This Week in Earnings Transcripts
We are in the middle of earnings season. What are corporate executives seeing in the world economy? Take a look:
Lots of bullish words on Europe:
“And given the caution in Europe about the pace at which they might engage in any tapering, I think we’re going to continue to see a good market environment, good market tone going forward. And that is a little more optimistic than I had been at certain points in the past.”
– Moody’s (Ticker: MCO)
“about half of our capital deployed or committed in the second quarter across the firm was outside of the U.S., with Europe notably being our busiest region of activity for real estate and credit, in particular.”
– Blackstone (Ticker: BX)
“And I think in general the European economy has been frankly better than we thought.”
– Visa (Ticker: V)
“the UK has been one of our strongest markets. This quarter I cited its growth again being at 15% in terms of volumes and it’s been growing at those kind of levels quite some time.”
– American Express (Ticker: AXP)
Along with Bullish Remarks on Mexico:
“Slide 13 provides an update on our Mexico Energy Reform and its impact on our current results. As you can see, sequentially, we have seen an increase of 255% in revenue and 223% in carloads.”
– Kansas City Southern (Ticker: KSU)
“Grain carloads increased 11% with continued strength in wheat exports, driven primarily by shipments to the Gulf and Mexico…. And we are still seeing a lot of propane moving into Mexico….The finished fuels have been a little slower to take off because there’s not a lot of terminal infrastructure in Mexico to handle them. But we see it as a reasonable opportunity over the period until more infrastructure is built in Mexico.”
– Union Pacific (Ticker: UNP)
“As we look our few key markets for example, we see continue double-digit FX adjusted growth in the UK up 15%, Mexico up 12%, and Japan up 17%.”
– American Express (Ticker: AXP)
“Mexico, Fabory and China make up the bulk of the rest of the international portfolio and all of those showed nice growth during the quarter.”
– W.W. Grainger (Ticker: GWW)
“Revenue in Latin American increased 9% sequentially driven by solid activity and sales in Mexico”
– Schlumberger (Ticker: SLB)
The consumer may not be as bullish as the companies however,:
“While our customers remain optimistic, many still do not have the confidence necessary to make meaningful investments and take on additional debt.”
– Regions Financial (Ticker: RF)
“And it would be fair to say that the continuing slow consumer demand is worrisome, but there’s nothing that we see in the data that suggests that consumer behavior is changing in any way.”
– Colgate – Palmolive (Ticker: CL)
Unless that consumer is in the stock market! Brokers had an excellent quarter:
“Sequentially, [cash] balances declined 3% due to record net buying activity in the quarter, as clients engaged the market… Cash as a percentage of total client assets ended the period at just under 13%, down from last quarter as client net buying was a record”
– TD Ameritrade (Ticker: AMTD)
“Margin debits rose 51% year-over-year, reaching a record level of $22.7 billion. Customer’s appetite for increased risk along with our competitive rates contributed to this increase….I’m guessing that hedge funds are the bulk of it, and individuals comes second, and financial advisors and IBrokers do very little.”
– Interactive Broker (Ticker: IBKR)
“The average balance of cash per account in that sort of 15% to 20% range depending on sort of customer risk appetites.”
– E-Trade (Ticker: ETFC)
And some companies are adding debt as well:
“Lastly, leveraged loans in the U.S., $400 billion to date, that is up 30%”
– Moody’s (Ticker: MCO)
The auto industry may be slowing, but segments of the Auto Industry remain strong:
“Automotive revenue was up 5% in the quarter on a 1% increase in volume and a 6% increase in average revenue per car. Finished vehicle shipments decreased 4%, primarily as a result of softer vehicle sales leading to reduced production and shifting product mix…. I think our finished vehicles were down 4%, but auto parts were up 2%”
– Union Pacific (Ticker: UNP)
“…from an overall macro perspective, we do believe the automotive repair arena remains favorable.”
– Snap-on (Ticker: SNA)
One company is trying to take advantage of temporary weakness. As many financial companies back away from auto loans, Capital One is ramping up lending:
“auto originations were up 14% to $7.5 billion with strong growth in prime, near prime, and sub-prime. As we discussed last quarter, competitive intensity in the auto finance marketplace remains a bit muted which continues to contribute to our growth. While we still see attractive opportunities for future growth, there are also reasons for caution in the auto industry including expected declines in auction prices and an increasingly indebted consumer.”
– Capital One Financial (Ticker: COF)
Other Random Topics:
e-Commerce effects people’s behavior:
“What we observe on eCommerce thus far is that the consumer is actually — tends to buy more premium and even if they’re not buying the premium brands, they tend to buy in multiples.
So, in fact the eCommerce behavior is favorable to us from a consumption point of view and if you look at the Hill’s business, 15% of the Hill’s business in the U.S. on eCommerce is subscription.
So that means once they buy it one time, they’re signing up to regular delivery of that diet over time, which is we believe a good business model for our brand.”
– Colgate – Palmolive (Ticker: CL)
Will the oil bear market end anytime soon? Schlumberger had a couple interesting things to say:
”Hydraulic fracturing revenue increased by 68% sequentially significantly outperforming the 23% increase in the land rig count. We remain sold out for several of our key directional technologies as our customers continue to move towards more complex well profiles with longer laterals….we expect U.S. land activity to remain strong throughout the second half of the year with our frac calendar already fully booked well into Q4 and the high demand of our drilling services expected to continue.”
…but,
“Needless to say, the longer the current under investment carries on, the more severe the cliff like decline trend will likely be when the producers run out of short term options to maintain production. And given the size of the production base, it would be difficult for the rest of the global producers to compensate for this pending supply challenge.”
Lastly, people need to brush their teeth more:
“our analysis has shown that in our top markets outside the United States, 70% of our addressable population brushes their teeth on average less than one a day.”
– Colgate Palmolive (Ticker:CL)
That’s all I have – What did I miss?
All transcripts come from www.seekingalpha.com unless otherwise noted.
