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Earnings Call Transcripts Analysis, Q4 2018

April 2019
Executive Summary
Hamilton Place Strategies (HPS) analyzed quarterly earnings call transcripts of
U.S. public companies to identify key issues influencing the business community's
decision making. This report contains our analysis of Q4 earnings call transcripts of
U.S. domiciled companies listed on the Russell 3000 index. The calls included in
this analysis took place from January-March 2019.
Key Findings:
• Mentions of trade policy on Q4 earnings calls decreased to 15 percent – a
difference of four percentage points from Q3 earnings calls numbers.
• Mentions of Brexit rose steeply on Q4 2018 earnings calls. Only 3.5 percent of
Q3 earnings calls discussed Brexit, but that number jumped to 9.8 percent in Q4.
• While only 43 calls mentioned workplace conditions, half of these companies are
providers of consumer discretionary goods and services.

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GOVERNMENT AND POLICY

Tax Policy And Trade Headlined Policy Conversations


On Russell 3000 Companies' Q4 2018 Earnings Calls
Percent Of Total Q4 '18 Calls Mentioning Select Policy Topics

Tax Policy 26.2

Trade/Tariffs 15.5

Financial Regulations 9.8


In addition to these policy
Congress 9.7
topics, HPS analyzed
mentions of the following
Brexit 9.7 during Q4 earnings calls:

Administration 3.7 • Workplace conditions,


including minimum wage
and leave policies
Infrastructure 1.3
• Economic slowdown
Healthcare 0.5 • The Green New Deal
• 2018 government
Immigration 0.2
shutdown

Source: Bloomberg, HPS


Note: Categories are not mutually exclusive. 2
TRADE

Despite Continued Uncertainty Around A U.S.-China


Trade War, Fewer Companies Discussed Trade In Q4
Russell 3000 Companies Discussing Trade On Earnings Calls By
Financial Quarter

-23.7%
494 Talk of trade among Russell
500
462 3000 companies has decreased
450 23.7 percent since Q2 2018
earnings calls.
400 377
• Between Q2 and Q3 2018
350 earnings calls, discussion of
trade decreased by 6.5
300 percent.
250 • Between Q3 and Q4 2018
earnings calls, discussion of
200 trade decreased by 18.4
percent, indicating that the
150
rate at which trade talk is
100 decreasing is accelerating.

50
0
Q2 Q3 Q4
Source: Bloomberg, HPS 3
TRADE

Overall Mentions Of Tariffs Continued To Dip, While


Mentions Of Brexit Rose Steeply In Q4 Calls
Number Of Calls Mentioning Select Trade Topics

500 476
Q2: July–September 2018
450 436
Q3: October–December 2018
400 Q4: January–March 2019

350 343

300

250 237

200 173
154
150 121
100 79 84
69
48 47
50

0
Tariffs China Trade War Brexit

Source: Bloomberg, HPS


Note: Categories are not mutually exclusive. 4
BREXIT

Mentions Of Brexit In Q4 Continued To Climb As Brexit


Deadline Approaches
Number Of Earnings Calls Mentioning Brexit, By Quarter

+182% Mentions of Brexit spiked on Q4


2018 earnings calls.
237
240 • Sectors: Monthly growth in
220 the UK contracted in
December 2018, the first
200
time since September 2012
180 that services, production,
160 and construction all fell
during one month
140
• GDP: During Q4, the British
120 economy grew by 0.2
100 percent. In December 2018,
84
it contracted by -0.4 percent.
80 69
60 • Looking Ahead: As
60 51
40 companies begin Q1 2019
40 earnings calls, the April 12
20 decision deadline is
looming.
0
Q3 Q4 Q1 Q2 Q3 Q4
2017 2017 2018 2018 2018 2018

Source: Bloomberg, HPS. Landscape data from the UK Office for National Statistics. 5
HEADLINE NEWS

Many Companies Discussed Headline News On Q4


Earnings Calls
Number Of Earnings Calls Mentioning Select Political/Policy
Topics

350 337
More companies talked about the
2018 government shutdown than 300
they did Brexit, but nearly the same
number of companies discussed an 250 237
economic slowdown as they did
Brexit. 204
200
Our analysis finds that companies
tend to stay away from political
topics in favor of policy topics. For 150
example, this quarter saw only one
reference to the nascent Green New 100
Deal despite more than 100 news
media hits during the quarter. 50

1
0
Government Brexit Economic Green
Shutdown Slowdown New Deal
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TAX POLICY

While Many Discussed Tax & Fiscal Policy, One In 10


Calls Specifically Mentioned 2018 Tax Reform
Number Of Earnings Calls Mentioning Select Tax Topics

600
555 Half as many calls talked about
550 the 2018 GOP Tax Cuts & Jobs
500 Act compared to tax and fiscal
policy.
450
Highlights:
400
• Notably, while buybacks were
350 discussed on 504 earnings calls,
300 only 50 of these (9.9 percent)
were within context of 2018 tax
250 227
reform.
200
• Companies did not discuss
150 border-adjusted tax, interest
100 deductibility, 100 percent
50 expensing, or destination-based
50
13 taxes alongside the 2018 tax
0 plan.
Tax & Fiscal 2018 Tax Buybacks Repatriation
Policy Reform & 2018 Tax & 2018 Tax
Reform Reform
Source: Bloomberg, HPS 7
WORKPLACE CONDITIONS

Consumer Discretionary Goods Companies Discussed


Work Conditions More Than Other Industries
Conversation On Work Conditions By Industry Of the 43 companies that discussed work
conditions on earnings calls, over half are
providers of consumer discretionary goods and
2.3%
services.
4.7%
This topic breakdown tracked mentions of paid
4.7% 4.7%
family and medical leave, parental leave, and
minimum wage.
9.3%

55.8%

18.6% Hotel, Resort, Entertainment, & Media


Company
Based In Nashville, TN
”…when Disney announces it's going to $15 an
hour minimum wage, we can't stick our head in
Consumer Discretionary Health Care the sand. We have to deal with it. And that's
what we're doing."
Real Estate Information Technology
Financials Consumer Staples - Colin V. Reed, Ryman Hospitality, 2/26/19
Industrials

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GLOSSARY – SECTOR CLASSIFICATIONS

Glossary

• Consumer Discretionary Sector: The Consumer Discretionary Sector encompasses those businesses
that tend to be the most sensitive to economic cycles. Its manufacturing segment includes automotive,
household durable goods, leisure equipment, textiles, and apparel. The services segment includes
hotels, restaurants and other leisure facilities, media production and services, and consumer retailing
and services.
• Consumer Staples Sector: The Consumer Staples Sector comprises companies whose businesses
are less sensitive to economic cycles. It includes manufacturers and distributors of food, beverages, and
tobacco, and producers of non-durable household goods and personal products. It also includes food
and drug retailing companies as well as hypermarkets and consumer super centers.
• Energy Sector: The Energy Sector comprises companies engaged in exploration and production,
refining and marketing, and storage and transportation of oil, gas, coal, and consumable fuels. It also
includes companies that offer oil and gas equipment and services.
• Financials Sector: The Financials Sector contains companies involved in banking, thrifts and mortgage
finance, specialized finance, consumer finance, asset management and custody banks, investment
banking, and brokerage and insurance. It also includes Financial Exchanges & Data and Mortgage
REITs.
• Health Care Sector: The Health Care Sector includes health care providers and services, companies
that manufacture and distribute health care equipment and supplies, and health care technology
companies. It also includes companies involved in the research, development, production and marketing
of pharmaceuticals and biotechnology products.

Source: MSCI GICS® Sector Classification 9


GLOSSARY – SECTOR CLASSIFICATIONS

Glossary Cont.

• Industrials Sector: The Industrials Sector includes manufacturers and distributors of capital goods such
as aerospace and defense, building products, electrical equipment and machinery, and companies that
offer construction and engineering services. It also includes providers of commercial and professional
services including printing, environmental and facilities services, office services and supplies, security and
alarm services, human resource and employment services, and research and consulting services. It also
includes companies that provide transportation services.
• Information Technology Sector: The Information Technology Sector comprises companies that offer
software and information technology services, manufacturers and distributors of technology hardware and
equipment such as communications equipment, cellular phones, computers and peripherals, electronic
equipment and related instruments, and semiconductors.
• Materials Sector: The Materials Sector includes companies that manufacture chemicals, construction
materials, glass, paper, forest products and related packaging products, and metals, minerals and mining
companies, including producers of steel.
• Real Estate Sector: The Real Estate Sector contains companies engaged in real estate development and
operation. It also includes companies offering real estate-related services and Equity Real Estate
Investment Trusts (REITs).
• Telecommunication Services Sector: The Telecommunication Services Sector contains companies that
provide communications services primarily through a fixed-line, cellular or wireless, high bandwidth,
and/or fiber optic cable network.
• Utilities Sector: The Utilities Sector comprises utility companies such as electric, gas, and water utilities.
It also includes independent power producers and energy traders, and companies that engage in
generation and distribution of electricity using renewable sources.
Source: MSCI GICS® Sector Classification 10