Positive Outlook
2024 appears to have a more stable outlook than expected a few months ago
Summary: Companies are feeling positive about the outlook for 2024. Consumers remain resilient. Inflation is down and lower interest rates are anticipated. But the Fed may move slightly slower than markets are hoping.
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Macro
Companies are feeling positive about the outlook
"Looking ahead, 2024 appears to have a more stable outlook than may have been expected just a few months ago, with a reasonable probability of seeing the much-discussed soft landing. As Leon mentioned in his opening remarks, the U.S. economy appears relatively healthy with inflation and unemployment metrics continuing to trend favorably" - Nucor (NUE 0.00%↑) SFO Stephen Laxton
"I'm more positive about our outlook than I was this time last year. Today, as compared to a year ago, we have more clarity about the outlook for interest rates with downward movement likely later in the year. More REITs associated with material economic slowdown or recession are dissipating. Inflation pressures on operating expenses are declining" - Mid-America Apartment Communities (MAA 0.00%↑) CEO H. Eric Bolton
"Recently, we observed some relatively positive indications that favor cautious optimism, including the expectation for lower interest rates, improving consumer sentiment and unexpectedly strong GDP growth." - MasterCraft Boat (MCFT 0.00%↑) CEO Frederick Brightbill
Consumers remain resilient
"The U.S. consumer and our customers remain broadly resilient. Employment remains at historic levels with low unemployment and almost 9 million open jobs, which is a positive for consumers and our customers. However, there continue to be some constraints in white collar hiring." - Equifax (EFX 0.00%↑) CEO Mark Begor
Inflationary pressures have eased
"Last year, we had a lot of inflationary pressures and claims from our suppliers. Those have eased very substantially and are going to help us deliver the $2 billion that John talked about. The second thing is the supply chain is much more stable. That allows us to run our entire system much more smoothly and helps us remove a lot of waste. It also reduces a lot of our freight cost because we've been doing a lot of premium freight last couple of years so that will help as well. And in terms of material, we're attacking it in like 3 different ways" - Ford Motor (F 0.00%↑) Group VP & President of North America Ashwani Galhotra
"The pace of inflation continues to slow. Twelve-month inflation, as measured by the personal consumption expenditures (PCE) index, was 2.6 percent in December, down from its peak of 7.1 percent in June 2022. And the six-month rate for PCE inflation was even lower, at 2 percent…Of course, last week's payroll report was quite strong…But the broader trend has been one of moderating gains. This moderation in payroll growth largely reflects cooling demand...With easing labor demand and robust labor supply, we have seen a slowing trend for wage growth." - Federal Reserve Governor Adriana Kugler
Interest rate reductions should further boost consumer confidence
"My personal opinion is if we see interest rate reductions that's going to boost consumer confidence and their level of activity in addition to the other benefits that you described with regard to overall financing costs, et cetera. But will that happen? And to what extent will we see those, will the initial rate reduction be a signal that encourages consumers to be more active or will it take more significant reductions, and then how will those reductions play out in terms of short-term rates versus longer-term rates in retail financing for consumers." - MasterCraft Boat (MCFT 0.00%↑) CEO Frederick Brightbill
“Market expectations for gradual declines in interest rates could result in more demand for consumer durables, light vehicles and increased activity across a broad construction sector." - Nucor (NUE 0.00%↑) CFO Stephen Laxton
"And we hope that by the summer interest rates will go down and that will create another source of oxygen for this possible incoming household. So we feel good about the consumer in the U.S., but if you think about those three elements, we decided to have at least four as the guidance for the top line." - PepsiCo (PEP 0.00%↑) CEO of Europe & Sub-Saharan Africa Ramon Laguarta
But the Fed may still be slightly more hawkish than the market expects
“Should the incoming data continue to indicate that inflation is moving sustainably toward our 2 percent goal, it will eventually become appropriate to gradually lower our policy rate to prevent monetary policy from becoming overly restrictive. In my view, we are not yet at that point. And a number of important upside inflation risks remain” - Federal Reserve Governor Michelle W. Bowman
International
5 Quotes – Europe is “noticeably weaker.” China remains sluggish.
Financials
6 Quotes – Subprime delinquencies are above 2009 levels.
Consumer
11 Quotes – Lower-income consumers are feeling a lot of pressure. Uber drivers make $XX per hour.
Technology
4 Quotes – AI requires a lot of energy and that’s a catalyst for at least one company.
Healthcare
3 Quotes – GLP-1 growth is expected to slow.
Industrials and Transport
Auto & EV demand has gotten worse over the last 90 days
"Yeah, clearly, first of all, I confirm what you say. It got worse over the last 90 days or at least our view on what we are exposed to got worse. I would say the end demand in Auto has weakened. I mean the latest S&P data is now almost a percentage point down year-on-year in terms of SAAR, so that's a little less than it was before. The xEV penetration is a little slowing. Again, it is still up, but it is a little slowing. So these are just gradual movements to the less positive side than what it was 90 days ago. But I think what is probably the somewhat bigger part in here is that we just got a better handle now, what is the remaining size of the excess inventory with our Tier 1 Automotive customers, which we are working down through the first half" - NXP Semiconductors (NXPI 0.00%↑) CEO Kurt Sievers
There is a seismic change in EVs
"Now someone portrayed the change in the EV market as Darwinian. That could be a slow evolutionary change, but we think this has been a seismic change in the last six months of last year. That will rapidly sort out winners and losers in our industry. Now the catalyst for that seismic change is a combination of EV manufacturers cutting their price by 20% across all major geographies and a tremendous amount of capital flowing and a ton of new capacity into one single segment, two-row crossovers." - Ford Motor (F 0.00%↑) EVP & President of Global Markets James Farley
"I think we're at an inflection point where early on we had customers that were early adopters certainly went out and bought the BEVS. Those early adopters now already have them, and you're getting to the point where you're trying to convince the customer to find their first BEV or their last ICE. …With BEV inventory in the U.S., just under 1,500 units, 12% of our total inventory, that's up 34% from the end of Q3, which is indicative of the sales rate starting to slow down a little bit." - Penske Automotive Group (PAG 0.00%↑) COO of North American Operations Richard Shearing
“...we have significantly reduced the volume assumptions and the timing of the [EV] launches..EV volumes and the transition to EVs are a little bit slower than what we had anticipated” - Lear (LEA 0.00%↑) SVP & CFO Jason Cardew
“While market reports still project 30% or 40% growth for silicon carbide in 2024, OEM's latest EV plans indicate a more tapered growth signaling a SiC market growth in the range of 20% to 30%." - ON Semiconductor (ON 0.00%↑) CEO Hassane El-Khoury
Hertz is cutting a third of their EV fleet
“Our decision regarding the EV fleet is one driver of opportunity…because we are eliminating a portion of the EV fleet that yielded the lowest RPD and exhibited the highest level of damage incidence, we expect to yield a disproportionately higher financial benefit over this year and next than the size of the fleet reduction would imply." - Hertz Global (HTZ 0.00%↑) EVP & CFO Stephen Scherr
BEVs are selling below MRSP
"Yeah, so, John, Tony said 41% or 40% of our cars last year at MSRP, if you look conversely at BEV, 83% percent of our BEV sales were below MSRP at more than $5,800. And if you look at just across all the brands we represent on a weighted average, the ICE GPPU [ph] is almost $2,200 less than a comparable ICE." - Penske Automotive Group (PAG 0.00%↑) CEO Roger Penske
Penske has 53 days supply of BEVs
"But there's no question that demand for BEVs has slowed. And when you look at our business, 51% of our BEV business is in California, and of that business, 90% is leased. So right now, the OEMs, in order to push the business in the luxury side at least, they're having to lease it and have a residual risk. We think the bridging strategy is certainly going to be is hybrid, and that's been proven with what Toyota is committed to now going forward with Camry at 100%. 7% of the market was BEV, obviously last year. And when we look at our days' supply, we're running at about 53 days as of the end of the year. In the UK, BEV units were really, at that point, they were much higher at 36% of the market. The BEV days' supply in the UK is 67 " - Penske Automotive Group (PAG 0.00%↑) CEO Roger Penske
Hybrids are seeing stronger demand
"Our global hybrid sales were up 20% last year and we expect them to be up 40% this year. We're now the number one and number two best-selling hybrid trucks in the U.S. Maverick is number one and we're the number three hybrid brand in the U.S. behind Toyota and Honda. But unlike them, our hybrids really sell best on trucks for our side." - Ford Motor (F 0.00%↑) EVP & President of Global Markets James Farley
Labor shortages and regulation is slowing reshoring of manufacturing
"...we are seeing activity in some of the reshoring in the advanced manufacturing, so you are seeing in the EV battery plants those types of things…What I would say is some of the headwinds, we see the peak of those activities in the volume and demand coming in the next few years. And the reason for that, there is a couple of things that are headwinds now. One is we have talked about on past calls is the labor constraints. That’s real out there. A lot of these projects are competing for the same labor pool. So we do see that having an impact. And then the other thing that’s also impacting the pace of these projects is really around regulations…it can take upwards of 18 months to go from when these projects are announced is actually when they start getting shipped" - Nucor (NUE 0.00%↑) EVP of Bar & Rebar Fabrication Products Daniel Needham
Caterpillar is expecting a slowdown in heavy construction equipment volumes
"After strong performance in 2023 in mining, heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in dealer inventory during 2024 versus a slight increase in dealer inventory last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity" -Caterpillar (CAT 0.00%↑) CEO James Umpleby
Total air travel demand is still below pre-pandemic levels
"...total air travel demand remains slightly below pre-COVID levels and OEM aircraft production rates remain well below pre-pandemic levels. There is still progress to be made for the industry, and our results continue to be adversely affected in comparison to pre-pandemic levels" - TransDigm Group (TDG 0.00%↑) Kevin Stein
U-Haul demand has been weak
"Well, thank you all for joining us again for our quarterly report. There have been few positive signs in the consumer demand for either truck sharing or self-storage rentals." - U-Haul Holding (UHAL 0.00%↑) Chairman & President of AMERCO Edward Shoen
Materials & Energy
2 Quotes – Oil demand is expected to reach a new record.
Real Estate
2 Quotes – “No one should assume that the soft landing is going to stimulate a pickup in office-using employment.”
Nuggets of Wisdom
Just keep showing up
"We gotta keep showing up. And forget the Grammys for a second, just in life. You've got to keep showing up. Keep showing up. Until they give you all those accolades you feel you deserve. Until they call you chairman. Until they call you a genius. Until they call you the greatest of all time" - Musician and Business Man Jay Z
Startups are a journey with many stages of life and evolving leadership needs
"If you study the iconic technology companies, they are often mission-driven, founder-led but include a dynamic and evolving leadership team surrounding the founders who bring a wealth of experience for each stage of the company's journey." - Cloudflare (NET 0.00%↑) CEO Matthew Prince