and delivery has not changed

“I think what a lot of people lose in this conversation is the fundamental input cost on pickup and delivery and that while technology today has certainly made user interface much more streamlined and easy as in the case of some of the applications we’re all accustomed to today, the fundamental input costs have not changed.”

Customer service with uniformed delivery person is important

“The other part about it that I think people lose sight of is the customer experience. Research has indicated time and time again that a uniformed person with proper identification showing up at your doorstep is an important issue for customers and consistency of customer experience is very critical in that regard.”

Getting rid of inefficient fuel burning aircraft

“Let me go ahead and start with the second part of your question, where we are actually modernizing our fleet. So we’re getting rid of very inefficient fuel burning aircraft of high maintenance to a newer fleet, better maintenance, better reliability, better fuel efficiency. So we’re balancing our fleet in the United States and around the world and that’s part of our profit improvement plan.”

Growth in oversized packages is a big deal in e-commerce

“we are a big outfit and we buy lots of trucks, lots of ground support equipment, lots of trailers, I mean between ground and the freight, I was just looking at these numbers, the other day we have over 70,028 foot [parts]. There was an article in the Wall Street Journal a couple of days ago about UPS handling oversized packages and I can tell you that the growth in those oversized packages is a big deal in e-commerce, so we are very, very hopeful that the Congress will increase the limit on twin trailers from 28 feet to 33 feet because it will take thousands of vehicles off the road, improve safety, save fuel, reduce emissions and allow both the LTL and the ground parcel businesses to better reflect the needs of the nation’s supply chain.”

We need to invest in new planes. Planes depreciate

“as it applies to airplanes, they’re just like trucks and ground support equipment. We need to buy the modernized fleet, 12, 15 airplanes a year and we continue to do that and you can count on us continuing to do that because they are aluminum, they oxidize, they wear out and the new models fortunately burn a lot less fuel and are much more reliable.”

FedEx FY 2Q15 Earnings Call Notes

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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

West coast ports are affecting things

“While we are still in the heart of peak season, there are several trends and developments that are affecting the season, including labor issues at the West Coast ports that have affected productivity and impacted retailers’ ability to get inventory where it’s needed and when it is needed. This issue has impacted our operations as we’ve made adjustments to capacity in key markets to support our customers facing these ongoing port slowdowns.”

Lower fuel costs offset by lower fuel surcharge revenue

“While second quarter results benefitted slightly year-over-year from the net impact of fuel, due to lower fuel prices this year versus last, the year-over-year reduction in fuel surcharge revenue largely offset the benefit of the lower fuel prices.’

Peak is a little more spread out than in past years

“I would also say that – reference back to what Mike said, looks like peak is more spread out than in years past. So while we had a great November at Ground, it was a little bit lower than we had planned for and we put in all that peak planning cost and everything”

Lower oil price could stoke foreign trade

“We’ve positioned our global powerful network around the world with exactly the right infrastructure, we have the 777s of course that are now flying non-stop out of Asia Pacific and around the world. So we think that the decrease in oil is going to have an increase in customers demand for higher yielding products.'”

The ecommerce economy is changing patterns

“November volumes were softer than our expectations but you need to know that this is not at all unusual in this new ecommerce economy. Over the last several peak seasons we have regularly observed situations where volume hasn’t always come where we expected it or come when we expected it but one thing has been certain, it always comes.”

The west coast port thing has been much bigger deal than people realize

“Let me put a little color on an issue that I think has been underreported and I suspect you’re going to hear a lot more about in January when the retailers start putting their results out. The slowdown in the West Coast ports has been a much bigger deal than people think and a tremendous amount of inventory was simply not put through the ports in the timeframe that the retailers had expected”

Air transport is driven by value per pound of the good

“what drives the movement of goods by air more than any other thing is the value per pound and there may be some closing samples that go air express or move by air but the vast majority of apparel is never going to move by air simply because the price point of the goods won’t justify the much higher cost of moving by air. “

FedEx FY 1Q14 Earnings Call notes

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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

Increased expectations for growth

“With private sector demand accelerating and fiscal austerity winding down, our expectation for real GDP growth is to average around 3% for the remainder of this year and next. Our US GDP forecast is now 2.1% for calendar 2014 and 3.1% for calendar 2015. We have increased our expectations for industrial production growth to 4.1% this year and 3.8% in calendar 2015.”

The global economy has improved, although it remains a multi-speed world

” The global economy has improved, although it certainly remains a multi-speed world. The US is leading the way and emerging markets are picking up. We expect global growth of 2.6% in calendar 2014 and 3.1% for calendar 2015.”

Raising prices

“As noted in the press Release, FedEx Express, FedEx Ground and FedEx Freight will be increasing shipping rates an average of 4.9% effective January 5 of 2015.”

Expecting a new record peak season

“And finally, just a couple comments on peak season. We’re expecting another record peak season in terms of delivery volume. Peak will once again be compressed this year with Cyber Monday falling on December 1.”

Adding capacity, adding workers

“We expect more than 50,000 seasonal positions to be added for the upcoming peak across the FedEx operating companies. This includes package handler, helpers, drivers and other support positions. Based upon our growth expectations and network expansion, the majority of those seasonal workers will have the opportunity to continue working for us after the holiday season. ”

We recognize teh dividend yield is low but that’s because the stock performance has been amazing

“We understand our dividend yield is sub par. Part of that is because of the outstanding stock performance. But we will continue to increase our dividends at some level as our strategy and objective, and so we’ll see where we get. ”

Clear change in strategy regarding product launches

“Over the last couple of years, there has been a change in the strategy regarding product launches. This is not a FedEx strategy; let me be clear, this is a market strategy.

More of these companies are electing to build time into their product launch planning to allow them to take advantage of more traditional freight networks to forward deploy the product and move the product into the United States or other markets and stage that inventory for the launch itself. That is changing the mix of traffic. And this is not only affecting FedEx, it’s affecting the entire transportation market in terms of how this product is forward deployed. So, I want to make sure I’m clear about that.”