Kinder Morgan (KMI) Q2 2016 Earnings Call

Kinder Morgan (KMI) CEO Steve Kean said their energy customers aren’t defaulting on their payments to the company even though the pricing environment remains challenging

“On customer credit, we continue our extreme focus throughout our commercial and corporate organizations. In the past quarter, credit defaults amounted to about 0.3% of budgeted revenue annualized, and most of that is associated with the Peabody bankruptcy that took place in the first two weeks of the quarter. Without that we would be well under 0.1%. And again, putting our situation in perspective, we’re a broadly diversified mid-stream company. We’ve got a strong and diversified customer base, which includes integrated energy majors, utilities and end-users. So the credit picture is stabilizing.”

Natural gas continues to gain market share versus coal

“We continue to see strong demand for natural gas across our network. Transport volumes are up 5% year-over-year, we’re getting good terms on storage, transportation and sales renewals in our business. Power burn on our pipes is up 8% year-over-year and recall the power burn was up 16% from Q2 of ’14 to ’15, so there is strong compounding work coming from the power sector. For the first time ever gas is making up a larger share of the fuel for power generation and coal, that’s been true year-to-date for 2016, and if I close in 2015 in the last — most recent quarter is through ’16, 35% of generation came from gas, versus 27% from coal.”

Kinder Morgan (KMI) Chairman Richard Kinder’s view on declining oil shipping volumes

“Yes not necessarily expecting an ongoing decline rate, what we do in this business is we’re looking at deploying capital that gives us an attractive return on the incremental barrels that we are producing that is associated with that capital spend and so that’s kind of how we look at each of our investments here. We don’t aim to necessarily look for higher returns, keep production flat or grow it slightly we really make those decisions on each individual capital and investment in the development programs that we spend money on a CO2.”


Kinder Morgan (KMI) Q1 2016 Earnings Call Transcript

Kinder Morgan (KMI) Chairmen Richard Kinder said they are cutting their spending significantly and are being more selective about their energy infrastructure investments

“We’ve again reduced our expansion CapEx, Steve will take you through that, for 2016 and we expect that trend to continue in subsequent years through both high-grading our projects and entering into selective joint ventures. We expect to fund the necessary CapEx out of our cash flow and continue to improve our debt to EBITDA ratio, thereby preserving and strengthening our investment grade balance sheet.  With respect to the capital update, we announced today a reduction in our project backlog of $4.1 billion, so from $18.2 billion down to $14.1 billion.”

Kinder Morgan (KMI) CEO Steve Kean elaborated on his recent conversations with the mood of executives at oil drilling companies

“I think that they’re being cautious about their next move. I think they want to see generally they wanted to see some additional recovery and see some stability in that recovery. I also think that as a group they’ve made themselves very, very flexible. I mean they are updating their outlook and updating their decision making. It’s no longer an annual process.  It seems like it’s a biweekly process or something now as they’re looking at things which suggests that when they do decide to turn things back up, they’ll be able to turn it back up relatively quickly. But look, as I said before, people signing up for a long term multi hundred million dollar or a billion dollar infrastructure on the producer side, I don’t think that that’s in the cards in the near term.”

Kinder Morgan (KMI) CEO Steve Kean says drilling in Eagle Ford shale which is located in Texas is down substantially from just a few years ago

“We’re not happy about any negative to plan, but I think when you put this in the context of the dramatic production declines particularly in the Eagle Ford, which is down 28% on oil from its peak and 15% on gas and credit weaknesses, our business is really diversified and insulated from the full brunt of the weakness in the producing sector.”

Almost half of the natural gas consumed in the US moves across Kinder Morgan pipelines

“Natural gas needs for transportation and storage services, we believe, should grow over the medium and long term as power generation exports including L&G and exports to Mexico and pet chem and industrial demand continue to grow. Over the last two years, the gas group has entered into new and pending firm transport capacity commitments totaling 8.2 bcf and I think importantly about 1.8 bcf of that was existing previously unsold capacity. And we currently estimate that we move about 38% of the natural gas consumed in the United States on our pipeline.”

Canadian Oil Sands are a more stable supply source for energy pipelines than shale

“They are taking a very long view, producers are taking a long view and they’re finishing out projects that they’re well into and the oil sands become a very stable source of production. It’s not like the shales where it ramps, you get a high ramp up in the beginning and it falls off rapidly, so there’s an actual projection of an increase in production in Canada. At the same time, the transport options out of Canada are becoming more limited. So our customers still want to do this project and we do too and the returns are good.”

Miscellaneous Earnings Call Notes 10.22.15

Advanced Micro Devices’ (AMD) CEO Lisa T. Su on Q3 2015 Results

Not anticipating that Windows 10 will drive PC refresh

“While we are not anticipating Windows 10 will drive a dramatic near-term PC refresh cycle the continued adoption of Windows 10 which has already been installed on more than 110 million PCs to date, provides a great opportunity for AMD over the coming year based on a semi-consumer and commercial refresh cycle environment”

Suntrust Banks’ (STI) CEO Bill Rogers on Q3 2015 Results

We’ve been in the lower for longer camp for a long time and think it stays that way in ’16

” We, as you know in our case, we have sort have been in the lower for longer camp for some time and set ourselves up appropriately for that type of an approach. As we look forward into ‘16, I think also lower for longer stays, I think if there are Fed increases, they will be very deliberate and the pace of rate rise will probably be slower now than the market had been thinking six months ago.”

Capital Markets activity should be better this quarter

“M&A had another really good quarter and pipelines are still good there. The volatility numbers are in sort of high yield bonds and the equity sales and trading and that’s better. Spreads have come in. I think things will get done more this quarter than they did last quarter if things stay stable. And based upon what I see in terms of our pipeline, I feel good about our pipeline”

CCAR has changed the way that the whole banking industry is thinking about risk

“I think one of the other benefits also that you see for SunTrust and perhaps for the industry overall is the benefit of CCAR. The CCAR has changed the way that companies think about their overall risk. They apply a stress test to all their portfolios now and think about how portfolios would behave during a stress test.”

Kansas City Southern’s (KSU) CEO David Starling on Q3 2015 Results

Volume continues to improve in October

“volume so far in October continue to improve. And subject to ongoing uncertainty in energy markets, we feel good about the trajectory of demand as we head into the end of 2015. Through the close of business, Wednesday, average daily carloads for October were running about 1% higher than September and 1% higher than October of last year as well.”

Business demand still feels very good to us

“business demand still feels very good to us, with the obvious caveat about the uncertainty in energy markets, which you have seen across the entire rail sector, have made it more difficult to forecast demand and provide guidance.”

Mexico is probably linked to the US, but they’ve done a good job managing their inflation and unemployment rates

“I think, Mexico ends up being fairly tightly linked with the U.S. economy, given the amount of goods that end up going north into the U.S. But they’ve done a really good job managing their overall inflation rate, which is now running below 2%, unemployment is below 5%.”

Hasbro’s (HAS) CEO Brian Goldner on Q3 2015 Results

Toy industry growth is strong ytd

“The trends that we see and the data that we have would indicate that the Toy industry year-to-date is up high-single digits, and we see that as boding well as we get into the holiday season and continues our trends.”

Labor is the biggest cost input to our COGS and it’s up in the double digit range

“The single biggest cost input to our cost of goods is labor. And we continue to see labor inflation rates in the double-digit range. We have seen a slight decrease in the cost of certain types of resins over the period since the end of 2014. But they tend to be more nominal and they run in arrears to whatever the petroleum or gasoline costs prices are out there as you know.”

Flextronics International’s (FLEX) Mike McNamara on Q2 2016 Results

Partnering with Nike for connected products

“Last week, during NIKE’s Investor Day, NIKE announced a partnership with Flex to accelerate the introduction of advanced innovation to NIKE’s manufacturing supply chain. Working together, NIKE and Flex will deliver innovation that enables product to reach consumers more quickly with customized solutions and increased performance innovations.”

There’s an electrification of the world going on and we can help mechanical companies adopt that

“the amount of electrification in the world, the amount of smart products in the world that are going into what’s not typically electronic products that are now moving forward, whether it’s anything from a shoe to a shirt to a door lock is tremendous. So you’re getting a tremendous amount of this electrification of the business. And as we look forward, the value to us is if we can create more value for these customers whether it’s automation or engineering or making a non-connected product connected or providing electrification where they’re more traditionally a mechanical type company”

Zions Bancorporation’s (ZION) CEO Harris Simmons on Q3 2015 Results

Energy chargeoffs are from borrowers that were already weak in the last cycle

“the charge-offs have fundamentally been borrowers that were weak in the last cycle, they’ve been kind of limping along, and for whatever reason, you know, we have not been able to get totally out, and this recent downturn was just kind of another very difficult blow to them.”

Restraining loan growth because concerned that we may find ourselves in another downturn before things get better

“I think that, you know, I for one have a concern that we may find ourselves set [ph] into another downturn before we see the economy strengthen a great deal again, I mean. So we’re trying to be very careful.”

Hawaiian Holdings’ (HA) CEO Mark Dunkerley on Q3 2015 Results

Hawaiian airlines has had a tough time getting flights in on schedule

“It’s been a poor summer operationally as reflected in our having recently posted our worst monthly punctuality in over a decade. The culprits have been several; the combination of a burgeoning flight schedule of Honolulu and airport construction has meant that during the peak hours of the day there have been insufficient gates. This has been exacerbated by congestion in customs, resulting in our not being permitted to de-plane arriving international passengers promptly. And lastly, an abrupt change in the traffic control procedures at Honolulu gave us no opportunity to make schedule changes to address the lengthen block times that have resulted.”

Yahoo! (YHOO) Marissa A. Mayer on Q3 2015 Results

Experiencing continued revenue headwinds

“our Q4 outlook, which Ken will return to later, is not indicative of the performance we want. While there are some well-known headwinds, year over year and even quarter over quarter like the loss of the Alibaba TIPLA, we are also experiencing continued revenue headwinds in our core business, especially in the legacy portions”

ACE’s (ACE) CEO Evan Greenberg on Q3 2015 Results

Underwriting environment continued to grow more competitive

“I want to now say a few words about current commercial P&C market conditions. The underwriting environment continued to grow more competitive in the quarter for our commercial P&C business globally. With some exceptions, price declines accelerated modestly. They were varied by class of business and geography.’

Large account more competitive, wholesale and property

“Large account business, particularly shared and layered is more competitive than midsized. Wholesale is more competitive than retail and property more so than casualty related”

Kimberly-Clark’s (KMB) CEO Tom Falk on Q3 2015 Results

The rate of currency deterioration hasn’t been as severe as it was

“The rate of currency deterioration hasn’t been as severe as it was, say, a year ago. On the other hand, there’s still some opportunity for price in some markets.”

Not seeing trade down in EM

“so far we are not seeing as much as a trade down as you would think. And we are still seeing — we launched boy/girl diaper pants in some of the super premium kind of tiers. We are seeing good response and growth there… particularly the economies that are in recession like Brazil and Russia, we are watching that see how the consumer performs and make sure we got the right offer, but we are also seeing really good innovation. Mom still wants the best for her baby.”

Texas Instruments, Incorporated. (TXN) Q3 2015 Results

It’s a weak environment but some segments were stronger than we expected

“our revenue declined 2% from a year ago, and we obviously would describe that as a weak demand. That’s actually similar to what we saw last quarter. But, inside of that, certainly it was stronger than what we had expected. There were a couple of areas that were stronger than we had expected. Wireless infrastructure and industrial were both stronger than what we had expected. ”

Kinder Morgan’s (KMI) CEO Steve Kean on Q3 2015 Results

By 2030 gas should be 39% of electric generation mix

“Its projected increase from today’s level of 76 Bcf a day to about 110 Bcf a day by 2025, that’s an increase of 40%.”

” If you look at the 15 mix of generating output and this is according to the EIA, 32% is gas and 33% coal. For those of you who have been in this industry a long time or followed it you know that that represents a dramatic shift to the positive for natural gas. If you flash ahead again these are EIA numbers to 2030 their projection of the mix of generation is 39% gas, 18% coal’

Renewable energy will need natural gas facilities as backup

” reliable flexible natural gas facilities are absolutely necessary to back up wind and solar. So to sum up the idea that we could move directly from coal to renewables without increasing natural gas usage for electronic generation is an unrealistic pipe dream with the substance and the pipe being legal only in Colorado and Washington State.”

Danaher (DHR) Thomas Patrick Joyce on Q3 2015 Results

Seen some incremental slowing, but in pockets

“Overall, we have seen some incremental slowing in the macro. That being said, it’s in pockets. There’s some pockets regionally where we’ve seen some of that slowing, clearly, and in some of the more industrially oriented markets.”

China is still one of our better markets

“we’ve actually seen China, while slowing incrementally, it’s still one of the better markets where we play today. Our growth rates continue to be very good in a number of our businesses. ”