Volatile Markets Not Hurting Companies' Prospects, Executives Say
By Austen Hufford, Aisha Al-Muslim and Maria Armental
Company executives on conference calls with analysts this week have brushed off concerns about recent volatility in stocks as part of a normal, functioning financial market. The gyrations are part of a week where the Dow Jones Industrial Average had the largest single-day point decline in its history and global markets have been roiled.
At the same time, central banks around the globe, including the Federal Reserve, are mulling rate increases.
Here is how S&P Global Inc. Chief Executive Doug Peterson on Tuesday described the impact of recent market activity on the company.
"We've built our plan, our approach to the markets looking at the economies right now, which are growing. Inflation is still low. Rates are still low. Banks have very strong liquidity and very strong capital around the world. Tax reform, we think, is a tailwind for the U.S. economy. And so, we do believe that overall economic conditions, putting aside some volatility in the markets and all of the transformation taking place in technology around us are going to be very positive aspects to how we're going to grow the business going forward."
On Tuesday, BNP Paribas SA said the recent stock market moves could have been expected as the market returns to a more normal amount of volatility from historic lows.
"Volatility has been very low in the second half of 2017," finance chief Lars Machenil said. "So, it was to be assumed that there would be a kind of an evolution back to more normal territory and that that transition could be a bit bumpy is maybe what we are seeing today."
Bearings maker RBC Bearings Inc. said Tuesday that 2018 should be a good year for U.S.-based manufacturers unless consumers get spooked by stock market declines.
"It's a very broad-based manufacturing resurgence. And I think when I look at the way that this new tax law has impacted RBC, and I multiply that times 10,000 companies, I think the effect of this new tax law on what's going to happen in calendar 2018 is going to be very impactful," CEO Michael Hartnett said on a call. "That assumes that the stock market doesn't scare the hell out of the consumer."
Highwoods Properties Inc.'s CEO Edward Fritsch told analysts Wednesday that despite the volatile start to the year in the financial markets, the office real-estate investment trust has several reasons to be upbeat. He highlighted the steadily increasing economic growth nationally, and continued job growth and real-estate fundamentals remaining healthy across its Southeastern markets.
"With all the volatility surrounding the financial markets, it's easy to get swept up in the headlines," Mr. Fritsch said. "However, conditions in [best business districts] office land remain steady."
PJT Partners Inc.'s CEO Paul Taubman told analysts Wednesday that the recent market volatility will have a short-term negative effect on merger-and-acquisition activity, but "in the intermediate term, it's going to be quite healthy."
"The fact is that these corrections are very healthy for the system," Mr. Taubman said. "They're quite disruptive and concerning in the very, very near term. But once you get this behind you, our sense is you probably have a better risk reward trade-off on valuations, probably sellers who've just seen every day that they wait, asset values increase."
"I think for a lot of reasons, corrections or---I like to joke they're little bit like annual physicals, which is they're good for your health, you always want to put them off, they're never fun having, but you're glad you had them done," Taubman said. "And I think that's a little bit how we think about this current correction that we're going through. It's not particularly comfortable, but net-net over time probably healthy in getting valuations back into line between buyers and sellers."
Willy Walker, CEO of Walker & Dunlop Inc., a commercial real-estate financial products and services company, told analysts Wednesday that he hasn't seen any patterns of deals falling out because of the recent market volatility and rate movements.
"The people who have deals that are under contract, they're moving forward with them," Walker said.
He added, "Market-rate volatility and rates moving up does make certain deals challenging with borrowers who are very rate-sensitive on how they are buying and what they are buying. And as a result of that our bankers have to work very hard to come up with creative solutions" such as early rate locks.
Commercial real-estate company CBRE Group Inc. said Thursday that some of their buyers had expressed worries over the stock market and interest rates.
"We're hearing from them some level of concern. They're not overwhelmingly concerned, but they're watching it closely and they think there is more reason to watch it now than there has been for several years," CEO Robert Sulentic said. "That's one of the reasons why we don't think there'll be a real growth in sales volumes this year, in an otherwise good economy."
Write to Austen Hufford at email@example.com, Aisha Al-Muslim at firstname.lastname@example.org, and Maria Armental at email@example.com
(END) Dow Jones Newswires
February 08, 2018 15:15 ET (20:15 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.