We track Emerging Markets growth rates for our covered companies. It has accelerated consistently since mid-2016…except for Q4 which likely feels the pinch from China’s volume-based procurement (VBP) program. One has to wonder what Q1-2020 will look like, between VBP and COVID-19 (coronavirus).
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Q4 revenue of $3.24B was well ahead of both our $3.16B and Consensus’ $3.15B. The revenue beat was driven by subscriber-related revenue as ARPU growth was above our estimates 257bps (+1.8% vs. our -0.8%) – we believe the ARPU beat was primarily a result of a mix-shift that skewed more to Satellite/DBS (vs. Sling) than we were expecting.
Scheduled system seat capacity for the Jan-Apr four-month period shows seat growth of +3.6% y/y, flat w/w. Domestic growth was up 9bp w/w to +4.0% y/y driven by additions by DAL and AAL slightly offset by ALGT. Pacific capacity was down 5.9pp w/w to -14.0% y/y on cuts to China and Hong Kong, transatlantic was up 46bp w/w to +6.2% y/y, and Latin was flat w/w at +1.9% y/y. Int’l growth was down 65p w/w to +0.8% y/y. Domestic competitive capacity was up 14bp w/w to +4.6% y/y. Early domestic Block 2 growth rates for the network carriers: AAL (+6.0% y/y), DAL (+5.9% y/y), UAL (+2.4% y/y).
BHC just reported solid Q419 results + issued 2020 guidance. As we outlined in our outlook report where we downgraded BHC to PP, 2020 is set to be at best a “meet” year for BHC and not a “beat” year on estimates. We’ll explain step by step below.
4Q19 E&P earnings has been a slow drip thus far, but heats up in earnest this week with prints from five of the largest producers (CXO, DVN, FANG, PXD, PE). These five companies collectively accounted for approximately ~$12B of USL-directed D&C capex in 2019, which illustratively is roughly the size of HAL’s 2019 NAM rev. CXO, DVN and FANG reported AMC yesterday and on aggregate reduced 4Q19 capex by 13% sequentially and collectively guided to a relatively benign 4% decrease in 2020 capex, with modest increase by FANG offsetting expected declines from CXO and DVN. PE and PXD report AMC today, with PE having already announced its 2020 capex budget (+16% standalone; -20% pro forma for JAG acquisition) and PXD informally guiding to a ~17% increase in total 2020 spending. In aggregate, the most recent guides suggest a modest 2% decline in 2020 capex from the group, considerably better than the double-digit declines expected for overall USL spending (smaller/privates likely lower).
A more sluggish start to the year for the L48 rig count, as int’l (including CDN) grinds higher. Perhaps due to the ill-timed, China-led pullback in commodity prices in mid-Jan, the L48 rig count has started off perhaps a bit more sluggish than drillers anticipated into year-end (even relative to the low bar). HP is tracking modestly below its implied 1Q20 L48 rig target, with perhaps lower adds outside of the Permian. PTEN is tracking above than its implied guide, with intra-quarter adds across all five of its top customers (ex-CVX). NBR is tracking below its 4Q19 level, and the company is set to report/guide AMC Thurs (perhaps tough comps against better HP/PTEN outlooks). Finally, PD-CA is tracking in-line with its prior guide, which includes the rollover with a key Appalachia customer (CVX) and general rig churn to start the year. As we have for several months, we remain relatively cautious on drilling vs. frac, with ‘flat’ rig pricing (or modest headwinds) and super spec high grading potentially yielding margin compression. Outside of USL, the int’l rig count continues to grind higher, with a better-than-expected start for CDN land (+30% Y/Y) largely benefiting PD-CA on a relative, geographic basis.
Yesterday (02/18/20), WAB reported 4Q EPS slightly below Consensus, provided C20 cash EPS guidance largely in line with expectations, and gave C20 cash flow guidance well below our expectations. The 2020 guidance has been an overhang on the stock given big declines in rail locomotive deliveries this year, and with the guide now behind us, the stock rallied 4%.
The STB released January headcount data for the rails (U.S. operations only) yesterday. Total headcount declined 12% y/y in January vs. -11% each of the prior 2 months. This is the largest y/y decline in the history of our data series (back to 2001). Total headcount also fell 2.4% m/m in January, the 14th straight sequential monthly reduction. Headcount on average for the Big 3 US rails declined 14% y/y, while volumes fell 6% y/y on average, implying the best labor productivity in the past 13 months.
Yesterday (02/18/20), EXPD reported 4Q EPS of $0.79, in line with its pre-report of $0.78-$0.81 and down over 20% y/y against a very tough comp when EXPD benefited from pre-tariff shipping activity. Consolidated net revenue declined 5% y/y with gross revenue and gross yields both below our expectations. Net operating margins also declined 400bp y/y as headcount increased despite weak volumes. The stock rose 1% yesterday after it had fallen 9% since its pre-report.
The way digital identity is managed remains largely unchanged since the advent of the Internet with no system allowing a person to present verifiable credentials across institutions or geographic borders. Instead, identity administrators such as government agencies or commercial services house the unique credentials of their users in centralized datastores siloed from other authorities. This approach puts identity ownership in the hands of the issuer rather than the person claiming the identity. However, an emerging digital framework known as self-sovereign identity looks to shift control back into the hands of the user.