Johnson & Johnson (JNJ) Q2 2016 Earnings Call

Alex Gorsky, Chairman & CEO and Dominic J. Caruso, Executive Vice President, Chief Financial Officer  

An overall positive medium term outlook in line with growth expectations in global healthcare

“We expect global healthcare to grow at 3% to 5% over the next five years, and we have an objective to grow our sales organically at a faster rate than the market.We also intend to grow our earnings faster than sales. When we combine these objectives with our plans of continue creating value through strategic acquisitions and partnerships as well as our strong dividend yield, we believe the result to be a basis for compelling, long-term total shareholder returns. And that is our focus. We invest for the long-term success of our business.”

Their capital allocation framework focuses on shareholder returns and value creating acquisitions

“Our capital allocation framework starts with paying dividends to our shareholders, which is why we have increased our dividend every year for the last 54 years. Next, we seek value-creating strategic acquisitions and partnership opportunities. And finally, we consider other prudent ways to return value to shareholders such as repurchase programs.”

Strong underlying sales growth in the first half of 2016

“…we continued to deliver strong underlying operational sales growth of approximately 7.9% for the second quarter and our sales results are above analyst estimates. Our second quarter earnings were also above analyst estimates, driven by strong sales performance and operating margin improvement…our operational sales growth this quarter was 5.3% and excluding the impact of acquisitions and divestitures, hepatitis C sales and also the impact of the devaluation that occurred in Venezuela last year, it was strong at more than 8%.”

Sales growing faster in the US than outside the US

“Worldwide sales to customers were $18.5 billion, up 3.9% versus second quarter 2015. On an operational basis, sales were up 5.3%, and currency had a negative impact of 1.4%. In the U.S., sales were up 7.4%. In regions outside the U.S., our operational growth was 3.1% while the effect of currency exchange rates negatively impacted our reported results by 2.7%. “

The impact of the Brexit is indeterminable presently

“We are watching the euro and other currencies closely, as it is uncertain how they will eventually settle out for the year…we’re closely following the situation with the UK’s vote to exit from the EU. We expect this will take time to fully determine what the impact will be, if any. To put it into perspective, though, the UK represents about 3% of our total sales. “

Hospital admissions and surgical procedures have increased, physician visits have declined

“…we are seeing a pick up in terms of hospital admissions and surgical procedures. I think hospital admissions are up around 3%. We think the procedures are probably up around 3.5%. We continue to see some decrease overall in office physician visits, down a couple of a percent. And we think that that’s just due to a more moderated utilization at the front-end due to increased co-pays and a number of other dynamics. But overall, if we look at the core growth rate in the medical hospital device area, we’re encouraged by some of the recent trends that we’re seeing.”

They´re the lookout for strategic, value creating acquisitions

“And as we said for some time, whenever we’re looking at inorganic growth opportunities, we look at, tuck-ins, we look at mid-size deals. We’ll look at large deals. Of course, the tuck-in strategy, particularly in Pharma, actually in all of our segments -Medical Device and Consumer, are those that, where we feel that we can create the most value. But we do think that there’s other opportunities to create value as well in, again, in mid and larger deals. But we’re going to be very disciplined. We’re going to be very decisive about how we do it, and ultimately try to better serve patients and consumers.”

A continuing expectation of consolidation in the market

“Over the past three years or four years, I think we’ve been pretty consistent in our thinking and in our projections about the likely increase in consolidation among providers and hospitals, particularly here in the United States, and just broader healthcare systems. And as systems feel continuing pricing pressure, we think that will manifest itself by them having consolidation. I think we’ve seen those trends. And I think they’re clearly starting an effort to try and be as effective and as efficient as possible. So we do believe that that will be a longer secular trend that’s going to continue.”

A disciplined approach to acquisitions with consideration to valuations

“..We´re very disciplined in our approach to acquisitions. And although we’re actively involved in considering them, valuations come into play, and willingness of the other party to do an acquisition at certain valuations come into play. So that’s regardless of how much money we have available to spend.”

Some valuations of potential acquisitions are prohibitive

“There are some expectations that are still not, in our opinion, normalized for appropriate valuations in the market, so that’s a factor, and that will take time and we’re patient with that. And then we’ll see how the market evolves over time, or as we learn more about the acquisition candidates and their progress in various areas.”

Extra notes

 

  • The Company increased its sales guidance for the full-year 2016 to $71.5 billion to $72.2 billion.  Additionally, the Company increased its adjusted earnings guidance for full-year 2016 to $6.63 – $6.73 per share.
  • The Board of Directors declared a cash dividend for the 3rd quarter of 2016 of $0.80 per share on common stock with the ex-dividend date being August 19, 2016.

 

 

 

 

Johnson and Johnson at UBS Conference Notes

Johnson & Johnson (JNJ) Management Presents at UBS Global Healthcare Brokers Conference

Sandra Peterson – EVP, Group Worldwide Chairman

Technology is an enabler but not going to change things by itself

“the way we think about it is that technology as an enabler, in and of itself it’s not going to change things. So I think you need to bring your expertise, which we have, as you all know, years and years of expertise of how you engage with consumers through our consumer portfolio, how you actually impact behavior change, but technology is an enabler for that. So I’ll use the surgery example again. We know that 70% of the cost of a planned surgery, whether it’s a knee or hip replacement, 70% of that cost actually happens post-surgery because the person doesn’t get up and get active and really get to their full productive self again as quickly as they should.”

Seen consolidation in hospitals and more physicians becoming employees of hospitals

“over the last couple years a significant amount of consolidation in hospitals, and that will probably continue. We’ve also seen that the physician, more and more physicians are becoming employees of the hospital than they have been in the past. And obviously given some of the changes with CMS and others, the requirements and demands on hospitals to demonstrate improved outcomes and improve patient satisfaction is also impacting how you go to market with hospitals.”

Have had to change the way we go to market

“And one of the things that we have done over the last 12 months is we’ve really changed the way in which we go to market, particularly in the US, but also globally with hospitals. We’ve consolidated and really created an organization that has clear line of sight working with individual hospitals.”

It’s analogous to what happened in the consumer business already

“It’s a little bit analogous to what happened in the consumer business 10 or 15 years ago, when there was a massive amount of consolidation of retail chains around the – in the United States and now globally, where we as a consumer business used to have four different consumer businesses, we now have one, and we have one point of contact that does strategic account management, joint strategic planning with those accounts. We’re now doing that on the hospital side. And given our breadth and depth in the hospitals today, we believe that we have scale to be able to do that.”

Miscellaneous Notes 3.24.16

Blackhills 2015 Annual Report

You don’t last long by resting on your laurels

“When you’ve been in business for more than 130 years you collect a lot of laurels, but you don’t last long by resting on them”


Astec Industries Inc. 2015 Annual Report

Construction equipment manufacturer Astec was impacted by lack of a Federal Highway Bill

“There was no long term federal highway bill in the United States, which kept infrastructure customers cautious and conservative with regard to major capital expenditures for equipment”

There is now a bill in place though

“For the first time in over a decade, the United States has a long term highway bill in place. We are already experiencing the impact of the bill with increased sales activity from infrastructure group customers. We are encouraged about our prospects during the first 3 to 4 years of this bill”


Idaho Independent Bank 2015 Annual Report

A small bank in Idaho ($550m in assets) has big problems on its mind

“It is a dangerous world out there with a lot goign on that either directly or indirectly affects all of us. There is the obvious connection between politics and economics, all kinds of conflict in the Middle East, the refugee crisis, China’s economic situation, the burden of excessive debt being carried by many countries, including our own United States of America, and more. Add to that very low interest rates that have forced a great deal of risk into markets and the financial system as investors and lenders go looking for yield. The Federal Reserve recently moved short rates a notch higher, but it still appears as if it will be a long road back to normality. Even though Idaho has been somewhat insulated, these are the realities and the environment in which we operate.”


Johnson and Johnson 2015 Annual Report

J&J Credo from 1940s

“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services”

We need to not just focus on costs in healthcare

“While we are plesaed to see that health care is a focus in the dialogue among government officials, politicians and other stakeholders, we must ensure that the discussion isn’t just about cost of care alone. In fact, a disproportionate focus on pharmaceutical pricing, which represents approximately 14% of total US health spending, puts us at risk of missing the bigger picture”


Manpower 2015 Annual Report Jonas Prising CEO

Talent has overtaken capital as the key economic differentiator

“In the Human Age–an era where talent overtakes capital as the key strategic and economic differentiator for organizations and countries alike–changes in the world of work are accelerating at a rapid pace and scale. A confluence of cyclical and structural forces, from shifting demographics and rapid globalization to technological revolution has created a more volatile business environment and knocked labor markets out of sync”

Labor markets are in a new normal

“Rather than returning to business as usual after the recession, labor markets are settling into a new normal where certain uncertainty seems the norm. At the same time, companies area applying sophisticated just in time hiring strategies and individuals with in demand skills have many more choices about how and where they work.”

Hiring managers are having trouble finding talent

“Our tenth annual Talent Shortage Survey shows 38% of hiring managers cannot find the talent they need.”


Gladstone Commercial 2015 Annual Report (REIT)

Vacancy rates have decreased in the US

“In the United States, vacancy rates have decreased for both office and industrial properties in most markets as increased user demand with restrained new construction activity has led to improved conditions. In fact, vacancy rates in many markets have been reduced to levels seen at the latest peak before the most recent recession and rental rates have increased in many primary and secondary markets. This condition has led to a rise in construction activity for both office and industrial properties in many markets; however, vacancy rates in certain secondary and tertiary markets are still higher than pre-recession levels as job growth has yet to return to all areas of the country even though the published unemployment rate has dropped over the past 12 months.”

Financing costs appear to be on the rise

“Interest rates have been volatile since the beginning of the year and although interest rates are still relatively low, lenders have increased their required spreads and overall financing costs for fixed rate mortgages appear to be on the rise”

These two factors combined are leading to increased competition in acquisitions

“The combined characteristics of lower vacancy rates, increased supply of capital from private and foreign buyers and a potential rise in financing costs has led to increased competition for new acquisitions”


PSEG 2015 Annual Report

Apparently even utilities have to have a social media strategy in 2016

“We are reaching out to our customers in new ways. PSEG has more than 90,000 Twitter followers and a considerable Facebook presence as well.”

Johnson & Johnson 4Q15 Earnings Call Notes

Johnson & Johnson (JNJ) Alex Gorsky on Q4 2015 Results

Medical devices and prescription drugs represent 18% of total healthcare costs

“Here in the United States, prescription drugs represent approximately 12% of total healthcare costs and medical devices represent around 6%.”

Last year M&A was premium priced. Today we see a number of opportunities

“As we reflect back on 2015 we realize that the market was premium priced. We remained very active in a number of different areas. And while we didn’t necessarily close on a larger deal, I would not assume that we were not engaged and involved. But at the same time, we think it’s really important for you, our shareholders, as you think about long-term returns, that we stay at the appropriate level of discipline and decisiveness as we go through that process. As we look at the environment today, we see a number of opportunities across the Consumer, the Medical Devices, and the Pharmaceutical groups. We’re going to remain very active.’

Overall we see a positive trend in med tech markets

“Look, I think what we would say overall is we continue to see let’s say a slightly increasing positive trend. So we saw hospital admissions I believe up around 2%. We saw surgical procedures up a little over 1% in the U.S. That’s the most recent data that we have.”

Dominic J. Caruso – Vice President, Finance and Chief Financial Officer

Did see a slowdown in China, but we’re optimistic

And on China, just a couple comments. That China, we did see a slowdown in China primarily in the Consumer business, because both Medical Devices and Pharma businesses still had high single digit growth in China. And we’re optimistic about China going into 2016. Our plans are for improved growth in China in 2016.

JS Earnings Call Notes 10/15/2015 – Colfax, Fastenal, Johnson & Johnson, CSX, Blackrock, Bank of America, Wells Fargo, Winnebago

Colfax (CFX) CEO Matt Trerotola doesn’t expect a recovery in his industrial end markets until 2017 

We must be more aggressive at managing our cost structure in the short-term as we work through the down cycles in several of our important end markets, especially oil and gas, and marine. Through our strategic planning process, we believe these downturns are cyclical, not structural but the timing of recovery in these markets is uncertain and may not be seen before 2017.”

And they will cut costs to remain lean 

“We’ve identified additional cost structure actions that we can take without limiting our operational capacity to accelerate growth. These actions are broad based across all three of our businesses and address manufacturing, operating and corporate expenses.”

Colfax (CFX) CEO Matt Trerotola said the company is actively looking for acquisitions as prices have come down in the cyclical sector

And as far as the acquisition pipeline, we continue to have an active acquisition pipeline. As I mentioned, we did a small one recently. We have some others in the pipeline as well. And the rate at which we complete any of those will be related to the deal processes but also will be connected to our ability to be comfortable with the value in light of the current dynamic situation in the economy.”

Colfax (CFX) CEO Matt Trerotola said the Chinese government is balancing environmental reform and economic growth challenges

I was over in China a few times earlier this year and there’s a significant amount of tension there right now between a real commitment from the government to make substantial progress quickly on the environmental front or at least a commitment from that portion of the government, at the same time as they’re having the industrial growth challenges and have other parts of the government wanting and needing to work very proactively on those. And so, our challenge is how do we figure out a way to work with customers to get these investments, further up the priority scheme and ideally maybe make them not just about environmental but have some productivity benefits.”

 

 

 

 

Fastenal (FAST) CFO Daniel Forness said their industrial customers are in a recession

Right now in the third quarter, 44 of our top 100 customers are negative. We have not lost any business with that group. They are negative in their spend. In some cases, they are negative because their business is very negative and they are somewhat negative with us. In some case, their business is treading water and they decided to tighten their belt.  The industrial environment is in a recession – I don’t care what anybody says, because nobody knows that market better than we do. You know, we touch 250,000 active customers a month.”

Fastenal (FAST) said the slowdown in the oil & gas sector continues to affect their business

“The first nine months of 2015 were hit hard by a slowdown in our business with customers connected to the oil and gas industry. This connection includes direct industry participants as well as those with a geographic connection.  Our end markets remain choppy, as demonstrated by our weak sequential patterns.”

And they are selectively choosing to open stores again

“After several years of holding back on store openings and even contracting our total store base, we plan to expand our pace of store openings in 2016 with a goal of opening 60 to 75 new stores.”

Fastenal said it would be difficult for their fastener customers to switch to another provider as it would be a time consuming process 

“We have strong capabilities at sourcing and procurement, at quality control, at logistics, and at local customer service. Each of these capabilities is focused on the customer at the end of the supply chain. This business is split about 50% production/construction needs and about 50% maintenance needs. The former is a great business, but it can be cyclical because about 75% of our manufacturing customer base is engaged in some type of heavy manufacturing. The sale of production fasteners is also a sticky business in the short-term as it is expensive and time consuming for our customers to change their supplier relationships.”

Weakness in some of their larger accounts hurt profitability

“The relationship between sales and gross profit depends on our success within our large account business (an area that is still under-represented in our customer mix). The large account end market produces a below company average gross profit; however, as demonstrated in recent quarters, it leverages our existing network of capabilities and allows us to enjoy strong incremental operating income growth. Given the sequential weakness with our largest customers, we saw a sequential improvement in our gross profit. Our gross profit is also impacted by supplier incentives. With weaker net sales growth and our tight management of inventory levels, the growth of spending with our suppliers is lower; hence, our supplier incentives are reduced.”

And they spent some time discussing how they view capital allocation

“Finally, some thoughts on capital allocation: During the latter half of 2014 and the first nine months of 2015, we have been modifying our capital allocation by buying back some stock. This is in response to several factors. The first centers on our external valuation. Our relative stock valuation has weakened over the last several years, which prompted us to reassess our cash deployment.  We are mindful of our shareholders expectations relative to our dividend paying history and have primarily funded this buyback with debt. Over the last three to four years, we had dramatically increased our capital expenditures, relative to our net earnings, for the rapid deployment of distribution automation and industrial vending.”

The company highlighted what makes the economics of the industrial fastener business compelling

“It is helpful to appreciate several aspects of our marketplace: (1) it’s big, the North American marketplace for industrial supplies is estimated to be in excess of $160 billion per year (and we have expanded beyond North America), (2) no company has a significant portion of this market, (3) many of the products we sell are individually inexpensive, (4) when our customer needs something quickly or unexpectedly our local store is a quick source, (5) the cost and time to manage and procure these products is meaningful, (6) the cost to move these products, many of which are bulky, can be significant, (7) many customers would prefer to reduce their number of suppliers to simplify their business, and (8) many customers would prefer to utilize various technologies to improve availability and reduce waste.”

And they view their geographic proximity to their customer base as a competitive advantage

“We believe our ability to grow is amplified if we can service our customers at the closest economic point of contact. For us, this ‘closest economic point of contact’ is the local store; therefore, our focus centers on understanding our customers’ day, their opportunities, and their obstacles.”

 

 

 

 

Johnson & Johnson (JNJ) Chairmen of Medical Devices reiterated the company’s goal of being a market leader in their 

We have a companywide premise that we should be number one or number two in the categories where we’re committed and have a clear technology path to getting through either a number one or number two position.”

And he expects an accelerated pace of acquisitions going forward

“So I think in a disciplined focused approach where we divest we will also look at opportunities to acquire. I think certainly accelerating our pace of tuck-in deals would be a good opportunity for medical device we seek, considering our scale in the market, especially in surgery and orthopaedics is large, and we anticipate accelerating that pace over the next 12 to 18 months.”

 

 

 

 

CSX Chief Financial Officer Frank Lonegro said the company is increasing train length to improve cost & labor efficiency

“To illustrate our progress, in the third quarter we increased overall train length by about 10% versus the prior year, which drove a significant reduction in crew starts.”

And they were able to combat the slowdown in volume by lowering their employee expenses and fuel expenses

“Looking at labor and fringe, we expect the fourth quarter head count to be down approximately 2% on a sequential basis, which reflects about a 6% reduction from the prior year.  Fuel expense in the fourth quarter will be driven by lower cost per gallon, reflecting the current price environment, volume-related savings, and continued focus on fuel efficiency.”

And oil shipments by rail, which was a huge growth segment for the railroads just a few years ago, is down substantially 

“In addition, we expect headwinds in our coal and crude oil markets to increase in the fourth quarter, driven by sustained low commodity prices. As I mentioned earlier, domestic coal volume is expected to be down around 20% versus the prior year. And crude oil volume is expected to decline at least 25% sequentially.”

Intermodal has been an area of strength 

On the domestic side, we are seeing the benefit of the investment and the service product that we are seeing. We have been able to grow that business somewhere between 5 and 10% over last several years. We are seeing a little bit of an enhanced growth here this quarter, as we know one of our customers who has the contractual ability to further diversify their portfolio is doing just that here in the quarter. So we are seeing a little bit of an uptick in the growth with that customer right now, beyond what we would normally see. But we feel good about that business, feel good about the ability to continue to grow that at a multiple economic output for a period of time here going forward.”    

CSX Fredrik Eliasson Executive VP said there is an opportunity to re-price legacy contracts in the coming years

So, I think you know that in our merchandise business, only about half of our business is up on the annual basis. And most of our other businesses, they are mostly 3 to 5 year contracts. We do feel that we will have good opportunities to reflect what the value we have in the marketplace, and with improving service on top of that, we do feel good about our pricing opportunities going forward as well.”

 

 

 

 

 

Blackrock (BLK) CFO Gary Shedlin said the company saw lower fees during the quarter as clients shifted money out of higher fee based products, such as emerging markets & commodities, into lower fee based products, like index funds 

“Sequentially, base fees were down 3% due to lower quarterly average AUM, a seasonal decline in security’s lending activity and the impact of divergent data on our fee rate as emerging and commodities market underperformed developed market.”

Blackrock (BLK) CEO Larry Fink said Blackrock maintains the #1 global market share of ETF’s with 38% of the market

iShares captured the number one market share of the net new business globally in the U.S. and in Europe and in the third quarter year-to-date. iShares flows were driven by fixed income as investors utilized fixed income ETF as an effective tool for diversification and liquidity.  Equity flows were driven by $5 billion into European listed iShares and we saw positive inflows in Canada and Asia Pacific as well.”

Blackrock (BLK) President Robert Kapito said the lower price of ETF’s when compared to traditional funds is only one component of what makes the offering compelling 

But just to step back on the price, please keep in mind that prices are only one reason why people buy ETF. They are looking for precision or what you’re discussing a new approach in smart beta or factored investing, they’re certainly looking for liquidity, which means, you have to have a fund and have some sort of size depending upon the type investor they could get core investor which we call it buy and hold or they are looking to be more active. So, price is important but its only one aspect.”

Blackrock (BLK) President Robert Kapito said ETF’s are now being used as an alternative to futures contracts

So, this is the beauty of ETFs that we constantly have been finding new uses for the products, so as futures becomes more expensive to use than ETFs had opened up a whole new world that we didn’t even think about because of the collateral cost behind futures contracts.  So as you know now ETFs are being use as a surrogate for futures across many institutional accounts, so we think that’s going to continue, how big that can be, just think about the size of the futures markets and certainly regulation is going to play a big role in that as well.”

Blackrock (BLK) CEO Larry Fink said the company could potentially benefit from Department of Labor regulation which may potentially emphasize ETF’s in retirement accounts

I think one thing is very clear how this outplays that it means greater emphasis on beta products and ETFs.  I would also say that if investors feel more confident because of however the DOL reform plays out that if investors feel more confident that they can invest fairly, securely we are all benefited by that. Now, I’m not sure how that will play out, but we’ve always believed that we could have a market place where our clients feel more secure that they have an opportunity to earn a fair return over a long cycle everyone will be benefited by that.”

And their active equity unit, which has been a poor performer over the last several years, is starting to perform 

So where we are starting to see the biggest turnaround is from the fundamental equity business. We spent a lot of time and money I should know in trying to rebuild our efforts there and the teams. And I feel very good about this, certainly in Europe our team there has been together longer. Their record across the board is now very strong and now we are starting to see the same efforts in the U.S. through our capital appreciation fund, our equity dividend fund. So the performance is actually really good.  So when you see better performance it translates directly into flow and we are starting to see those flows or having much better dialogue with our consultants who are now putting us in the mix for proposals and we’re also internally very focused on building out the equity effort and you are going to hear a lot more from us, from our marketing teams and the rest of the teams across the firm, because we are going to be much bigger in the active equity space and we are very happy to have the performance to back that up, so very important part and we’re still adding people but we are getting results at the same time, good positive feedback from our clients.”

 

 

 

 

Bank of America (BAC) CEO Brian Moynihan said the bank’s performance is improving in a tough economic environment

the key message is we continued to make good progress in a tough revenue environment due to low interest rates and a sluggish economic recovery. In addition with the late summer’s volatility, especially the fixed income trading markets are remaining challenging. So with that we produced another good quarter of progress in all the businesses.  We continued to make progress towards our full earnings capacity here at Bank of America, and this quarter represents the fourth consecutive quarter of solid results following the resolution of our large legacy exposures in the third quarter of last year.”

Bank of America (BAC) CEO Brian Moynihan emphasized the evolving nature that the retail bank has with its customers as it seeks to right size their banking branching

As a reminder, our consumer franchise is the largest retail bank in the United States. In our consumer banking business, as you can see, we grew revenue and earnings year-over-year despite the low interest rate environment. We have been restructuring our branch structure, selling some branches, closing some branches, and changing account structures, and with that this quarter our core consumer checking accounts continued to grow. We grew those accounts and improved the percentage of those customers who use us as a primary bank, and importantly the average balance per account continues to grow.”

And mobile banking is becoming a larger and larger component of the customers banking experience

When you go to the change in our financial services business for mobile and digital banking, we now have 18.4 million active mobile customers and 31 million active online customers.  More customers are using mobile device to deposit checks and access their accounts, and now are starting to buy products as well as book appointments. To get a sense of that, we are now booking 15,000 appointments a week off of our mobile devices.”

And mobile banking is more cost efficient for the bank as well 

“Mobile processing is better for us and it is better for our customers. It is one-tenth the cost relative to processing of financial centers and more convenient for customers.”

Bank of America (BAC) Paul Donofrio said the company’s retirement solutions business is gaining momentum from its ability to cross sell products 

The last thing I would note that’s not shown here is referral rates across the company remained strong. For example, our retirement solutions business continues to win in the marketplace. We have won more than 1200 retirement plans year-to-date, many of which were referred from global banking. On a year-to-date basis, this is up more than 40% from 2014.”

 

 

 

 

Wells Fargo (WFC) CFO John Shrewsberry reminded investors that the bank is positioned for interest rates remaining “lower for longer” than most anticipate

As I have discussed previously our view on interest rates has evolved over the past year to be more of a lower for longer expectation for both short term and long term rates. As a result, we’ve been adding duration to our balance sheet, however our balance sheet remains asset sensitive and we are positioned to benefit from higher rates and we expect to be able to grow net interest income over the long term even if the rate environment continues to be challenging.”

Like many of the other banks, they continue investing in their IT infrastructure and effectiveness

We continued to invest in our businesses with particular focus on risk, cyber and technology projects. These investments partially reflected in higher outside professional services expense in the quarter.  Our new and existing customers are increasingly using our digital offerings with active online customers up 8% and active mobile customers up 17% from a year ago.”

 

 

 

 

Winnebago (WGO) CFO Sarah Nielson said the company has decided to exit the bus business

“We made the decision to enter the bus business as announced earlier this week and have sold the related inventory and tooling to our distributor partner at cost. In light of the labor constraints that we have experienced this past year, we determine that our resources were better used to focus on the design and manufacturing of our motor homes. Also, we had not achieved profitability within this operation since the interception. We’ve recorded 1 million in operating losses in fiscal 2015.”  

Winnebago (WGO) CFO Sarah Nielson wants the company to be reactive, as opposed to proactive, in terms of figuring out which RV models the customer wants

We’re going to have to kind of monitor kind of quarter by quarter, what makes the most sense from a production plans. When we plan in an aggregate for the year we’re looking a lot at the labor resources we have to allocate and assuming a certain mix, but it’s a market where we want to be very reactive to what the deals want, what the consumers want. So, we want to be able to change as needed in them, so it potentially could but its hard to predict how all that will play out as we set today for the whole fiscal year for 2016.”

Johnson and Johnson 3Q15 Earnings Call Notes

Dominic Caruso – VP Finance and CFO

Announced new share repurchase program

“Just this morning we announced a $10 billion share repurchase program. We are very well positioned to drive continued growth in shareholder value with our exceptional financial strength including our strong balance sheet and cash flow.”

If you regulate drug prices you’re going to impact innovation

“Let’s see, well you’re right. There has been a lot of rhetoric about pharmaceutical drug pricing and despite significant media tension on drug pricing, there really isn’t a consensus on policy solution that would lower prices without negatively impacting innovation, that’s the key point.

I think every time we talk about drug pricing, we unfortunately miss the balance of the other side of the coin which is of course the innovation that comes from the pharmaceutical industry and the improvement in the health and well being lives of many people around the world.

The pharmaceutical industry has and continues to be a constructive partner in any of these policy debates and we look for solutions to the issue along with policy makers.”

Not every deal works out how you thought it would

“You’re right. Not every M&A deal works out exactly the way you would predicted it would.”


Gary Pruden – Worldwide Chairman Medical Devices

Good demographics, industry consolidation

“Demographics favored continued market growth as population’s age, the incidence of chronic diseases grow and more people gain access to care globally. As both customers and providers seek to improve efficiency, effectiveness and manage escalating cost, consolidation has accelerated both within our global customer base and the industry.”

Results continue to be impacted by soft global market conditions

“Our 2015 results continue to be impacted by the relatively soft global market conditions. We are seeing the market in the U.S. improve but EMEA growth remains challenged and the emerging markets have slowed this year. We expect the soft market conditions and pricing challenges across the Board to continue.”

5 Billion people lack access to safe surgical care

“The World Health Organization estimates that nearly a third of the world’s global disease burden could be addressed through surgery. Yet nearly 5 billion people continue to lack access to safe, timely and affordable surgical care.”


Louise Mehrotra – VP, IR

Sales down 7.4%, 8.2% of which due to currency

“Worldwide sales to customers were $17.1 billion for the third quarter of 2015, down 7.4% versus third quarter 2014. On an operational basis, sales were up 0.8% and currency had a negative impact of 8.2%. ”

Currency translation significantly impacted net earnings

“adjusted net earnings for the current quarter were $4.2 billion and adjusted diluted earnings per share were $1.49, representing decreases of 9.4% and 7.5% respectively as compared to the same period in 2014. Currency translation significantly impacted net earnings. On an operational basis, adjusted diluted earnings per share grew 1.2%.”

Johnson and Johnson 2Q15 Earnings Call Notes

Sales were down 8.8% and were also down constant currency

“Worldwide sales to customers were $17.8 billion for the second quarter of 2015, down 8.8% versus second quarter 2014. On an operational basis, sales were down 0.9% and currency had a negative impact of 7.9%. In the U.S., sales were down 2.4%. In regions outside the U.S., our operational growth was 0.5%, while the effective currency exchange rates negatively impacted our reported results by 14.8%.”

Excluding divestitures growth was 1.7%, excluding Hep C competition growth was 5%

“Excluding the net impact of acquisitions and divestitures, underlying operational growth was 1.7% worldwide, 0.6% in the U.S., and 2.7% outside the U.S. Additionally, excluding hepatitis C sales underlying operational growth was 5%.”

Adjusted operating earnings were up 6.7%

“On an operational basis, adjusted diluted earnings per share grew 6.7%.”

New Hep C competitors significantly impacted sales results

“Moving now to our Pharmaceutical segment, worldwide sales of $7.9 billion increased 1% with U.S. sales down 1.5% and sales outside the U.S. up 3.8%. New competitors in hepatitis C significantly impacted sales results.”

Ongoing consolidation among health systems is creating pressure on pricing

“as we look at this market, the ongoing consolidation among health systems and within the insurance industry is continuing to create pressure on pricing.”

We have been encouraged by healthcare utilization trends

“We have been encouraged though by data showing that healthcare utilization trends in the U.S. have continued to improve for the fourth consecutive quarter with growth in both hospital admissions and hospital surgical procedures. And we remain optimistic about increased global healthcare utilization as well.”

Sounds like the Jack Welsch school of management

“our focus is on areas where we are or we can be number one or number two in a particular area as well as on those products or businesses that will be directly complementary. And if we have an asset or a business that doesn’t meet those criteria, we have demonstrated that we will divest it and redirect our resources ”

We are building digital marketing capabilities for consumer brands

“As we invest in our global brands and our top regional brands and in our priority markets, we are building new marketing capabilities such as digital. We doubled our digital media investments and digital channels with emphasis on social and mobile. Today, 40% of our digital ad spending is via mobile and more than 90% of our Facebook ads are served up on either smartphones or tablets.”

Technology is reshaping the healthcare landscape

“technology is reshaping the entire healthcare landscape. The consumerization of healthcare, wearables and mobile apps are giving patients unprecedented access to health information. Physicians, regulators and payers are leveraging big data, analytics and real world evidence to personalized care, understand product safety and efficacy and drive improved outcome. Artificial intelligence, machine learning and advanced centers are creating new opportunities to take advantage of the best clinical and wellness expertise. We are at the tipping point, where technology is becoming the medium through which healthcare can become a more effective and efficient system. The opportunities this creates for Johnson & Johnson to become a healthcare technology innovator are immense.’

Partnerships with Google and IBM

“We have identified key technology areas that will accelerate growth and are actively pursuing programs and partnerships in those areas. The relationships with Google and with IBM and Apple that Alex mentioned are great examples.”

I have heard over and over that technology was going to disrupt our industry and this time it’s true

“I have been in healthcare long enough to have heard over and over again that technology was going to disrupt the industry beyond recognition. But today, maturing technology, scientific advances and global healthcare reform are combining to make disruption a reality.”

If currency stays where it is it would impact earnings by 0.60c per share

“we are not predicting the impact of currency movements, but to give you an idea of the potential impact on earnings per share if currency exchange rates for all of 2015 were to remain where they were as of last week, then our reported adjusted EPS would be negatively impacted by approximately $0.60 per share, which is consistent with our previous guidance. Therefore, our reported adjusted EPS would range between $6.10 to $6.20 per share. ”

Consumer remains an area of strong strategic importance for JNJ

“I would just add onto that that the Consumer area remains one of strong strategic importance for Johnson & Johnson. When you think about the role of consumers and healthcare utilization going forward, when you think about the way that you are able to drive innovation and frankly when you think about the reach that it gives you, particularly in the emerging markets and the fast growing markets.”

There is a clear line of demarcation between standard and robotic surgery

“as we see the surgical suite continue to develop in today’s environment, I would say there is a pretty clear line of demarcation between what you would say as standard surgery and robotic surgery. And we think as technology develops in the future, whether it’s real-time data collection, whether it’s visualization, whether it’s incorporating some of the new technologies in areas, such as energy and hemostats, combining these in very new and unique approaches we think offers a real significant opportunity to improve patient outcomes ultimately to grow our business.”

Johnson and Johnson 1Q15 Earnings Call Notes

Partnership with Google in robotics

“In Medical devices in line with our priority to accelerate growth through innovation we announced in March definitive agreement to collaborate with Google Life Sciences to advance development of a surgical robotics program which we see as an important step in our commitment to advancing surgical care around the world.”

Sales growth rate would fall by 7% if currencies stayed here

As of last week the euro was lower by approximately 17% as compared to 2014 average levels and the dollar has strengthened recently versus virtually all major currencies. And though we are not predicting the impact of currency movements to give you an idea of the potential impact on sales if currency exchange rates were to remain where they were as of last week for the balance of the year our sales growth rate would decrease by nearly 7% reflecting the weakening of the euro and other major currencies against the U.S. dollar.”

At this stage of the year we would be comfortable with your models reflecting the midpoint of this range

“our reported adjusted EPS range will range from $6.04 to $6.19 per share primarily due to the increased headwind of currency on ESP of $0.18 per share which is partially offset by our improved operating performance of approximately $0.10 per share.

At this stage and year we would be comfortable with your models reflecting the midpoint of this range.”

The US needs to lower corporate tax rates

“On the repatriation question, we’re still firm believers that the ultimate conclusion here is a much more competitive corporate tax system in the U.S. I can’t speak for what GE did but this not alter our view that its currently uneconomical to repatriate those earnings at such a high corporate tax burden and we’d much rather see our government move in the direction of lowering that tax burden for corporation, getting that cash back to the U.S and invested more appropriate without the burden of this extra tax spike, but I can’t comment on why or whether we would do something similar as to what GE did.”

Consumer spending environment is healthier

“We’re very pleased with the consumer businesses progress over the last several years actually and now we’re seeing that progress result in higher sales levels, for couple of reasons. I think overall the market is healthier in consumer spending is what we see. ”

About the google partnership

“We’ve now obviously partnered with Google to gain their expertise in technology and visualization and in robotics and I think that’s going to provide us some acceleration to the plans we were already anticipating.

We’re already in the market for robotics in terms of our particular – in terms of particular procedures where our Ethicon products are used at the end of the robot, at the actually procedure end of the robot. So we’ll continue to do that. We would expect this collaboration would take – I would say several years for us to come to the market with the new type of robotic surgery that we think we’ll dramatically revolutionize surgery. So, I think it will take some time to do that, but we’re accelerating our efforts there and I’d say it’s a couple of years away.”

Johnson and Johnson 4Q14 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

Currency impacted sales by 1.9%

“Now turning to the financial highlights for the full year of 2014, consolidated sales to customers for the year of 2014 were $74.3 billion, an increase of 4.2% as compared to the same period a year ago. On an annual basis, sales grew 6.1% operationally and currency had a negative impact of 1.9%. ”

52 consecutive years of dividend increases

“And as we enter 2015, the business of Johnson & Johnson is very strong and we’re well-position for the long-term. We delivered 31 consecutive years of adjusted earnings increases, and 52 consecutive years of dividend increases for our shareholders.”

Healthcare will be 20% of US GDP in 2020

“he rising cost of healthcare, which by 2020 is expected to account for 21% of the GDP in the United States, nearly 11% in the European Union and 6% in China. And as I travel around the world, it’s clear that providing sustainable high-quality healthcare is one of our society’s greatest challenges”

focusing on greater cross segment collaboration

“We’re also focusing on greater cross-segment collaboration to innovate and focused operationally on building market-leading capabilities that enable us to achieve the highest quality and efficiency standards possible across the world. ”

Innovation centers giving start-ups places to work

“Our new innovation centers which are in four innovation hubs across the world have made over 200 alliances in the past few years and at our four no-strings-attached incubators at Janssen Labs, we’re giving small start-ups places to work and access the instrumentation. I had an opportunity to visit our facility in South San Francisco just last week and that was one of our teams that we’re working with, who says it could have taken them eight years and $300 million to do what we’re enabling them to do in just a couple of years for significantly less, in an environment where they are building a foundation for strong partnerships for themselves and frankly with us as well.”

Significant priorities for M&A

“There is number of spaces, we’ve identified areas such as orthopedics, such as surgical, such as vision care in particular to be significant priorities for us and we continue to look in those spaces.’

trying to migrate things learned in pharma business into med device and other segments

“But as we look even longer-term, clearly we’re trying to take pages from the innovation playbook that you might say our pharma group is built on and apply those in other areas. So whether it’s in our clinical development programs, the way we monitor safety, adverse event reporting, those are areas we’re spending a lot of time. We’re doing more and more through our innovation centers that we’re recently opening and utilizing JJDC on how do we better source early start-up innovation. Again in the pharma as well as the device but even our Consumer businesses going forward and of course we’re looking at ways also to partner with customer in new unique ways. So, we remain confident in our Medical Device businesses, we’ve got some very strong businesses, we’ve got — we realize there is others that we still have more work to do, but we think long-term they offer a significant opportunity for patients, for us and for our shareholders.”

Seeing utilization uptick in US

“we think we’ve got about three quarters now in the positive, when I say in the positive I mean somewhere between 2% and 3% when we’re looking at hospital admissions, surgical procedures, physician office visits still appear to be negative. So I think it’s too early to declare complete victory yet, but generally I would say we’re encouraged by some of the signs that we’re seeing and if we can see the fourth quarter, the full results coming out for this year and have a third quarter then of increasing results that would be a positive.”

“I think first of all let’s talk about Europe, in Europe we saw contraction initially then Europe actually performed better. As I mentioned earlier in the guidance going forward we’re watching it closely and even there you’ve got Southern Europe versus Northern Europe. We continue to see Northern Europe performing slightly better than the rest of Europe it’s been impacted in the most recent quarter by Russia in a significant way.”

Johnson and Johnson 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Forex negatively impacted results by 1.3%

“In regions outside the U.S. our operational growth was 1% while the effect of currency exchange rates negatively impacted our reported results by 1.3%. On an operational basis, the Western Hemisphere excluding the U.S. grew by 3.5%, Asia-Pacific Africa region grew 2% and Europe declined 0.8%”

Pretty solid earnings growth

” net earnings for the current quarter were $4.3 billion and diluted earnings per share were $1.50, representing increases of 9.5% and 10.3% respectively as compared to the same period in 2013.”

Hep C product driving growth

“A major driver was our recently launched hepatitis C product called OLYSIO in the U.S. and EU and SOVRIAD in Japan. Excluding sales of hepatitis C products, OLYSIO and INCIVO, underlying growth worldwide U.S. and outside the U.S. was approximately 8%, 14% and 1.5% respectively.”

Positive momentum in hospital utilization rates

“Although modest, we have now seen two consecutive quarters of positive momentum in hospital utilization rates, which is in line with recently published analyst reports noting this trend. We continue to remain confident that as economies recover and as healthcare reform continues to gain momentum here in the U.S. and abroad, utilization rates are going to increase.”

We’re seeing Europe slow

“I think you’re all very familiar with the fact that Europe is in fact slowing down, and we’re seeing that across our businesses as well.”

Any changes the Irish make to their tax code are supposed to be grandfathered

“But we understand from all the comments that have been made by Irish regulators that there will certainly be some grandfathering period for any changes that they propose because they do expect to keep Ireland competitive in the world economy. So we certainly expect that there will be some grandfather period, I don’t know how long it will be but we’ve heard in the range of five years. It could be three years to five years. It could be five years to seven years, but we expect that the grandfathering provisions will give us all enough time to adjust any plans that we might have as a result of any impact.”

strategic thoughts on the medical device business

” We’re looking at areas where we think there’ll be strong market growth either because of demographics or because of innovation or because of our own ability to compete in the market bringing in new technologies with our current presence. As you know, we made a determination some time ago that we were going to focus on surgery, general surgery and Specialty Surgery and Orthopedics and have less of a focus on Cardiovascular and you know we got out of the drug-eluting stent business as we saw that become a commoditized business.

Within the overall approach to medical devices, we still believe surgery is the place to be. We’re obviously very happy with our market position there. We made a big bet as you know in Orthopedics and we’re continuing to see the benefits of that combination with Synthes. And with respect to cardiology, we believe that there are specific areas of focus within cardiology that are important. And for example, electrophysiology where we’re a leader there and we’ve seen very good growth, I think nearly 18% growth this quarter from our Biosense Webster business. So nothing has really changed. We believe these are the two main areas within MD&D that we’re going to focus on, Surgery and Orthopedics with selective investments in selective growth areas within cardiovascular medicine.”