Room to raise the ceiling: management says its own prices, rates, or terms sit below what the market would currently bea
The model's full reasoning — Q3 2022 call → NOWe need to determine if management conveys that the company is currently charging less than what the market would bear, and that it is actively closing that gap while customers stay. Look for management's own words about pricing, fees, rates, terms being below value and moving to close. In the transcript, there are mentions of deposit rates, loan pricing, fees. For example, Don Kimble mentions that they were "a little stingy on some of our deposit rates" and that they plan to use deposit beta to retain or attract customers. That suggests they were paying less on deposits (i.e., charging less for deposits? Actually deposits are liabilities, so paying less interest is good for them, but from customer perspective, they are getting lower rates. But the question is about what the company sells—its products/services. For a bank, it sells loans and services. The gap would be if they are charging less on loans or fees than market. They mention that they are increasing deposit rates to retain customers, but that's cost. They also mention that they are seeing deposit beta increase. But is there a claim that they are undercharging on loans? They talk about loan pricing: "we haven't seen the commercial spreads widen that much yet" and "we would expect that to pick up over time." That suggests they are not yet seeing spread widening, but they expect it. That is not a current gap being closed. They also mention that they are being disciplined in underwriting and walking away from business. They mention that they are raising rates on deposits, but that's cost. The question asks: "management convey that the company is currently charging LESS for what it sells than the market would presently bear" — that could be on loans, fees, etc. They mention that they are being "stingy" on deposit rates, but that's about what they pay, not what they charge. They also mention that they are implementing a new NSF OD fee structure that will decrease service charges on deposit accounts by approximately $25 million. That is a decrease in fees, not an increase. So that's not closing a gap upward. They also mention that they are seeing loan growth and that they are bringing more onto balance sheet, but no mention of undercharging. The only possible thing is that they are increasing deposit rates to retain customers, but that's a cost increase, not a price increase for what they sell.
| Ticker | Company | Call | Date | Call grade |
|---|---|---|---|---|
| MEC | Mayville Engineering Company, Inc. | Q3 2022 | 2022-11-05 | B+ |
| CAG | Conagra Brands, Inc. | Q2 2017 | 2016-12-22 | C+ |
| SOHO | Sotherly Hotels Inc. | Q3 2016 | 2016-11-08 | D |
| RCL | Royal Caribbean Cruises Ltd. | Q1 2016 | 2016-04-29 | C+ |
| HPP | Hudson Pacific Properties, Inc. | Q4 2015 | 2016-02-25 | C |
HPP · Q4 2015 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices, rates, fees, or terms sit meaningfully...YES The transcript shows management explicitly describing a gap between its current charges and what the market now supports, then confirming that the company is already closing it through mark-to-market resets and higher new/renewal rents. Victor Coleman states that the company has “rolled out 80% plus mark to market” on recent leases 2.5 years old, and that cash rent spreads on 1.6 million square feet executed since the acquisition were “north of 30%” with “20%, 25% mark-to-market for 2016 and 2017.
MEC · Q3 2022 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices sit meaningfully below the value custom...YES Management explicitly states that they have taken pricing actions in 2022 and have "more room for margin expansion through continued value pricing even beyond the pricing actions taken during 2022." This conveys that their current prices sit below what the market would support, and they are actively beginning to close that gap with further value pricing.
SOHO · Q3 2016 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices, rates, fees, or terms sit meaningfully...YES The transcript shows management explicitly identifying a rate gap at the Laurel hotel (and similar situations at other properties) where current charges sit below the competitive set/market, while describing active steps already underway to close that gap through continued ramp-up and occupancy/rate improvements.