Honeywell 1Q17 Earnings Call Notes

Darius Adamczyk

Slight downtick in animal spirits

Yes, and Joe, maybe just add a couple of comments. I think as you look at our long-cycle business and our backlog, we are fairly encouraged by what we saw, in Q1 backlog being up pretty much for every one of those businesses, and certainly there is a level of confidence in what we’re seeing on the long-cycle.

The short-cycles is a slightly different story and we are positive on that short-cycle too, but if you think about kind of the animal spirits that we saw overall in the markets particularly in the U.S. and let’s say in January versus what we see now, I would say that’s a slight down arrow versus what it was and I think some of that could be reflected in the short-cycle and frankly we’re being a little bit cautions and measured in terms of our outlook and we hope to deliver to the upside of what we stated.”

Honeywell 4Q16 Earnings Call Notes

Honeywell International’s (HON) CEO Dave Cote on Q4 2016 Results

Net exporter

We’re a net exporter, so on balance it would benefit us from a tax standpoint. When it comes to repatriation, it depends on what the final deal is. If there is really high tax that’s put on in, well, that makes it a lot less interesting. So, we’ll have to judge it when we see it.

Animal spirits

“I would say, it’s changed become more positive. I’ve really been impress to see that improvement in animal spirits, small company CEOs, big company CEOs, a small banks that I’ve talked to, really quite surprising, so the animal spirits are real, there is no doubt about it. And hopefully if we can just get a few specs here with some actual actions that could be enough to really start turn the herd. I don’t think it takes us to crazy levels, the GDP growth and if it did that would be a problem. But I think we are going to see an improvement here, not ready to bid on it, we’re going to continue to plan for a slow growth global economy, but it still feels more positive than it has in a while coming off of worst recession since the great depression.”

A trade war is bad economically

” you have to be worried about a trade war. If it gets to that point, it’s not going to be bad just for trade, but it’s going to be bad economically, it’s kind of tough to be in economic island now especially if you are the number economy in the world. So it depends on how all that gets handled. And yes, of course it’s a concern for us.”

Better than it’s been in a long time

“Well, I do think and I’ve said this for several years that I don’t economist also really understand what happens after a severe financial recession, it was true that 30s and it was true of this one, and hit overall confidence was just really, really strong, really hard, and when you have the whole herds thinking about slow global growth and that’s just the way it is and that’s just the way it’s going to work, well, it becomes self-reinforcing because we all act that way. If you take the look at the conditions for recovery, it actually pretty good for while, they were been talking for number of years about how good consumer balance sheets were in the U.S. You look at capacity utilization, it’s in good shape, unemployment down 4.5 or so percent, you can argue under employment, but still employment in good shape, our bank balance sheet in the best condition, they’ve ever been, most companies balance sheets really good shape, and I really think it just need to spark. And the election assuming that we – the right things gets follow through and we don’t end up with some unintended consequences provide that sparks and I’m really encourage by what I’m seeing. Now it’s got to turn into something, but right now the feelings are better than I’ve seen them in long time and that could be enough to get the herd moving in the direction of saying, I’d better not miss this moment as oppose to just hunker down and keep waiting it out.”

Cote leaving

“Thanks. After 15 years at the helm, this is my last earnings call as some of you pointed out. It’s been an honor to lead the Honeywell team for this many years. And all of us are proud of what we’ve accomplished. I’ll have to say we are even more excited about what’s coming. Our outperformance will continue because we’ve invested heavily in people, process and portfolio to do the seed planting that we’ve always done.”

Miscellaneous Earnings Call Notes 10.28.16

SunTrust Banks’ (STI) CEO Bill Rogers on Q3 2016 Results

Regulatory and compliance costs are not likely to abate

“But in terms of overall regulatory and compliance costs, if I look forward, John, I don’t think that in the short- to medium term I would think of regulatory costs in general abating or declining. I think we’re in an environment, where we would expect regulatory and compliance costs to be generally stable or increasing over time. And just the environment that we’re in, I don’t see realistically that anybody in the industry is going to see regulatory and compliance costs fall off.”


Potlatch Corporation’s (PCH) CEO Michael Covey on Q3 2016 Results

Eric Cremers

No rollover in land pricing

” Pricing remains firm. There is a lot of money on the sidelines looking to invest in the asset class. People have an expectation that prices will move higher over the next several years as we continue with this housing recovery that generally gets built into the models that are used to value timberland. And in a low interest rate environment high timberland prices are supported. So we’ve not seen a rollover in timberland pricing at all.”

Lumber prices well supported here. Moving from mid to upper 80s capacity utilization”

” As I think Jerry mentioned in his opening remarks, we might see a real slight rollover in lumber pricing in Q4, and that’s consistent with what the external pundits are forecasting maybe 1% or 2% rollover in pricing. You know generally speaking markets are well balanced, our order book is solid. As you know we sell forward our lumber production. So we’re out into the first or second week of November at this stage. And so we feel very good about where lumber markets are at, at this stage of the game. Just the general backdrop here, if you think about it, we’ve got demand, which has remained strong. Of course the housing market data, there is starts data is volatile from month-to-month. But generally we’re seeing starts increase, we’re seeing strong R&R repair in the model activity, and we’re seeing strong commercial and industrial activity as well. And with industry wide capacity utilization now moving up from the mid to the upper 80s and supply-chain inventories as Mike had mentioned remained very well, we think, lumber prices are well supported here.”


Brown & Brown’s (BRO) CEO Powell Brown on Q3 2016 Results

Hurricane Matthew will have little impact on rates

“We believe Hurricane Matthew will have limited impact on rates, if any. There will be more discussions around flood and wind deductibles, rate for cat property continued downward affecting retail, wholesale, and national programs, and that will continue into Q4 and into 2017.”


Honeywell International’s (HON) CEO Dave Cote on Q3 2016 Results

A favorable setup for 2017

” Darius and Tom will provide more details about 2017 during our annual outlook call in December, but we have a favorable setup. The fourth quarter momentum continues, our long cycle businesses are improving and our inflections start to kick in.”

Tom Szlosek/Dave Cote

A salesperson isn’t productive in his first year on the job

“A salesperson really isn’t productive enough in his first year on the job, so we have to ensure we have enough sales employees in place today to support tomorrow’s business… when you hire salespeople there’s training and familiarization that has to go on. So they’re not immediately productive. It’s the sort of thing that shows up in the future.”


Heidrick & Struggles International’s (HSII) CEO Tracy Wolstencroft on Q3 2016 Results

Rich Pehlke

Improvement in September/October

“we can’t really point to one thing because as we saw July and August kind of soft we really did worry a little bit about was it a sign of some kind of a cyclical trend or a movement but you know September bounced back pretty well and so – and as we talk to our folks and see what’s out there and see how October is progressing. You know there is nothing we can really point to that says that you know there is one – there is one driving factor. So whether or not it could have been client decision caused by things like Brexit et cetera certainly is certainly one of the factors that would have fallen into play but there isn’t any one thing that we can put to, and I don’t know if you want to leverage.”


Zions Bancorp. (ZION) Q3 2016 Results

Harris Simmons

It was a softer quarter for C&I loan demand than we would have hoped for

“I think that’s consistent with what we saw during the third quarter. The third quarter has generally been a softer quarter. You get kind of the summer vacations and everything else baked into it, but this was softer than I think we would have expected. And so we’ll see what happens through the remainder of the year. But it was a softer quarter in C&I than we would have hoped for.”


Brinker International (EAT) Q1 2017 Results Wyman T. Roberts – Brinker International, Inc.

Challenging times across casual dining

“Just as we said last quarter, these continue to be challenging times across casual dining. We’re already seeing some of the weaker players struggle with their viability in this choppy environment. ”

There are some examples of concepts that are shrinking

“We don’t have great metrics around capital spending in the category. But there are some examples of concepts that are shrinking. And in some numbers that are reasonable, we’re talking now in tens and hundreds. So that does make a difference. We’re also hearing from some competitors a dial back, which I think is again encouraging that people are starting to say, hey, listen let’s address the overcapacity and slow things down a little bit. And I heard something recently from a competitor that the expectation was that would also maybe take some of the steam off some of the real estate market, which has not really come back in our opinion kind of represented the softer overall economic situations out there. Still paying a pretty good premium in this environment we think for real estate. So all of those things I think bode well for getting the economics right and getting the supply and demand situation more in line”


United Technologies (UTX) Q3 2016 Results Gregory J. Hayes

China Otis sales down 10%

“We also continue to make good progress at Otis. Our China new equipment orders and units were up 2% in the third quarter and 3% year-to-date. This is in the face of an overall market, which is down more than 5%. I would remind you though, the pricing pressure remains intense, so despite unit orders being up, new equipment orders on a sales basis in China were actually down 10% in the quarter. A tough market right now, but we remain focused on increasing our installed base and converting those units into our service portfolio, which will deliver recurring revenue for decades to come.”

Have seen a slowdown in construction activity in UK

“In Europe, we have seen a slowdown in construction activity in the U.K., we think as a result of the Brexit vote, but the rest of Europe appears to be improving slowly, more than compensating for the slowdown in the U.K.”


Freeport-McMoRan (FCX) Q3 2016 Results
Richard C. Adkerson

It’s clear there’s going to be a need for copper

“Is just, unless you see the world really turning upside down economically, it’s clear that there is going to be a need for copper that’s going to require a significant price increase to justify the spending, and that’s why we feel very good about our long-term strategy.”]


C.H. Robinson Worldwide (CHRW) Q3 2016 Results Andrew Clarke

Carriers raised rates when Hanjin filed for bankruptcy

“Hanjin filed on August 31 and what happened shortly thereafter is the other carriers that remained in the Trans-Pacific eastbound lane began to raise rates. I think what happened then shortly thereafter was that they doubled them. They were up as high as $750 as I mentioned earlier, $750 to $900 a box. Now, we weren’t able to immediately pass those rate increases along to our customers. As I mentioned, our account managers are out there right now having those discussions with our customers to reflect the rates that are now in place in that trade lane. We would expect the impact to trickle into the fourth quarter, but not much beyond that.”


Applied Industrial Technologies (AIT) Q1 2017 Results
Neil A. Schrimsher

October a little softer than September

” I’d say on our sales per day trends – did include expected seasonal softness in July with improvements then in August and even stronger in September. Order trends for October, as expected, developing a little softer than September. However, we still have a handful of days to go. And I’d say year-over-year October is just kind of down low single-digits, which, again, is what we expected looking at the comparables. And, again, that’s got still a handful of days for us to positively impact it.”

Mark Eisele

Foreign exchange rate impact down to zero

” That’s exactly the expectation. If you look at foreign exchange rates, let’s say, for September and if those would stay relatively stable through December, when we look at our overall sales, we would expect to have a 0% impact of currency translation in the December quarter. Then if you keep going on through the rest of the fiscal year, you’d actually see a small positive impact probably in the March quarter and then more flattish in the June quarter. So, our view is, for the entire year, we may end up at virtually zero on FX. Obviously, it depends upon how the rates move from today forward, but that’s our perspective. We’re seeing some stability.”


Range Resources (RRC) Q3 2016 Results
Jeff Ventura

Supply and demand for gas could be more balanced into 2017

“On a macro level, there are signs that later this year and into 2017, supply and demand will be more balanced and pricing could improve. We expect natural gas production in the U.S. to continue declining for the remainder of the year. Based on available data, it appears 2016 will be the first time that natural gas production will decline on the year-over-year basis since 2005. This supply decline is happening while demand for natural gas is increasing, driven by Mexican exports, power generation and LNG exports. Looking towards 2017, the NYMEX Strip has moved above $3 and we think it can continue to climb. Based on where strip pricing is today, we believe that we can grow the combined company at 33% to 35% for 2017. This equates to an organic growth rate of 11% to 13% for 2017, coupled with the full year of the North Louisiana division versus roughly a quarter in 2016. Importantly, this preliminary plan for 2017 also results in strong growth for 2018, assuming a $3.25 per mcf and $60 per barrel, we are projecting that we should achieve organic growth for 2018 of approximately 20%


Honeywell 2Q16 Earnings Call Notes

Honeywell International (HON) David M. Cote on Q2 2016 Results

Expect minimal near term impact from Brexit

“We’re also monitoring the macro environment in light of Britain’s recently announced exit from the European Union and we expect minimal near-term impact. Tom will take you through some of the actions we’ve taken to mitigate potential risk, but it’s important to note that our planning framework hasn’t changed”

We never referred to this as an expansionary environment

” I don’t think we’ve ever referred to this environment as being expansionary. And the way I would describe the overall performance and why we say strong: if you take a look at the cash we generated, if you take a look at the operational margin rate improvement, 110 basis points which is consistent with what we were doing last year. It’s just all the stuff to the right of the chart was moving in the right direction. This year it’s not.”

Miscellaneous Earnings Call Notes 4.28.16

General Electric (GE) Jeffrey R. Immelt on Q1 2016 Results

Saw improvements in our business in China

” We’re in the midst of a challenging Oil & Gas market. However, we are things sustained strength in Aviation and Power markets. Healthcare is rebounding. I was in China last week and saw improvements in our business. Most of the portfolios are strong and we’re delivering. There’s plenty of business out there to achieve our goals.”


McDonald’s (MCD) Stephen J. Easterbrook on Q1 2016

All Day Breakfast came out hard and then settled but is still exceeding expectations even at the settled stage

“we clearly came out of the tracks hard with All Day Breakfast. It exceeded our expectations through the launch phase, and then hit a more settled rate. Frankly, it’s still exceeding our expectations through the settled stage as well. So we’re incredibly encouraged.”


Honeywell International (HON) David M. Cote on Q1 2016 Results

I’m hopeful for a rebound but we’re not going to count on it. Europe did better than expected

“I’m hopeful that there is a global economic rebound, but we’re certainly not going to count on it. If there was any region that surprised me in this past quarter, it was Europe did a lot better than I expected. I don’t know if this is just a one-time bounce or something that’s going to stay consistent, but I was quite encouraged by seeing that. It was a nice surprise. I mean, we’ll see how much that turns into something. But right now, we’re going to stay with this whole idea that this is a slow growth global environment and it’s just the smart way to plan. And you see that reflected in how we are forecasting the second quarter and how we’re forecasting the total year. I just don’t think there’s any percentage right now on being bullish about it. If it happens, great. I think there’s a greater chance it happens than there is that it doesn’t. But that being said, I don’t see any percentage in being bullish about it.”

Flight hours is the most important driver of the aerospace cycle

“I’d say it comes back to flight hours again. They fly a lot. And that’s really – I’ve said many times the biggest Aerospace driver we have is flight hours. And it’s not tied to OEM schedules or airline profitability or any of that generally. The long-term trend is going to be driven by flight hours. If they’re flying, everything ends up working out. Whatever short-term disruptions or benefits, whatever you’re seeing, over time flight hours ends up being the driver. Flight hours continue to climb, and that’s a good phenomenon for us.”


LyondellBasell Industries’ (LYB) CEO Bob Patel on Q1 2016 Results

Olefin and polyolefin markets are tight

“Looking forward, we see olefins and polyolefins markets remaining tight during the near-term. There are heavy turnaround schedules in both the US and Asia. The recent rise in crude oil prices provides tailwinds for both pricing and demand, as customers no longer feel incentives to delay purchases, in hopes of future declines in product prices.”


Procter & Gamble’s (PG) Q3 2016 Results

Jon Moeller

It’s not enough just to gain market share

“The reason that we’ve talked a little bit about not following share out the window, we can be gaining shares in categories that are declining, and that’s not going to grow our top line. What we need to be doing as innovation leaders in our categories is getting the market growing through that innovation and gaining a share of that growth.”


Twitter’s (TWTR) CEO Jack Dorsey on Q1 2016 Results

Acquisitions have been critical in creating value for the internet sector for two decades

“The first point I would make is that acquisitions have been critical in creating value for the Internet sector, consumer Internet sector over the last two decades. Many of our competitive peers have bought assets at very early stages that have resulted in billions of dollars of value and Twitter has been the same”

Goal is to be one stop shop for advertising

” At end of the day, our goal is to be a one-stop shop for advertising. And having both owned and operated inventory, third party inventory and ad text stock that can serve both of those constituencies is really critical.”


United States Steel’s (X) CEO Mario Longhi on Q1 2016 Results

Favorable trade case results are boosting the domestic steel industry

“Last year, we successfully advocated for the passage of the Level Playing Field Act in the trade adjustment assistance bill. This represents the first time in decade that U.S. trade laws were revised and clarified to align with the original congressional intent. The interpretation and enforcement of these new laws has already been reflected in preliminary determinations in the three major trade cases we elected to pursue with other steel companies in 2015. Yesterday, we announced another step in our efforts to have the rule of law enforced. We filed a complaint with the U.S. international trade commission to initiate an investigation under section (337) of Tariff act of 1930 against the largest Chinese steel producers and their distributors. The 337 complaint alleges illegal unfair methods of competition and seeks the exclusion of all unfairly traded Chinese steel products from the U.S. market. I would like to emphasize that the remedy under section (337) is not a tariff, it is an exclusion of products from the U.S. market. Our complaint alleges three clauses of action, the illegal conspiracy to fix prices, the theft of trade secrets and the circumvention of trade duties by false labeling.”


Third Point 2Q16 Investor Letter Dan Loeb

One of the most catastrophic periods of hedge fund performance since this fund’s inception

“Unfortunately, many managers lost sight of the fact that low net does not mean low risk and so, when positioning reversed, market neutral became a hedge fund killing field. Finally, the Valeant debacle in mid-March decimated some hedge fund portfolios and the termination of the Pfizer-Allergan deal in early April dealt a further blow to many other investors. The result of all of this was one of the most catastrophic periods of hedge fund performance that we can remember since the inception of this fund”

Volatility is bringing excellent opportunities

“As most investors have been caught offsides at some or multiple points over the past eight months, the impulse to do little is understandable. We are of a contrary view that volatility is bringing excellent opportunities, some of which we discuss below. We believe that the past few months of increasing complexity are here to stay and now is a more important time than ever to employ active portfolio management to take advantage of this volatility. There is no doubt that we are in the first innings of a washout in hedge funds and certain strategies. ”

Texas Instruments’ (TXN) Management on Q1 2016 Results

Kevin March

Inventories were up because we expect higher shipments

“We expect that material is going to ship over the balance of the year. And between the increased shipments in 2Q and the shipments of that personal electronics material, we’ll see the days of inventory drift back down comfortably inside our model, very similar to what we saw last year. If you go back and take a look last year, we were also a little bit higher in the first quarter, anticipation of second quarter growth, and then days drifted down as we came through the year.”

Dave Pahl

Weakness came in as expected but broad based strength in other areas

” that portion of demand where we saw weakness came in about as we expected. The strength was more broad-based, and we continue to, obviously, to see strength in automotive and then the improvement in industrial and comms equipment. So, very, very broad-based strength that we saw. So the second part of your question was sequentially. What we saw from the trends there, no surprise that automotive remained very strong, and it was driven by infotainment as well as the hybrid electric and powertrain systems. Industrial, again we had growth across almost every sector inside of industrial. Personal electronics down, with most sectors declining”


Group 1 Automotive’s (GPI) CEO Earl Hesterberg on Q1 2016 Results

Vehicle inventory stood at 85 days vs 69 days in 1Q15

“The U.S. new vehicle inventories stood at 31,400 units which equates to an 85 day supply compared to a 69 day supply for the first quarter of 2015. Luxury brand inventories drove much of the year-over-year increase. We have adjusted orders and expect to bring inventory closer to our target level of 60 days by the end of the second quarter. ”

Oil companies still have a long way to go in restructuring their balance sheets for what’s happened to oil prices

“our new vehicle sales in Houston, we held a 1% decrease for the quarter, so we’re fighting it pretty well, but I attend a lot of meetings and I’m various Boards with these oil company executives and they still have quite a way to go in restructuring their balance sheet and that’s what happening now.”

Hasn’t been a big consumer confidence problem outside of energy impacted markets

“No, I don’t really see weakness outside of the energy belt. David I’d say people are reacting to the fact just not growing as significantly as it had been in recent years. So when it’s flat without it only grow 1% or 2% or 3%, I think it feels for a lot of people like it’s just very slow. But I wouldn’t say I have seen any big consumer confidence crisis anywhere outside of the energy impacted market.’


AGCO (AGCO) Martin H. Richenhagen on Q1 2016 Results

2016 farm income expected to remain below 2015 levels

“estimates call for 2016 farm income to remain below 2015 levels. In North America, relatively young machinery fleet and dealer efforts to reduce inventory levels have contributed to continued decline in industry sales through the first quarter. Weaker demand from the row crop sector resulted in significantly lower industry retail sales of high-horsepower tractors, combines and sprayers.”


Miscellaneous Earnings Call Notes 2.6.16

Amazon.com (AMZN) Management on Q4 2015 Results

Brian Olsavsky

Distribution partners have not been able to handle all the capacity that we need at peak

“what we’ve found is in order to serve – properly serve our customers at peak. We’ve needed to add more of our own logistics to supplement our existing partners. That’s not meant to replace them. And those carriers are just not – no longer able to handle all of our capacity that we need at peak. They have been and continue to be great partners. And we look forward to working with them in the future. It’s just we’ve had to add some resources on our own. You mentioned trucks. The Amazon trucks, we did invest in those – this past year. We use those primarily for movement between our warehouses and our source centers.”


Microsoft (MSFT) Satya Nadella on Q2 2016 Results

Security is now a major driver of cloud adoption

“Security is now a major driver of the cloud adoption. As threats become more frequent and sophisticated, Azure’s unique technology like machine learning empower customers to adapt to these new realities.”

AI will be at the heart of every business in the future helping to understand the past and predict the future

“At the heart of every business in the future will be systems of intelligence, powerful AI that helps people understand the past and predict the future. Cortana Analytics is the building block for these systems of intelligence. ”


Flextronics International (FLEX) Michael M. McNamara on Q3 2016 Results

See weaker industrial demand pull through

“As far as the macro, what we see is kind of broadly across the industrial set of businesses particularly – probably more so in the United States, but also in Europe. We see it’s just been a challenge. We’ve started seeing the macro push probably in the September quarter. We talked a little bit about it – maybe even at the end of the June quarter. We continue to see it going into the December quarter. And our forecast for March reflects kind of a weaker industrial demand pull-through.”


United Rentals’ (URI) CEO Michael Kneeland on Q4 2015 Results

Market activity is solid and in many cases trending upward

“Beyond the current market uncertainty, we agree with the industry forecasters that there are multiple years of growth ahead for rental in North America. The latest projection from Global Insight is about 6% annual growth in construction and industrial rentals through at least 2017. And we’re seeing levels of customer activity to support this view. That point can’t be lost when revenue flattens out for reasons I mentioned earlier. So it’s important to note that our actual — market activity is solid and in many cases trending upward. And our customers are on a whole optimistic.”


Honeywell International (HON) David M. Cote on Q4 2015 Results

Not seeing negative surprises in January

“Right now, I’d have to say it feels just fine. I know last year we got surprised the other way. This year we’re not getting surprised. But it’s three weeks, so who can tell how the whole thing’s going to go? But it’s – I would say we’re not having to deal with the same kind of negative surprise we had last year.”

Big thing in aerospace for us is that flight hours continue to increase

“if you take a look at what’s happening in the aerospace industry, the biggest thing for us is that flight hours increase. And flight hours last year were up 4% or 5%. They’re likely to be up 4% to 6% again this year. And the big thing is that planes fly, and as long as they fly, and as long as there’s a need for the kind of upgrades that we keep talking about, and as long as the technology keeps progressing towards this kind of connectivity and the need for airlines and passengers to just be connected better than they have in the past, those are all good phenomena for us.”

No doubt it’s a slow growth environment

“there’s no doubt, it’s a slow growth environment. That being said, whether it’s slow growth or high growth, we believe your best bet is Honeywell ”


Colgate-Palmolive’s (CL) CEO Ian Cook on Q4 2015 Results

It’s difficult to find anybody with anything optimistic to say

“it is difficult to find anybody with anything optimistic to say about much of anything these days. Without being overly general, I would say that the underlying consumer sentiment and behavior in China and India is okay. I would say that the underlying consumer sentiment in Mexico is okay. I would say that the underlying consumer sentiment in Russia is not great. And that would be English understatement. And I would say in Brazil, the underlying sentiment in Brazil is not great.”


Mattel (MAT) Christopher A. Sinclair on Q4 2015 Results

Richard Dickson – President and Chief Operating Officer, Mattel, Inc.

Barbie still relevant

“never has Barbie been more diverse on so many dimensions and more celebrated. TIME Magazine’s cover story and associated buzz last week are great examples that underscore not only how powerfully relevant the Barbie brand is, but reinforce that we’re on the right track.”


Ralph Lauren (RL) Stefan Larsson on Q3 2016 Results

Our performance over the last couple of years has been very disappointing

“And when I looked at our performance over the last couple of years, including the recent quarters, it’s very disappointing. So I see significant untapped value in both the idea behind the brand and as well as how we drive the business. And therefore, in the way I outlined the way we approach, building the growth plan for the future, there will be a customer facing component which is about evolving the brand, evolving our product, marketing, shopping experience, and then radically improve some of our business engines. ”

The consumer is now in charge in retail

“When it comes to the disruption, I’m a firm believer that we’re just seeing the beginning. So I believe that the biggest disruption is that the customer is now in charge. So the customer has better visibility and better choices than ever before. So any company that’s in the business of providing generic products or don’t have any real value add beyond the lower and lower price or who, more importantly, is not close enough to the customer will be in trouble. So that’s why we are building on the strength that’s made us great, and we are adding an even closer focus to what’s going on in the market and what’s going on with the customer.”


Honeywell 3Q15 Earnings Call Notes

Honeywell International’s (HON) CEO Dave Cote on Q3 2015

Markets seem to think there is a chance of recession here, but we don’t think so because we’ve never really had a recovery

“At least from my perspective, it feels like markets really think there is a chance of a recession here. And I guess while there is always the chance if there were some un-forward terrorist events somewhere or something drastic like that, I really don’t see that. This feels a lot different than it did in 2001 or 2008 to me, just because after a great recession we’ve never really had a recovery. 2010 was the only real recovery year that we had. After that it’s really been the slow growth environment and I think that’s kind of what we can expect over the next 2 or 3 years in the just way we ought to think about things, so I don’t see boom coming but by the same token I don’t see a crash coming.”

*Analyst comment: I went back and read the transcripts from 2008 and everybody held on until they couldn’t anymore*

“I guess I went back and I read all the transcripts from 2008 and everybody held on, held on, and held on and some of the similar comments then all of a sudden it fell off and I just — you have to — in our job at least you have to start scenario analysis planning here and it’s feeling a little sloppy, that’s all. I don’t disagree with your assessment.”

The debt position is very different today

“I can understand the transcripts but if you look at like debt position of the say just the American consumer back then versus today, very different, bank capability, bank reserve, they’re very different than what we’re dealing with today.”

Honeywell 1Q15 Earnings Call Notes

Have hedged a lot of currency exposure

“we’ve continued our transactional and translational hedging into 2016. The euro is our biggest exposure. In 2015 we’ve hedged approximately 85% of our euro P&L exposure in an average rate of about $1.24. For 2016 we have again hedged approximately 85% of our euro P&L exposure at a plan rate of $1.10. In the current environment we believe the certainty this provides is prudent and generates the time needed to offset the impact in future years.”

We’re cautious on the macro environment as we have been for five years

“As we look ahead, we’re cautious overall on the macro environment like I’ve been for five years. While we continue to expect that the benefit of lower oil prices will eventually play through in the US and in oil importing nations, this is really yet to be seen.

There was weakness in January across the portfolio that we weren’t able to fully recover from, but we did see good signs of improvement as the quarter progressed. GDP growth rates globally are weaker than most had expected for the first quarter.”

Hedging program had a big impact on margins

“our hedging approach for foreign currency provided a big benefit. As you know, we made a decision last summer to expand our hedging approach from protecting our hundreds of individual P&Ls from foreign currency exposure, that is transactional exposure to one now where we are protecting the consolidated Honeywell enterprise, so that’s transactional, plus translational exposure. The hedge strategy is in place to protect our operating results, but not necessarily at top line, thus the margin lift.”

There was something in January that caused a slowdown but then things turned in February and March

“There was just something about January that caused everything to be a slowdown, and I’d have to say I was a little nervous as we were in January, and then things turned in February and turned bigger in March. So I can’t explain it. It just happened.”

Acquisition prices are high right now

“I’d say its more price now than anything else. Prices are just high. This is – we’re going to continue to be disciplined and be smart about this. But prices are high right now, and you haven’t heard me say that much in the past, but this time they are.”

We were really only affected by currency translation

“I would say in general when it comes to FX, the only effect we’re really seeing is on the translation side, and as you know we hedged the income number there and so it shows up on the sales side. But preserves the income side, which is one of the reasons our margins look good, and jeez, I think we should be getting kudos for being smart on how we hedged this year and next.”

I do think lower oil prices are going to have a big impact on the Macro in the US

” I would say, though, I really do believe that lower oil prices are going to play through bigger in the macro economy than what we’ve seen so far, especially in the US.

And this is the – kind of the longest the consumer is gone historically with not spending kind of newfound riches, whether it’s through oil price or tax refunds. So I think we’re going to start to see the benefit of that sooner rather than later. I don’t think it waits until next year.”