What America's Companies Really Think

Tyler Durden's picture

If one believes the various US diffusion indices - among which key are the assorted regional Fed surveys the monthly PMI data - and listens to the pithy soundbites of their respondents, the US economy has hardly ever been better (of course, that 60% of "growth" in the past year has been due to inventory accumulation on hope that the consumer end demand will finally come is neither here nor there). However, we don't exactly believe said indices. Instead, to get a true sense of what is going on, it is always better to listen directly to those who are not only deep in the trenches, but are also accountable to their shareholders every quarter: the various CEOs and CFOs of America's public corporations. Below, courtesy of Bloomberg chief economist Rich Yamarone, who has compiled a selection of Q3 earnings call soundbites, is an indicative snapshot of the US economy as seen most recently through the prism of executives in a wide range of industries.

Simon Property [SPG] Earnings Call 10/25/13: "…it is clear that the economy has slowed. You've seen it with wages, you've seen it with employment. Needless to say we don't have to get into what's going on in terms of leadership in our country, none of which we use as an excuse, because we put blinders on to the best of our abilities when it comes to that kind of stuff. But we're operating at a high level in a very slow growth economy, and we're outpacing the growth in the economy and that's all that we can do, but we are affected by the economy."

Caterpillar [CAT] Earnings Call 10/23/13: "….while it looks like there's a good chance that the world economy could improve next year, there's still much risk and uncertainty. The direction of U.S. fiscal and monetary policy remains uncertain, and the climate in Washington is divisive. Eurozone economies are far from healthy, and China continues to transition to a more consumer demand led economy. In addition, despite higher mine production around the world, new orders for mining equipment have remained low. As a result, we're holding our preliminary outlook for 2014 sales and revenues flat with 2013, in the plus or minus 5% range."

DuPont [DD] Earnings Call 10/22/13: "The macroeconomic environment and in particular global industrial production is improving sequentially, but at a slower pace than we expected three months ago. As a result, we recently lowered our global industrial production outlook for 2013 from 2.5% growth to slightly under 2%."

Brinker International [EAT] Earnings Call 10/23/13: "The malaise we've seen in the category didn't let up this quarter. Consumer sentiment is guarded at best and consumer confidence remains somewhat volatile. And there's some evidence that guests have shifted some of their spending to larger ticket items like homes and automobiles. And while we believe this is a temporary phenomenon, but one that has certainly impacted casual dining here in the short term. And while employment rates are showing signs of improvement, casual dining in particular is being impacted by struggles many young adults are facing, particularly those in that 18 to 24 age range. Many are graduating college significantly un- or underemployed, weighted down with debt and often moving back home with their parents. And as a parent with two of those, it's a scary thought."

Air Products [APD] Earnings Call 10/29/13: "Economic activity in the second half of 2013 was slower than we had initially anticipated in most regions. Given the current economic conditions, we are planning for economic growth to be modest again in 2014. Globally, for the regions we operate in, we are forecasting manufacturing growth of 2% to 4%. In the U.S., uncertainty in the economy remains, despite the government restart. The combination of unresolved fiscal challenges, weak job growth, low consumer confidence and diminished global demand are likely to continue to act as a headwind on economic growth, despite the positive drivers of lower energy costs and strength in housing. We are forecasting a range of 2% to 4% growth."

Revlon [REV] Earnings Call 10/24/13: "Total company net sales in the third quarter were $339.4 million, an increase of 1.1% excluding the impact of foreign currency fluctuations as compared to last year. This increase was primarily driven by higher net sales of Revlon color cosmetics despite low year-over-year new product net sales particularly in the U.S. as well as higher net sales of Revlon ColorSilk hair color and Revlon Beauty Tools."

Timken [TKR] Earnings Call 10/24/13: "It's now clear to us that the weakness in several of the key markets we serve, including the emerging market infrastructure, mining and energy exploration, is more a structural and will be longer lasting than we had expected. This leads us to believe that the slow steady improvement in demand that we've seen thus far in 2013 will extend well into next year. This situation has been exacerbated in the third and fourth quarter of this year by seasonal reductions in demand in some sectors."

AutoZone [AZO] Earnings Call 9/25/13: "A key macro issue facing our customers today is the reinstitution of payroll taxes back to historic norms. This reduction in our customers' take-home pay began at the beginning of the new calendar year and at this point it has been difficult to objectively quantify the ramifications of this change, however, we believe this is and will continue throughout the year to be a headwind to our consumer's spending habits."

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Shizzmoney's picture

"Our customers have no fucking money.  I somehow get paid to assess this statement.  Thank you for listening, and please join us at the Dirty Scoundrel after for Happy Hour with shots and oysters".

Singelguy's picture

Oh, and because interest rates are so low, what little profit we do make is used to buy back our stock, to increase the dividend per outstanding share which drives our stock price higher so we managers can get a bigger bonus check this year. No point in investing in plant and equipment. We are waiting for our customers to make some money. Hopefully next year.........hopefully.

robertsgt40's picture

What they are really saying is the economy is sucking wind and they will be sucking hind tit.

sangell's picture

I've always wondered about those PMI surveys. Do companies have a chief fill out the survey officer whose job it is to answer fully and accurately some questionaire sent to them. And what exactly is a diffusion index that makes it so reliable. To me it sounds more like 5.1 on the one hand and 4.9 on the other. While I'm ranting what in the hell is the idea of 0.1% GDP forecasts. Do they really think they can measure GDP to within a 1/10 of a percentage point when they will revise measured GDP by a factor of 10 or 20 times that!

LetThemEatRand's picture

Official PMI Survey:  

Is you business

A:  awesome (4.9) or

B:  awesomer (5.1).

Answer:  Must be A or B*

Official results are tallied according to whether a single company answers B, in which case B is the official result, +/- whether a higher or lower result will generate more QE.

Au Shucks's picture

These companies need a "mandela interpreter" on their earning call webcasts. 

Zero Point's picture

Haha! Never saw that one.

Gotta admire the guy, it would take hard core balls to put yourself in that position.

Imagine being in a position where you had to fake sending signals to millions of people, so that they could make important decisions, based on what those signals were.

Reminds me of someone.... Dunno who, it escapes me.... 

Bobbyrib's picture

In a world filled with fraud, it shouldn't really be too surprising. The criminals are winning.

ebworthen's picture

Corporations:  "Things are crap.  We keep cranking out product while cutting employees and their pay, yet the buyers just aren't showing up for some reason."


Trimmed Hedge's picture

Imagine how much money these companies could save if they outsourced all their executives...

DeadFred's picture

Sssshh! It isn't time for phase 3 yet.

Bobbyrib's picture

That phase will never come. The MBA's won't outsource themselves.

rustymason's picture

Listening to the calm reasonable voice of Jim Rickards, I get the feeling that, even though we are flying off a cliff and are inevitably going to crash and explode in a huge ball of flame, everything has been anticipated and we have the situation under control.

Seer's picture

For a minute there I was worried...

ThisIsBob's picture

To coin a phrase:  If roller bearings ain't happy, ain't nobody happy.

disabledvet's picture

What do they think? "our only problem is with Wall Street and their useless media." These profits...and these management teams have been nothing but spectacular during the greatest collapse in US financial history. And what do the banks do? "Don't lend a plug nickel." This is the biggest failure of money center banking in US history....new banks can arise from these ashes...as well as new monetary policy. A Novus Ordu Seclorum may indeed be right around the corner here as what existed previous to 2008 becomes "fossilized."

WTFUD's picture

Dooby dooby doo, dooby dooby doo
doobydoo doobydoo doobydoo

Racer's picture

"accountable to their shareholders every quarter"