CH Robinson 2Q17 Earnings Call Notes

John P. Wiehoff – Chairman and CEO

Truckload volume growth has slowed from the second quarter

“Truckload volume growth has slowed from the second quarter. The holiday timing makes precise comparisons difficult this early in the month but truckload volume growth has been in the low single digits.”

If volume continues to taper off we will see decreased hiring

“If our volume continues to taper off, we will see decreased hiring in the areas where we are driving hiring relative to volume. We already do see tapering off in some of our divisions where that occurs. So we adjust that fairly quickly. There are some fixed costs associated with adding to our team. And just like truckload pricing, it can take a quarter or two to cycle through.”

Navistar 3Q16 Earnings Call Notes

Navistar International’s (NAV) CEO Troy Clarke Q3 2016 Results

Partnership with Volkswagen

“And the most recent news is that on Tuesday we announced a wide-ranging partnership with Volkswagen Truck & Bus. This includes a strategic technology alliance, a procurement joint venture, and an equity investment in Navistar by Volkswagen Truck & Bus. This partnership will do a number of positive things for us. The technology alliance will allow us to offer customers expanded access to leading-edge products and services through collaboration on technology and the inclusion of Volkswagen Truck & Buses products and components.”

Share of products with Cummins engines

“Yes, that — yes, Jeff that’s the heavy number. It’s 60 and change and 30 and change actually on heavy. But on a medium duty, basically everything else its over 80% of our product have Cummins engines in them. And it’s just a little bit, I would say, it’s over 80%. So it’s a mid-teens with regards to in the other spaces and a 100% of our buses. Yes, a 100% of our buses, right. And that actually works into the average that I gave and so on.

Less volume than anticipated part the market part our own recovery

“No, actually we thank you very much for your time today, obviously the quarter was a less little volume than we had originally anticipated, part of that is in the market and part of it is just the fact that we continue to recover, but there are some really good times, we believe in the reception of our product by our customers. ”

Walter Borst

Truck sales down 24%

“Now let’s look a little closer at the results for our segment. Truck sales were $1.4 billion, down 24% compared to the prior year largely due to a 42% decline in Class 8 volumes, reflecting the general weakness in the industry.”

CH Robinson 3Q15 Earnings Call Notes

C.H. Robinson Worldwide (CHRW) John P. Wiehoff on Q3 2015 Results

A little bit softer demand

“one of the things that we wanted to highlight, though is that the trucking industry continues to be a cyclical industry…a lot of our net revenue growth this year has been enabled by responding to a market that has a little bit softer demand and taking advantage of the marketplace from the standpoint of serving our customers in a more effective way.”

Trucking industry has had some underlying cost pressures with driver shortages and increased equipment regulation

“I think very consistent with what we, and maybe many others in the industry, have been saying that there is some underlying cost pressure increases around driver shortages and increased equipment and increased regulation that’s limiting productivity. So you put that all together, and over the last five years, think the industry and we have seen some above inflation cost increases due to a lot of the factors that have been talked about in the industry.”

Everybody is expecting a softer market. Margins will depend on whether or not that materializes.

“So everybody’s expecting a softer market and everybody is moving down towards the lower end of price changes in the range, and really whether net revenue margins on that committed business expand or contract probably has more to do with how next year compares to what everybody is expecting during these bids versus the absolute tightness of the market year-over-year. ”

Volumes are still up in October but the growth rate has decreased from where it was in 3Q

“They were pretty consistent throughout the quarter. It’s what we discussed. Towards the end, there was kind of a slowing of that growth rate towards the end of the quarter. In October, what we’re seeing is volumes are still up, but, again, it’s up – that growth rate has decreased from where it was in the third quarter.”

Cummins 3Q15 Earnings Call Notes

Cummins’ (CMI) CEO Tom Linebarger on Q3 2015 Results

Worse than expected slowdown in Brazil and China

“Revenues and earnings in the third quarter declined from a year ago as a result of very weak demand in global off-highway and power generation markets and a continued slowdown in Brazil and China. Although we anticipate lower demand in these markets, orders have fallen further than expected, causing disappointing results for the company”

Reducing headcount

“we will reduce our professional headcount by approximately 2,000 people, with the majority of these reductions to be completed by the end of year.”

Competitors in the Euro are benefit from low Euro

“in the power gen segment we have now seen some pricing competition come in, primarily as a result of low Euro. So there is just a number of competitors in the European area that are Euro based costs and so areas where Eurozone exporters can compete with us, we are seeing some price competition in the gen set”

We had a slowdown in August, what was surprising is that continued into September

“We did start to see a bit of a slowdown in August, mainly in the components and engine segments. That’s not unusual. So having that slowdown in August is not the first time that’s happened. What was surprising and disappointing was the slowdown continued into September, again primarily in those two segments. ”

We thought emerging markets were starting to bottom, but they’ve weakened further

“we have set our plan not expecting a whole bunch of improvements in those markets, but they were starting to bottom, just as you suggest and if anything would be level or coming up. And in fact, what’s happened is they have gone down further. And that’s, I think, what maybe is the thing that says we haven’t clearly bottomed in most of those markets. We thought we had and we have not and where the bottom is, we are not exactly sure, but it doesn’t look like we have reached it. “

Paccar 2Q15 Earnings Call Notes

Strong deliveries due to economic growth and strong freight demand in NA and Europe

“PACCAR delivered 41,600 trucks during the second quarter, an 8% increase versus the first quarter this year and slightly ahead of our expectations. The improvement reflects increased truck deliveries in North America and Europe due to economic growth and strong freight demand.”

European outlook continues to improve

The European economic and truck market outlook continues to improve. GDP growth expectations for this year are 2.4% in the UK, which is PACCAR’s strongest market in the region, with 1.5% GDP growth on the continent.

Freight transport activity on German highways is up 2.6% year-to-date through June compared to the same period last year and it’s at the highest level since the German toll system was launched in 2007.”

US Economic picture positive too

“The US economic picture remains positive with GDP forecast to grow 2.4% this year. The housing and automotive industries are bright spots in the economy and create a large amount of freight. Housing starts are projected to grow 11% this year to 1.1 million and the automotive industry is expected to deliver 16.9 million vehicles, near the record level of 17.3 million set in the year 2000.

US freight tonnage is at near record levels. We’ve raised our US and Canadian Class 8 truck industry retail sales estimate to a range of 270,000 to 290,000 units this year. The stronger market reflects expansion in industrial fleet capacity due to continued strong freight fundamentals.”

Not seeing any cancellations in the US

“Cancellations have been at a very low rate and vocational trucks are very active, lots of reasonable growth in housing construction, commercial construction. So it’s all been pretty steady.”

It’s a really good operating environment

“I think it’s a really good operating environment. I think we’re in a good position right now and obviously our teams in our factories do a great job of managing to the conditions in the marketplace and we expect that that will continue as we move forward of course this year and next.”

Lots of available capacity

“We have lots of capacity available in most of our factories to be able to produce trucks to meet customer demand. So it’s not a concern for us.”

Cummins 2Q15 Earnings Call Notes

International revenues declined due to stronger dollar and weakness in Brazil

“Cummins International revenues declined by 6% year-over-year mainly due to the negative impact of appreciating U.S. dollar and weakness in all end markets in Brazil”

Heavy and medium duty truck demand in china down 30% as economic confidence weakened

Industry demands were heavy and medium duty trucks in China declined by 28% in the second quarter and is down by 30% year-to-date as the industrial economy continues to soften.We have lowered our full year forecast for the truck market to decline 30%, it’s down from our previous forecast of down 15% as confidence in the economy has weakened”

Demand for construction equipment remains suppressed in China

“Demand for construction equipment remains suppressed in China due to the slowdown in real-estate development and infrastructure spending. Industry demand for excavators in China declined 34% in the second quarter and is down 42% year-to-date with no visible sign of near-term improvement.”

India’s economy showing improvement

“Industry demand in the truck market increased 20% compared to the second quarter a year ago as the economy continues to show signs of improvement. We now expect industry truck production to increase 22% for the year, up from our prior forecast of 15% growth.”

Expect Brazil to be down 50%

“Second quarter revenues in Brazil were $110 million, down 43% from the second quarter last year due to the severe slowdown in the economy and near 40% depreciation of the real against the U.S. dollar. Industry truck production declined by 40% year-over-year and our shipments declined 38%. We have lowered our full year projection for industry production and now expect to decline of as much as 50% worse than our previous guidance of down 27% due to deteriorating business and consumer confidence. We expect our engine shipments to decline by 45%.”

Chinese freight numbers aren’t down as much as our 30% down forecast would suggest

“The potential macro market which was more your question, you see the uncertainty there the freight numbers are actually up a little bit so the freight numbers aren’t down to the level that demonstrate a 30%, so our view is there is still some kind of shake out would be going on here were a bit optimistic with the positive sign we see as in the freight numbers.”

Chinese moving to higher emission standards

“emission standards if anything are tightening they’ve got a date now Euro 5 implementation, they’ve got cities like Beijing, Shanghai talking about implementing Euro 6. There is a lot of support from local and federal governments about pushing ahead with emissions standards can all that just drive people towards better technology, more focused on fuel efficiency and the quality of emissions equipments”

It’s obvious that the government is serious about making changes in China

“I would add it’s obvious I think that the Chinese economy is going through a change and their governments are very serious about making this change. So, I don’t I’m not optimistic that we are going to see a big pump up in any of our end markets in a hurry because I think that Chinese government is going to try to keep going on this change of their focused in the government not so much on infrastructure and not so much on build and export a little bit more on consumer and a little bit more disciplined in the provinces”

There is some stabilization in the markets though

“I also think there is some stabilization going on in the markets. So they’re pretty low now and they definitely seem to be bottoming up and stabilizing as Rich was indicating, so we don’t see a further fall and we’ve indicated but we also don’t see necessarily a major turnaround in the near-term.’

Navistar FY 2Q15 Earnings Call Notes

Good demand for trucks

“U.S. economic outlook remains optimistic so is the outlook for the transportation industry. Improving freight rates, lower engine costs, favorable business conditions, aging fleets and better new truck fuel economy and safety all translate into good demand for trucks.’

Maintain forecast of 350-380k class 6-8 trucks

medium duty sales have been the low replacement levels for several years. And the good news is we are seeing growth in this important segment in 2015 due to increase in business investment and extension in the housing market. We continue to believe that these conditions will remain favorable and we maintain our industry retail forecast for class 6 through 8 including bus to be in the range of 350,000 to 380,000 units this year.”

Dealer inventories are where they need to be

“I think dealer inventories are where they need to be. We were a little bit low as we entered this year and we had a couple of programs out for our dealers to increase their inventory to levels that they can service the market. And the other part of that is we’ve got a lot of new product and to sell those new products we have to have them on our dealers lot and they need to be showing them to our customers. So that’s been planned. I always think dealer inventory is too low. But yeah, its certainly grown this quarter and we don’t anticipate that growing the rest of this year though.”

While the market is in better shape, we don’t have the pricing power that we did in ’06 because not capacity constrained

“I think in years past, right I mean, why this question comes off, I think the way that it does is that, pricing was driven by capacity constraints. Even though the market is running better, it’s not running like it did back in 2006 let’s say, or prior to those emission breakpoints where there was actually shortage of capacity which is driving pricing and on top of that real emissions equipment, hardware that you are adding that you had the whole industry had to take price for.

Today even though the industry is running at a higher level, it is not running at capacity. There is still additional capacity, I think for most manufacturers even some supplier so that prefer has moved and there is not a lot of hardware than we are putting. So, emissions are regulatory requirement.

So the pricing that really is out there is based on the better performing truck and the better performing company. We are bullish that it’s out there but its not, it’s not that way to complete, its something you got to go out and work for basically deal by deal. And I think that’s not a whole industry use at this point.”

Cummins 2Q14 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

Construction demand in China has not rebounded

“Demand in construction markets has softened already from already weak levels as the pace of investment in infrastructure has not rebounded in China. ”

Conditions still weak in India

“Second quarter revenues in India, including joint ventures, were $293 million, down 14% year-over-year as conditions remained weak in most end markets. Enthusiasm over the election results in May and the prospect of pro-business reforms by the new government have not yet translated into significant change in orders in our key markets.”

Brazil weak too

“We now expect our full-year revenues in Brazil to decline by 15% to 20%, down from our previous forecast of a decline of 15%. Power Generation and Distribution revenues have held up relatively well in the weak environment in Brazil.”

More on China

“the underlying economic conditions in China have not been that robust. And so that has meant that although truck markets have improved, generally speaking, the demand is not as robust as it was before — when they were doing a lot of infrastructure building. And so those combination of factors is why we lowered the second half.”

We’ve lowered our long term expectations for China

“We definitely have lowered our long-term growth rates for China. A couple of investor conferences ago, we were saying, hey, we thought we might be growing 9% to 10% for several years. We have of course lowered that down and now what we hear from even from China was a pretty optimistic view is sort of 7% to 8% and increasingly our number is more like 7%.”

Our head of India thinks it’ll be at least until the end of the year before you start to see real improvement

“The Head of our India Operations, Anant, believes that it will be still through the end of the year before — we won’t see much improvement maybe until beginning of next year. I think he’s basing that on a bunch of consensus. He think sentiment will continue to improve, it’s pretty good right now and he thinks it’s going to continue to improve. But before you can see significant improvement in the markets, it may be that long before you see it.

Again people have different points of view, but that’s his is the most balanced I’ve heard on the optimistic and pessimistic side.”

YRC Worldwide 3Q13 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.

“YRC Freight’s tonnage was down 0.5%, and regional tonnage per day was up 6%. The decline at YRC Freight was due to a loss of business in our local channel. YRC Freight’s revenue per shipment grew by 0.6%, which included a decrease of 2.2% in revenue per hundredweight and an increase in its weight per shipment of 2.8%. While the regional carriers increased their revenue per shipment by 0.8%, and the revenue per hundredweight by 1%, their weight per shipment decreased by 0.2% on a year-over-year basis.”

“due to the decline in performance at YRC Freight, we have had to cut back on that plan for the time being. While we will be — while we will continue to reinvest in our fleet and especially technology, it simply will not be at a pace that we had originally anticipated.”

“Obviously, we were not pleased at all with our overall reported results for the third quarter.”

“One, we did not have enough drivers relocate to the terminals that gained freight volume as a result of the change of operations.”

“Two, with a manpower shortage, there were too many locations in the YRC Freight network where freight was not processed timely, causing the network to be out of cycle. With the network out of cycle, we increased spend on purchased transportation and incurred a lot of unplanned over time to help clean out the freight that was clogging the network. Simply put, we were operating an inefficient network.

Three, the service under pressure for basically the entire third quarter due to the manpower shortages, we experienced some temporary loss of business that obviously we’re not happy about.”

“Four, we experienced a decline in productivities during the third quarter as compared to those experienced prior to the network optimization. And finally, the momentum created by our concentrated sales effort leading up to the May change of operations took a step backwards in the third quarter.”

“where we’re going to spend our CapEx dollars, it will be more focused on the technology side. I mean, we’re going to continue to do what we can from the revenue equipment in terms of the total fleet, in particular, on the engine swings and to the extent that we can continue to lease, we’ll certainly do that. And I think, our biggest bang for the buck, not only in the near term but in the long term, is going to be along the lines of our handheld technology, actually getting that to being more of a partner in how we operate the dimensioning units.”

“I’m confident that we’re going to continue to move the company forward. I just can’t seem to predict how fast it will be just coming onto the holiday season and the tough winter months. But I’ll just say the fundamentals of the business are better than they have been.”

“And candidly, we missed the window in terms of when you — it spiked up. There’s only a 45-day period when it ran to the roof and then it came pretty heavily back down, went from 7 to 34, and then it went back down to 15, now it’s 10. Well, the good news is that, at 3, it’s still alive. It’s out there. We just need to clean up some of our supplemental disclosures and if we’re so fortunate, we could choose to use it.”