Insights from 16 conference calls: Whispers from companies that reported this week

I believe that the most-underrated source of information on the economy is from corporate conference calls, particularly those that are most-sensitive to macro. I went through the calls of 16 companies that reported this week and found the comments about macro health, consumer demand and the outlook.

Here are the highlights.

Citi:

The US consumer is described as “healthy yet more discerning.”
U.S. consumer dynamics remain consistent with prior quarters, with customers being healthy but more discerning in their spending.
“Global economic performance continues to be surprisingly resilient”
Europe is experiencing a modest rebound but continues to struggle with structural challenges around competitiveness.
“ASEAN, Japan, the Middle East, Mexico and Brazil are all notable bright spots globally.”
China’s consumer sentiment and property market remain concerns
Lower discretionary spending is impacting our retail services portfolio
Signs of stress are isolated to consumers with lower FICO scores.

Proctor & Gamble (just finished):

North America organic sales grew 4%
Greater China organic sales declined 15% due to weak market conditions
Expect China to take a few more quarters to return to growth
Maintaining full year organic sales growth guidance of 3-5%

American Express (call just finished):

Transaction volume grew 9%, indicating continued customer engagement
US consumer spending remained very stable, with strong growth from Millennial and Gen-Z customers (up 12%)
Restaurant spending, a key category for Amex, grew 7% in Q3 versus last year
Airline spend accelerated slightly from 5% to 6% growth
Delinquency rates remain very low and in line with prior quarters
The company expects continued stable spending trends in Q
Management believes there’s capacity for increased spending if consumer and small business confidence improves, raised EPS guidance
“The U.S. consumer, just to pick the U.S. consumer has been really stable. I mean, it’s been just about 6% for the last few quarters.”
“We’re not seeing anything that would indicate our credit metrics are getting any worse. In fact, you saw write-offs go sequentially down.”

WD-40:

The company provided guidance for fiscal year 2025 projecting 6-11% net sales growth
The US experienced solid point-of-sale demand in Q4, though sales were down compared to an exceptionally strong Q4 last year.

Johnson & Johnson:

Mentioned macroeconomic pressures in Japan, without specifying details
Increased its adjusted operational sales growth guidance for 2024

US Bancorp:

Asset quality metrics remained stable, reflecting “ongoing macroeconomic stability.”
Credit card loan balances increased and revolver rates improved.
Management noted “improved underlying market conditions” contributing to growth in some fee income categories.

Steel Dynamics:

Management is constructive and optimistic about the steel market and demand environment heading into 2025
Underlying steel demand remains steady
North American automotive production estimates for 2024 were recently revised to stable production over the next several years
They believe rate cuts will unlock pent-up demand in housing
AI and cloud computing should support nonresidential construction through data center buildout
There is a significant deficit in aluminum supply in North America, which is expected to grow considerably

Bank of America:

Activity is fine overall, though consumers are wary of cost of living increases and higher rates.
Commercial business trends consistent with a lower growth economy.
Businesses want to grow but are being more careful due to concerns about final demand
CEO: “an economy that continues to be stable, albeit with slower growth and falling inflation.”
Consumer credit losses declined as expected
Expect a moderating interest rate environment to unlock pent-up project work and create new opportunities in 2025

PNC Financial Services Group:

The economy is described as “fine” with consumers still spending.
Commercial loan demand remains soft, with utilization rates still low and below historical averages
Companies are facing some margin pressure as they can’t pass on price increases as easily
There’s discussion of cost-cutting, but this hasn’t translated to significant layoffs yet

PPG Industries:

PPG sees a challenging macroeconomic environment continuing, with mixed demand across sectors
Auto OEM industry, particularly in the U.S. and Europe, has seen unscheduled prolonged downtime, called it a “rapid decline”
PPG expects this downturn to continue into Q4, but anticipates an uptick in 2025 based on customer feedback and IHS projections.
General industrial activity in the U.S. and Europe remains lackluster and mixed by end use.
Aerospace strong and expected to stay strong in 2025
PPG notes ample supply in their supply chain for 2025, which should help to keep prices down

Blackstone:

Blackstone is seeing signs of recovery in commercial real estate
Blackstone expects increased M&A and IPO activity in 2025 as debt costs come down and equity markets remain strong

Insteel Industries:

Market conditions remained sluggish in Q4, with weak order backlogs contributing to plant inefficiencies.
The company is being patient rather than trying to stimulate demand through price reductions
For fiscal 2025, they expect a gradual improvement in construction end markets, though current indicators are mixed

CSX:

Weakness in metals and automotive markets
Seeing strength in chemicals, agriculture, forest products, and minerals
Expect modest volume growth in Q4
Expect benefits from infrastructure spending and potential improvement in trucking market

Autoliv:

Global light vehicle production declined nearly 5% in Q3
Seeing production cuts in North America, Europe and Asia (ex-China) due to slow vehicle sales and inventory adjustments
Expects a 9% decline in European light vehicle production for Q4.

Alcoa:

In aluminum, global demand is at record levels. Specifically in North America and Europe, the packaging segment is recovering.
The transportation market overall has been steady with some slowing of growth within the automotive sector. For building and construction, it has been a challenging year, but rate cuts in Europe and in the U.S. are likely to provide some support for a recovery in the future.
When you compare power in Spain versus Germany and France, Spain is fundamentally uncompetitive.

Morgan Stanley (mostly referring to the wealth management business here)

So needless to say, the markets are improving. You’re seeing momentum in the economy. Uncertainties are lifting. And retail clients are engaged, both from seeking advice, but also coming to the platform as new clients, which I think is a particularly good trend to watch.

Collective takeaways from me:

The US economy is stable with the main stress on bottom-quartile consumers
China and Europe face challenges and are soft
Manufacturing and automotive sectors face ongoing challenges, particularly in Europe and North America.
Rate-sensitive sectors like housing and automotive are under pressure
Inflation pressures are easing but remain a concern for businesses
There is optimism for 2025 due to rate cuts

I don’t think there is much to worry about here as rate cuts should help in the soft spots and post-election uncertainty should lift, though politics were hardly mentioned. As this week’s retail sales report showed, the consumer is fine.