Miscellaneous Earnings Call Notes 10.21.16

Hasbro’s (HAS) CEO Brian Goldner on Q3 2016 Results

Strong POS trends

“So you’re right, Drew. We are in fact seeing really strong POS trends entering the fourth quarter, particularly in the US. We saw a little bit of softness in POS in the late summer, July, August period. And then in September given the shift in Star Wars as well as the impact from Jurassic, that impacted our US POS. Internationally, we’re seeing very strong POS, up double digits, in Europe, up in Latin America, up year to date in Asia-Pacific. And then in the quarter in Asia Pacific, particularly in Australia, recently we’ve seen some retail issues with a retailer where there was just less inventory taken, and a little bit less of a sell-through and therefore impacted that HAPM number, the Asia-Pacific number because of Australia. So overall we feel very good about the POS trends year to date, and the POS trends going into fourth quarter, with a little bit of a note in the third quarter due to some of those timing shifts and some of the brands that have come down significantly versus year ago.”


Kansas City Southern’s (KSU) CEO Patrick Ottensmeyer on Q3 2016

Brian Hancock

Mexican customers very aware of peso changes

Chris, this is Brian. I would tell you that for the customers in Mexico, as they look at the peso, that impacts them significantly. And many of them have asked us price in peso and we have done over the last 18 months. There is still a significant portion of our businesses that is priced in dollars because it’s more of a global basis. But we watch that as they do as well. And we’ve tried to do everything we can to make sure that each other understand where the peso is, how it’s impacting the business.”


UnitedHealth Group’s (UNH) CEO Stephen Hemsley on Q3 2016 Results

Medicaid has been ACA’s biggest success

“Medicaid has been a very significant success of the ACA and wherever that has played out, those markets have actually been more stable and better performing. And Medicare continues to be a core program of the country and that funding for both Medicare and Medicaid is something that we have been advocating consistency and stability of it. Kind of those themes are what we have stayed with. I think commenting beyond that, particularly as new administrations take hold and so forth, our posture is to be very constructive about making the marketplace work most effectively and serving the most number of individuals and making that system simpler and more usable for everybody. So I think beyond commenting on that level, I don’t think we are going to get into what’s going to happen going forward on either a state basis or federal.”


Regions Financial’s (RF) CEO Grayson Hall on Q3 2016 Results

Large customers accessing capital markets to pay down bank debt

“Regarding business lending, average loans are down modestly on a year-over-year basis. We continue to experience muted customer demand and heavy competition in the business segment, particularly in the middle market commercial and small business sectors. We are also seeing some large corporate customers’ accessing the capital markets and are using these proceeds to pay down bank debt”

Barbara Godin

Mortgage delinquencies getting back to all time lows

“Yes firstly they’re all within our risk appetite so we’re very comfortable with what’s happening in the consumer book. What we see is real estate continues to improve in particularly we see home equity was down significantly this quarter. Mortgage is really back to with all-time low tracking along the bottom. Some of the other portfolios that we see indirect is pretty stable.”


Burberry FY 2Q17 Carol Fairweather – Chief Financial Officer

Did see a slight improvement in US but still challenging

“In terms of the U.S., in terms of our plans to turnaround, clearly the U.S. market does remain very challenging. It’s an 80% domestic market for us and both domestic and tourist remain down. That said, we did see, and I said just now, we did see a slightly improvement in Q2, but we are still down low single digit.”

Did see improvement in China

“Okay, so in terms of Chinese trends, Luca, what we are seeing is we just seeing an improvement in our second quarter, both at home and when they were travelling. So China, as I said was up mid-single digit or up double digit excluding the rationalization or evolution of the portfolio. ”


Morgan Stanley’s (MS) CEO James Gorman on Q3 2016 Results

I don’t think I’ve ever seen transaction levels lower than this. It has to change

“I think as having watched this business over two or three decades, I don’t think I’ve seen transaction levels lower than this. And just supposed against that that the business had record revenues is a testament to the managed money side of it, the banking side of it, the deposit side of it, things that frankly 15 years ago really didn’t exist to a highly dependent transaction activity. And the world has changed, investors have changed but we’re sitting on $2.1 trillion of assets. And their behavior has changed whether the transaction stuff picks up; I don’t know post the election, post the Fed moving it remains to be seen. My guess is over time it does, I feel just intuitively, it feels like a low but can it go low, I guess it could go low but probably there is a bias to moving up rather than moving down of the next couple of years that said more and more money is going to fee based accounts.”


SUPERVALU’s (SVU) CEO Mark Gross on Q2 2017 Results

Eric Claus

22 states lowered SNAP benefits

“In addition to deflation, Save-A-Lot has been adversely impacted by the reduction of SNAP benefits in 22 states in which we operate, the factor that is compounded by the fact that our level of SNAP sales is meaningfully higher than other retailers. These states have either lowered the amounts paid to individuals or barred them completely from receiving benefits, a fact that has negatively impacted customer accounts and basket size among our customers using SNAP. ”


M&T Banks’ (MTB) on Q3 2016 Results

You’re certainly starting to hear more people worry about concentration limits in CRE

“Well, I think you’re certainly hearing more people worry about the concentration limits. And I think that’s certainly a concern. I read through some of the other comments from other calls and I recognize that’s a concern. We obviously pay attention to that as well. And when we look at where we stand today, we feel pretty good about the headroom that we have there. But I guess the important thing for us is that we try to do business, particularly in the commercial real estate space, with customers with whom we have a long history of doing business. The equity that’s in the deals is still very strong and as strong as it was pre- the last recession or stronger than that.”

Commercial bankers feeling good about the demand that’s out there

“I guess from speaking with our commercial bankers across the region before coming on the call, they are feeling good about the demand that’s out there. You know, as I mentioned before, our pipeline is very, very strong. It’s in line with what we’ve seen in prior quarters. I think there is a little bit of a pause and I expect there will be a pause this quarter, as we go through the election cycle and people digest what that means and with the change in administration.”


Tupperware Brands’ (TUP) CEO E.V. Goings on Q3 2016 Results

Tupperware’s global sales force is 3.1m people

“We are holding our sales force size at 3.1 million. There is really no change from the second quarter.”


Danaher’s (DHR) CEO Tom Joyce on Q3 2016 Results

We have not seen another leg down in industrials

“Yes. Well, first of all, I think we have seen – while not the beginnings of growth on the industrial side, I think we haven’t seen – we have not seen another leg down. In other words, we have seen some stability. ”


Danaher 4Q15 Earnings Call Notes

Danaher (DHR) Thomas Patrick Joyce on Q4 2015 Results

Slowing in December clearly impacted our industrial businesses more than others

“what we’re assuming is that what we saw with some of the slowing in December is essentially the environment that we’re going to see in the near term here. It’s clearly impacting our more industrial businesses more than our other businesses”

Fortunately the Euro has stabilized

“Fortunately, the euro has stabilized so the overall currency impact is not what it was in 2015, but there’s a little bit of a negative right now.’

Having trouble getting a sense of channel inventoriesThe environment is favorable for us in terms of M&A. THere are more people on the sidelines than in previous days

“I think the environment is generally a favorable one for businesses like ours with a balance sheet that’s ready to deploy into small and midsized situations. And I think to your question, there are some folks who are perhaps a bit more on the sidelines right now than in previous days.”

We actually saw Middle East numbers hang in through the middle part of the year

“We’re trying to be increasingly conservative as we see how government funding is being influenced. I think it was interesting watching the course of the year. Oil continued to drop, as you know, throughout the course of the year and yet we actually saw our Middle East numbers hang in there reasonably well throughout the middle part of the year and it wasn’t until the latter part of the year that we saw a more acute shift in the Middle East. And so there was a little bit of a lag there and it’s taken a bit of time for the team to fully recalibrate.”

Daniel L. Comas – Chief Financial Officer & Executive Vice President

Markets have opened up M&A opportunities

“Clearly what’s going on in the high yield market has made it very difficult for the private equity parties, let alone industrial companies that have a lower credit rating. So, some of the anxiety out here is definitely helping some of the conversations. So, on the margin, we’re a little bit more encouraged than we were 60, 90 days ago on the M&A front.”

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. ”

Danaher at DB Access 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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“if you go back to 2001, 2 of our 5 segments were 50% gross margins. But 70% of the company was represented by businesses that have more like a 30% gross margins. And what we really noticed for us, the difference between the 50% and the 30%, the 50%, we were, by and large, selling analytical instrumentation, often with a consumable element, often a razor-razorblade model. We really felt that the customer, the professional end user of those instruments was really willing to pay us for the technology that. They were willing to pay us for the service in a way that we couldn’t kind of replicate in those lower gross margin businesses.”

“fast forward 10, 11 years later…with our Industrial business, which were largely kind of 30% gross margin businesses, we really changed that portfolio by getting to what we called Product Identification where we’re a leader in marketing encoding again, a razor-razorblade business, a model that we really like…And then we’ve gone into 2 entirely new areas, Life Science & Diagnostics and Dental. Again, both businesses with a razor-razorblade model that you can see collectively 50% gross margin. So all 5 of our segments today are at 50% or north of 50%.”

“So how do we do that? Clearly, a lot of capital had been deployed by Danaher over the past decade. We’ve deployed about over $20 billion over the past 10 years. And you can see the number of deals, I think if you add across, there’s probably about 175 deals…actually most of our deals are quite small, often typically under $100 million. We call these bolt-on deals. But I think they’ve been really important to us. They need to bring in technology, distribution or increase our exposure to high-growth markets. ”

“what we bring to capital deployment, and we really kind of comes down to really 3 simple themes for us. One is the strategy first mentality. We don’t think about businesses first. We think about markets that we want to be in and invest in, and then we think about what are the companies within those markets that we want to attempt to acquire…Two is to have a model to run those businesses, and we think that’s a Danaher Business System. Important, not only to integrate those acquisitions, big part of what we do. We normally bring in about 15 new companies a year, but to run those businesses over the long term.

And three, to bring financial discipline. We’ve had the same metrics around our return hurdles for the last 10 years. And I think keeping that discipline has really served us well. And I think it’s that combination of those 3 factors that, at least historically, have made it successful with M&A.”

“One of the things we’ve learned, which is maybe a little bit counter intuitive, we actually have found it easier to improve the gross margin of a high gross margin business than a low gross margin business. We said, well, why — that doesn’t sound like that, makes a lot of sense.

But I think we learned, as we look at some industrial businesses, that with 30%, 35% gross margins, you went into one of their facilities, they’re often pretty well run. They were thoughtful about the supply chain. You’re owning some businesses, and this is true I think on the industrial and health care side, we’d find a 50% gross margin business, and they’re really the people in R&D and they’re really the people in sales and marketing. They didn’t have the best players running the facilities, they didn’t have the best people focused on the supply chain.”

“one of the things we’ve learned is that with new products, when you’re in a razor-razorblade business, when you come up with new instruments, new equipment that use consumables, by coming up with new products faster than your — than our competitors, we’ve been able to build the installed base faster than our competition.”