Miscellaneous Earnings Call Notes

PepsiCo (PEP) Indra K. Nooyi on Q1 2016 Results

It’s a difficult environment indeed

“Most of the developed world outside the United States is grappling with slow growth. GDP growth in developing and emerging markets is also challenged with many D&E markets experiencing significant political unrest and high unemployment. Key energy-producing countries are dealing with significant budgetary gaps; and high levels of local inflation in many of these markets are eroding disposable income and dampening consumer spending. It’s a difficult environment indeed.”

Hugh F. Johnston – Vice Chairman, Chief Financial Officer & EVP

Incrementally less optimistic in South America and Eastern Europe

“I think the two places where we’re probably incrementally less optimistic, number one is South America, not Mexico. Mexico, I think, we’re quite positive on, but the balance of South America obviously is a challenge. And then number two is Eastern Europe. Eastern Europe is obviously continuing to be challenged from a GDP perspective and that flows through to disposable income and therefore to consumer spending on our products. The balance I think were probably roughly in line with where we’ve been.””

Hasbro’s (HAS) CEO Brian Goldner on Q1 2016 Results

Seeing impact from ongoing economic challenges

“While consumer demand remains robust, we are beginning to see an impact on some retailers from the ongoing economic challenges.”

Retailers are excited about toy category

“I would say this is the second year of strong growth year-to-date; we are seeing high single digit growth rates, both in developed economies like U.S. and also throughout Europe. Retailers are very excited about the category, as we continue to have more story driven brands, more integrated play brands and more innovation in the category. Overall, POS was very strong, as I said, but as we’ve noted before, online POS was even stronger, and many additional retailers that have been historically brick retailers are doing a very good job in omni-channel.”

Morgan Stanley (MS) James Patrick Gorman on Q1 2016 Results

Seeing a better turn in markets now

“where are we now? Though it’s impossible to predict the future, we’re seeing a slightly better turn in markets, certainly, in comparison to what was evident at the start of the first quarter, leading into the early days of February. The M&A pipeline is strong and some green shoots suggest the equity underwriting calendar may open up. The S&P level at the end of the first quarter will help with asset pricing in our Wealth Management business, where we continue to grow our lending book and see flows into managed accounts. ”

Brinker International’s (EAT) CEO Wyman Roberts on Q3 2016 Results

QSR is taking share with promotions

“I mean there’s just such a strong value proposition being played out there. And we don’t think that that’s sustainable or it’s a long term issue, I think it’s more of those are limited time offers, but they also are interesting that the QSR category is kind of showing us that they’re rethinking how they deliver value and their value propositions ”

The Coca-Cola (KO) Ahmet Muhtar Kent on Q1 2016 Results

James Quincey – President & Chief Operating Officer

The degree to which our industry was affected by the slowdown in China was worse than expected

“In China, we are adjusting our plans to reflect these realities. China’s macro environment was challenging in 2015, and that continued to be so in the first quarter. While the economic slowdown is not new, the degree to which the NARTD industry was impacted this past quarter was worse than expected.”

Chicago Bridge & Iron NV (CBI) Philip K. Asherman on Q1 2016

Customers aren’t canceling work, just delaying

“I would have to say if there’s customer impact in today’s environment, it has to do with just again a delay in making financial commitments and we’ve seen that. However, we haven’t seen any cancellations in current backlog or in prospective work. So, that’s good. It just seems to be pushing out a little further.”

Knight Transportation (KNX) CEO Dave Jackson on Q1 2016 Results

April has been better y/y

“if I were to look into April thus far, we would say what we have seen so far in April has been more of the same where we’re seen our trucks run a little bit better in terms of miles’ year-over-year and we’re seeing — so therefore we’re seeing decent volumes on a year-over-year basis.”

PulteGroup (PHM) Richard J. Dugas, Jr. on Q1 2016 Results

No V-shaped rebound

“We have believed since the outset of this housing recovery that it would be more gradual than the V-shaped rebound, typical of most housing cycles. Our thesis is unchanged as we expect an extended recovery will continue to unfold for the next several years supported by improving economy, favorable demographics, years of relative under-building and a supportive mortgage rate environment.”

Inventory of available homes remains tight

“The inventory of homes available for sale remains tight in most of our markets; and at least on the new home side it will likely remain that way for a while given the limited supply of finished lots available. ”

Fifth Third Bancorp (FITB) Gregory D. Carmichael

Would grow investment portfolio at slightly higher rates

“So, frankly, if rates were to stay at these pretty low levels, you could expect from us just to reinvest cash flows because the entry points don’t look real good. But if rates were to have a little bit of a sell-up here and present more opportunity, then you would expect our investment portfolio to grow in line with earning assets. But I don’t think you’ll see a lot of movement in the book one way or the other throughout 2016.”

Cohen & Steers’ (CNS) CEO Bob Steers on Q1 2016 Results

The asset management industry is no longer a growth industry

“The simplest takeaway from the letter is that the asset management industry in its current form is no longer a growth industry for a majority of traditional active asset managers. Overcapacity, chronically poor investment performance, high fees, competition from passive strategies, growing barriers to entry for access to distribution and the rapidly growing cost of regulatory compliance, taken together will challenge future growth and profitability for most legacy investment managers. However, we’re convinced that asset managers who are focused on a limited number of historically inefficient markets, with strong brands and track records of consistent outperformance, will be among the relatively small number of big winners.”

Real estate is under-allocated in retirement plans but not among institutional investors

“I would say that large institutions are not under-allocated to real assets. The largest endowments in sovereign wealth funds have had a 10% to 30% allocation to real-assets for some time. However, most of those allocations have been executed to private equity strategies. Where the under-allocation is more pronounced is both in the wealth and what I would call the retirement channel, the fine contribution channel which as you know we’ve been adding to our DCIO team because there’s virtually no representation in the 401(k) market in real assets.”

Reliance Steel & Aluminum (RS) Gregg Mollins on Q1 2016

Rising steel prices for the first time in over a year thanks to positive trade case filings

“for the first time in well over a year, we’ve begun to experience rising metal pricing for carbon steel products as well as stainless steel flat-rolled products. This pricing improvement, which accelerated towards the end of first quarter, was mainly result of the recent trade case filings by U.S. steel producers. We continued to support these trade actions which seem to be having a positive impact on reducing the overall level of imports in the United States marketplace and on metal prices.”

Not seeing anyone build inventory in anticipation of higher prices

“You have to realize that our average order size is about $1,600, so we are dealing with a lot of small to mid-size job shops. That’s probably the vast majority of our businesses is not with large OEMs, and so therefore they are really not buying in advance. We have not seen or heard from our guys in the field that anybody is building inventory in anticipation of higher prices. So I’d have to say basically its business as usual with our customer base and we don’t see anybody really trying to build inventories ahead of price increases.”

Fifth Third Bank 4Q15 Earnings Call Notes

Fifth Third Bancorp’s (FITB) CEO Greg Carmichael on Q4 2015 Results

Tayfun Tuzun

Credit spread widening has not reached bank loan credit spreads

“credit spread widening seen in the high yield market has not yet reached bank loan credit spreads.”

We are cognizant of where we are in the credit cycle

“As we discussed last quarter, we are cognizant of where we are in the credit cycle. The global concerns associated with a diverse set of factors reaching from geopolitical to fundamental economic performance are well-known. Although we are a predominantly domestic bank, it is difficult to take comfort purely around the health of the U.S. economy relative to the rest of the world. In this environment and in light of the absolute low levels of our credit metrics, we need to point out that these levels maybe subject to potential volatility from time to time.”

We have backed off in some markets where rents are rising faster than wages

“Specific to multifamily, we are sensitive not only to market demand and household generation, but also affordability as in some markets rents are rising faster than wages as the housing market returns. This has caused us to back off in certain markets”

Frank Forrest

We do look at high yield spreads, clearly there is a correlation, but right now things look ok

“We do look at high yield spreads, there is clearly a correlation between high yield spreads and future loan losses on the commercial sector and we follow that and they are going up both on the energy side and outside of the energy side. So, we will continue to monitor and watch that over time. But our performance overall, the core of our middle market book, the mid cap book and the large cap book is still performing very, very well outside of energy, to answer your question, with no really discernible trends either in geography or products that are cause for concern at this time. So, our intent is up like everybody else. We are looking at a lot of leading indicators. We are managing credit very closely. But at this point, we still feel good overall about our portfolio for the year. ”

Risk is to oil field service lenders

“Again, we feel very good as a senior secured lender with the exposure we have in the reserve-based portfolio. And that is the bulk actually is criticized assets. When you look at where there is potential loss, it would be on the oilfield services”

Manufacturing sector continues to be strong

“frankly, I do not see developing concerns at this point. In fact, the manufacturing sector continues to be very strong. The credit metrics of that profile continue to look like what we have seen over the past couple of years. They are generating high profits on a relative basis, historic basis, generating excess liquidity.”

Lars Anderson

“frankly as recently as just the last few days I have had interaction with a number of clients in the marketplace. So I think this is pretty contemporary feedback. We are seeing a growing sense of caution from our client base. And frankly, that is really across almost all of our businesses, maybe an exception could be in the healthcare sector where they continue to have a level of confidence is some of the uncertainty was taken out in the end of last year there.

Miscellaneous Notes Week of 9.17

Stronger than expected turnout at Credit Suisse Basic Materials conference

John McNulty – Credit Suisse Analyst (From Dow Presentation Transcript)

“Okay. If you all take your seats we’ll get on with the presentation for today. Yesterday was a big day for us actually for what it’s worth, those keeping track, I mean, the rooms are certainly more full than we’ve seen them actually. We are – attendance was up about 45% for our first day, yesterday. So apologize if there are logistical issues, because it’s a bigger crowd than even we had expected, but it’s a nice problem to have.” –Credit Suisse (Investment Bank)

Sirius’ CEO was bullish on car sales

Jim Meyer – CEO Sirius XM

“I spend a lot of time with the senior executives in the automotive industry and all of them along with me are pretty confident that what the next six or 12 months looks like in auto sales. And we see them continuing strong.” –Sirius XM (Satellite Radio)

40% of millenials do not have a TV and 20% say they are considering cutting it

Lowell McAdam – Chairman and Chief Executive Officer

“40% of millennials do not and have never had a TV in their home and another 20% have said they have got it, but they don’t use it that much and they are considering cutting it.” –Verizon (Telecom)

Verizon doesn’t think Apple’s installment plan is a threat to them

Lowell McAdam – Chairman and Chief Executive Officer

“They love to have people stay on iPhones forever. And if I look at it from our perspective, from a cash flow perspective, it is – it’s a relatively positive, marginally positive I guess. So, it’s not a threat. It’s similar. I think about it the way I think about bring-your-own-device, which we have been doing for quite a while. Apple today is a very small piece of our distribution. So, it’s not going to shift the way we do business in anyway. And right now, it doesn’t look like a threat to us.” –Verizon (Telecom)

Fifth Third echoed that credit remains benign

Tayfun Tuzun – Chief Financial Officer

“We are operating at very low levels of charge-offs in historical terms and ongoing quarterly improvement every year in charge-offs will be difficult to achieve, but nevertheless credit should generally remained benign.” –Fifth Third (Bank)

You have to optimize your business to perform well over the course of a whole cycle

“If there is one lesson that we as managers have learned during the crisis it’s the importance of relentless focus on through the cycle performance. Business models created for the present part of the business cycle that are not grounded in long-term fundamental value creation will outperform for a period of time, but will not increase the value for shareholders who have longer time horizons, as they are now sustainable.” –Fifth Third (Bank)

Sustainability is the key focus

“I wish I could tell you that it is possible to tailor our strategy in a very timely manner to every turn of the business cycle, but it is not. Therefore sustainability has to be the key focus. Our top goal is to perform well throughout the full cycle.” –Fifth Third (Bank)

Necessity has been the mother of invention in driving more efficiency in the oil industry

Bob Gwin – Executive Vice President-Finance and Chief Financial Officer

“necessity being the mother of invention that, I think, is largely true across industry. Very proud of our folks driving efficiencies, working very hard to drive down costs, increase in our oil production everything operationally has gotten better. Now that obviously for a macro perspective, continues to put pressure on commodity prices as we see the resiliency of U.S. production. But our view is that we’re going to see that – we’re starting to see it roll over a bit and that – in this era of prices with this double dip and without a real strong outlook on the underlying commodity, we see that the need to continue to focus on cost and the need to continue to focus on driving returns” –Anadarko (E&P)

The focus is on returns, not growth

“The focus right now is not on growth, it’s on returns. We don’t look at growth as being a deliverable that’s going to be valued by the market or by our shareholders, rather growth will be – the growth rate will come out of the capital allocation work that we do” –Anadarko (E&P)

HCA thinks of itself as the preferred healthcare provider in the markets they operate

Bill Rutherford – Chief Financial Officer

“we want to be the preferred healthcare provider in the markets that we operate and we create what we think is a high value integrated delivery system. It’s anchored by our hospital network, supported by outpatient centers, ambulatory surgery centers, we have 120 surgery centers, outpatient imaging, physician clinics, we employ close to 4,000 physicians in our marketplace, freestanding EDs and urgent cares. So, we deploy access points in the marketplace. So, there are multiple ways patients can access the HCA network in multiple service dynamics. And then we develop deep service line capability generally organized around patient conditions in cardiology, in women’s services things or orthopedics, oncology, neurosciences, emergency room and we developed deep service line capability.” –HCA (Hospitals)

We may get more medicaid expansion post 2016 when it’s not so politically charged

“I don’t see much movement until post-2016 election, once we have someone else as President and the office maybe Medicaid expansion becomes something that’s more state-driven rather than considered Obama Care.” –HCA (Hospitals)

An exchange enrollee is worth much more than medicaid

“the one thing you do have to remember as Bill pointed out, our significant benefits have come through the insurance exchange. I mean if you just look at the pricing differential on what you get on an exchange enrollee versus a Medicaid enrollee it’s three times on an exchange. So remember if we get one exchange to three Medicaid, we benefit substantially more.” –HCA (Hospitals)

Union Pacific is optimistic that ex-energy volumes look not too bad

Rob Knight – CFO

“And as we look at the macro, it actually sort of — I think it speaks to what we’re seeing at the macro level, clearly the energy related activities are a drag on our volumes right now. But the rest of our business volumes are ever so slightly and we’re very cautious, we’re not getting exuberant here, but are on the positive side of the volume trends. We’re watching very carefully, things like our intermodal business. Our intermodal is roughly half international, half domestic. If you look at our third quarter numbers, our international is down about 7%, our domestics flattish, and what we’re seeing in our international space and our intermodal world is a cautiousness, as people are cautious not to build inventories too high.”

“We think the peak season that we would normally experience is a couple of weeks still in front of us, so we would hope to see some improvement in that space, if that holds. While we don’t think it’s going to be a rocket ship kind of peak. We do expect it’s going to build, but there is clearly some cautiousness in the space with people not wanting to overbuild inventories and I guess [indiscernible] away we would feel about the macro economy cautious, steady as she goes, things are positive when you separate all the energy challenges we have.” –Union Pacific (Railroad)

Twitter is full steam ahead under Jack Dorsey

Anthony Noto – Chief Financial Officer

” we’re focused on what we control which is executing on the business, we haven’t missed a step since the transition to Jack, we’ve been full steam ahead.” –Twitter (Social Media)

Fifth Third 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

Slower loan growth because the rest of the industry is being too aggressive

“Loan growth was more muted compared to other quarters, especially in C&I, as we maintain our cautious approach with respect to the industry’s aggressive pricing and structure from both banks and non-banks that we’re seeing in certain segments of commercial lending today.”

credit environment remains positive

“The credit environment in general remains positive. Net charge-offs ticked up slightly. But non-performing asset levels continued to trend down and were 21% lower than the prior year, and our non-performing asset ratio declined below 90 basis points.”

current environment leaves little room for error

“Shifting to loans, similar to our cautious approach within our investment portfolio, we are being prudent on pricing and terms, and we continue to originate loans to customers where their relationship profitability meets our return hurdles. We believe that the current market environment and pricing levels leave little room for error in extending loans under riskier structures.”

Sitting on the sidelines rather than investing the securities portfolio

“In terms of activity in this environment, we’re just not adding leverage to the portfolio. We just don’t believe that the risk/return profile of those investments at this point are attractive enough, and we’re willing to sustain a little bit short-term pain for that because I think in the long term, being able to invest – although I have to say that we don’t know yet when that environment will realize. But at 2%, 10-year and even the short end of the curve being where it is, I think we will remain on the sidelines, which obviously from a NIM perspective actually it’s not that hurtful. But from an NII perspective, we will have some short-term pain, as we actually discussed in the script.”

It’s difficult to predict how this is going to play out

“30 days ago the likelihood of us being in this environment was as high as the Reds making the playoffs at that time. The Reds didn’t make the playoffs, but here we are in this environment. And at the same time, this morning’s economic data indicated that the jobless claims are at the lowest level since April of 2000. So it’s difficult to predict exactly how this is going to play out in the global context and what the Fed will do.”

Refi volumes replace slack in loan yields in weak interest rate environment

“refi volumes are picking up, but we’ll see how long that holds. If I were truly prophetic and had put in the interest rate sensitivity slide on page 15 that had a flat-and-fall scenario, what you would see for us is about a 1% NII decline, but more than made up for by that mortgage banking revenue and refi. So we think we’re well positioned and have a nice diversified balance sheet and business to really battle through this type of environment if it were to stay this way for a while.”

Fifth Third 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

Loan pipelines are still good

“We spend a lot of time, as you might imagine, in the markets today talking with clients and prospects. And I would tell you that for the most part, nothing has changed relative to our client’s perspective. The pipelines are still good from that regard. We are seeing though a more competitive environment than last quarter. I’m sure it’s going to be more competitive tomorrow than it was today, and we are sensitive to that at this point. So credit spreads are tightening, not giving us or not giving a lot of room relative to making a mistake from that perspective.”

There is still lack of clarity around whether regulators will allow deals to get done

“one of the things I think is challenging in this environment is still some lack of clarity relative to the M&A environment. I don’t think, from our perspective, not being able to calculate what the cost of that ambiguity is in the process and not wanting to have a diversion or a focus in terms of a longer lead time to get a deal done or closed from that perspective really leads us to making sure we stay focused on the core franchise at this point.”

Not optimistic that 2015 is the year that happens

“I don’t know when that gets better. I think it will get better. I’m not particularly optimistic that 2015 is the year that happens.”

It is challenging but not going to make bad credit decisions

“As I mentioned to Jason’s earlier question, we are seeing it getting a little bit more challenging out there, and so we’re not going to pursue that. We’re not going to make bad credit decisions in order to just simply to bulk the balance sheet and jump into 2015 from that perspective. That doesn’t make sense to us. And as it gets more reflected in pricing or structure, we’ll really be more disciplined”