Slowing global growth and an inverted yield curve have begun to rattle markets and stoke investor fears:
To address these questions with data and facts, we look to the Amenity Forecast Index, which quantifies the tone of forward-looking commentary of US public companies. What did we find? The Amenity Forecast Index checks in at 45.0, sharply off the lows, but down 5% year-over-year. The recent bounce suggests companies are more optimistic when looking past a softer Q1.
About the Index: Earnings sentiment of only forward-looking commentary from U.S. quarterly earnings calls. This analysis goes beyond the stated revenue and EPS guidance to capture all significant forward-looking financial commentary: market share, new products,pricing, inflation, margins, growth, Capex, hiring, share repurchase, etc.
Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.
Have global growth fears migrated to the US consumer? Our data says no, or at least not yet, as spring spending appears to be on solid footing:
"We continue to believe, as we said last quarter, that the market took a natural pause, it has now adjusted and recalibrated, and we’re optimistic that demand, driven by fundamental economic strength, will continue to accelerate through the spring selling season."
"You have already heard from several retailers that prolonged winter weather caused a soft start to fiscal Q1. In the first part of the quarter, our entire footprint experienced colder average temperatures year-over-year. Markets that were less impacted by weather performed significantly better than their more weather-affected counterparts.As temperatures in those markets have stabilized, we are seeing demand rebound."
"We saw market conditions beginning to improve in January with further improvement in February, and we are encouraged to see the solid trends continuing in March."
"We expect sales in the first half to be adversely affected by several factors: a meaningful FX headwind, lower foreign tourist spending and a difficult comparison to strong base period comps."
"The industry grew approximately 3% total growth, and that’s a really good number. I’m excited about that. I think,we’re going to continue to be able to grow share in that environment. So I think, the consumer is really strong at this point."
"There were some timing impacts related to our NBA business and the launch of certain products year-over-year. There are always timing impacts in terms of product launches. So yes, nothing in terms of a turn or change in consumer demand. In fact, consumer demand for our apparel in North America is very strong."
Like most new network technologies, 5G hype has run ahead of reality for sometime. I even remember 5G-driven bull cases from 2017. We are finally tracking an uptick in tone as carrier investment comes closer to reality, with Juniper standing out as a curious outlier:
"We expect 5G adoption to create increased demand for memory and storage in IoT devices, wireless infrastructure and data centers. Our embedded and networking businesses are already starting to see benefit from early 5G infrastructure investments."
"We continue to see strong wireless momentum as the rollout of 5G services continues to ramp."
"There is no obvious killer use case that would lead to 5G generating more business for the Service Providers. In fact, the ARPU compression in the SP space is real and it continues, right? So if we start from that macroeconomic perspective of the business of the SPs have and therefore what they can spend,we see a couple of things. There are places where SPs need to spend because 5G requires a pretty fundamental architecture change. We are cautious with some of the spend might be shifting from other areas of their CapEx and OpEx. And so all up yet to be seen whether that is a growth."
"We see a very solid demand backdrop that everything to do with building up mobile infrastructure or 5G wireless, that’s globally."
"In fact, 5G is coming much faster than most of the industry believe."
Growth in average hourly earnings accelerated in the most recent jobs report, even as overall job creation disappointed. Is the data reflective of reality? Our data suggests recent trends are sustainable:
"You are seeing wage growth probably in the 2.5%-2.7% range, which has been good. It’s coming up. And of course, those earning the least are getting the biggest increase. So they’re seeing – those earning minimum wage, etc, because of the minimum wage increases across the country are seeing 3.5%-4.0% increase, sometimes a little bit more, where salaried or the higher-wage earnings are seeing 2% or below 2% is what we’re seeing."
"We do anticipate our inflation to stay about where it is, and we’ll continue to find productivity enhancements to help offset."
"Labor pressures, I would say, are about the same as we’ve seen in the first 2 quarters of this fiscal year. I wouldn’t call it any worse, but they still remain."
"The labor market across the U.S. is extremely tight and our more labor-intensive activities have struggled to find enough qualified labor to meet the demand from customers. We’ve been impacted by these labor shortages in MRO during the last several quarters, and while we saw sequential improvement in MRO in Q3, it was not at the level that we had anticipated."
"We still have upward pressure on wages. We think we can mitigate some of that with the workforce management program we are putting in place. But there is continued upward pressure on wages."
"As we go forward, I think that’s a topic (wage pressure) that’s going to be a challenge until there’s some shift in the employment market."
Consumer spending and customer traffic have been a bit misleading over the last couple of quarters, as many retailers have been tripped up by the negative margin impact of e-commerce growth. This trend appears to be the new normal.
"The way we think of that internally is a merchandise margin improvement of about 25 to 30 basis points, and that will be offset by increased supply chain costs by about 25 to 30 basis points."
"Gross margin is expected to decrease 100-150 basis points, reflecting continued improvements in product margin, resulting from decreased product cost and reduced promotional activity, offset by increased shipping costs due to the growth of our eCommerce business."
"The impact of the higher net freight cost, that has been one that has hurt us and we have to take a hard look at everything from pricing strategy there to – and that includes, by the way, the impact of HAY coming into the overall mix of that business."
"A lot of our supply chain initiatives to help lower some of our cost that hit gross margin should also be helpful. The tailwind – or the headwind, if you will, is the higher shipping costs that we continue to have, obviously, from both the UPS shipping rate increases but, more importantly, from the higher mix of furniture and the China tariffs, which is everybody’s question mark, as to where that’s going to land."
"We anticipate that the large retailers are going to continue to fulfill locally. That’s going to put pressure on that top-line yield, but we have the right infrastructure to do so profitably, which is where FedEx Extra Hours and similar products come into play."
Our team at Amenity Analytics looks forward to joining Fintech leaders participating in the ESG5 Summit on Thursday, April 4th. Our CEO, Nate Storch, will speak and lead a panel discussion on text analytics and ESG integration.
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Transcript text provided by S&P Global Market Intelligence.
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