An uncontained pandemic. A shrinking economy. What could corporate executives possibly be excited about?
A lot, it turns out. Executives said “super excited” more than ever in the third quarter, according to a analysis of transcripts from earnings calls, conferences, and analyst and shareholder meetings. The latest batch of earnings calls in October suggest the corporate big cheese are still in good cheer (or at least pretending to be when analysts and shareholders are on the line).
As companies post third-quarter earnings, their results are trending better than expected. Some 85% of companies in the S&P 500 Index of large US stocks have reported earnings-per-share that exceeded analyst estimates, and 81% of them posted a revenue surprise, according to FactSet analyst John Butters. Analysts are gradually increasing their estimates after slashing them in March through May as Covid-19 tore through the global economy.
“Analysts are having a hard time trying to figure out what the prospects are for businesses,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. For many companies, earnings expectations will remain tied to the path of the virus and the dissemination of a vaccine.
Information technology execs, many of whose products have been unscathed—if not accelerated—by the pandemic are the most animated. These companies accounted for 28% of the “super excited” references in the last 1,146 transcripts. (IT companies only make up about 11% of transcripts.) As a sector, their shares have also been super pumped this year.
Take Zoom Video Communications, one of the biggest winners from the pandemic. On Oct. 14, Zoom CFO Kelly Steckelberg said she is enthused about videoconferencing helping to democratize the workplace:
When you look on the screen, we’re all the same size. How do you keep that positivity, that sense of democratization. When we start going back, and some people might be in the office and some people might be working from home? And that’s why I’m super excited about this technology we’re starting to see which allows you to have the same experience. Really, it’s like I’m sitting in my sister’s house right, but you’re sitting in the office, how do we have that same experience.
The stock is up 665% this year. Of course she’s excited.
Chip maker Nvidia is also in good humor. You might need to be a computer scientist to understand exactly what CEO Jen-Hsun Huang was so bubbly about on Oct. 5, but it has something to do with AI and network traffic.
We’re super excited about doing that. And this is one of the reasons why and if you go back to the very early days when I talked about the acquisition of Mellanox, I talked about in-network compute. And I talked about how the network itself will become a fabric where we do a lot of computation, a lot of AI. This is the first step.
The stock is up 127%.
Spotify, which Sentieo classifies as a communications services company, says it’s delighted about its deal with Universal Music Group, which will give the Swedish firm streaming rights for the label’s catalogue. On Sept. 16, Spotify CFO Paul Vogel said the deal provides validation.
So we’re super excited about where we are with Universal. And I think for us, it really validates the marketplace strategy. It validates what we are trying to do that the largest label wants to lean into the tools and services that we’re providing. And so we’re really optimistic that this is sort of the next step in the growth and evolution of where the marketplace will go.
The stock is up 81%.
The CEO of Elastic, a search and data analytics company, almost single-handedly dragged the information technology sector’s “super excited” references higher. Shay Banon used the phrase four times on Oct. 14—he’s “super excited about our relationship with Google”—and twice on Sept. 9.
The stock is up 69%.
Consumer discretionary stocks are also having a good year, particularly companies like Home Depot that have benefited from people staying home during the pandemic. CEO Craig Menear dropped four super-exciteds on Sept. 10 at a Goldman Sachs conference.
We’re super excited to see the engagement from the DIY customer. I think that customers have spent a lot of time around their home. They see a lot of things that they want to do. And at the same time, there’s more wear and tear in the home. Our customers tell us from surveys that home is never more important than it is today. And so we’re super excited about the opportunity that we see.
Energy companies certainly have less to be excited about, as oil prices and energy demand tend to decline whenever the global economy slows. Shares in these enterprises have fallen about 50% in 2020.
The CEO of EOG Resources, William Thomas, is among the few executives in this sector to have used that expression recently.
We’ve got the most robust set of exploration opportunities that ever have been in the company. I’ve been with the company for decades and it’s certainly the largest and highest-quality exploration inventory we’ve ever had. And we’re super excited about it.
The crude oil and natural gas exploration company has fallen 56% this year.
Likewise, financial companies aren’t having a great year. The economic malaise could mean a wave of defaults and missed payments, and low interest rates are making their bread-and-butter lending businesses less profitable. The last US mega-bank to be super excited about something was pre-pandemic, when Douglas Petno, JPMorgan’s CEO of commercial banking, said the company was “super excited to continue to deepen our presence” with middle-market clients.
JPMorgan’s stock has dropped 26%
Of course, executives aren’t the only ones who say they’re super excited. Analysts occasionally use it, too.
On Oct. 21, Umer Raffat, an analyst at Evercore ISI Institutional Equities, tried to suss out why Biogen CEO Michel Vounatsos seemed less excited than he used to be.
Michel, I know you were super excited the day you guys decided to file with FDA. I don’t know if it’s just the virtual nature of this call today, but I’m not quite hearing that, at least on the call for the EU filing. Is there something EU is raising which is different than FDA? I’d be curious what you say on that, Michel.
The CEO replied that the biotech firm, which is focused on Alzheimer’s research, is “equally excited about all the interactions with regulators all around the world.” The company’s stock is down 10% this year.
—With assistance from Dan Kopf in Oakland.