Exxon Mobil Corp. investors experienced a year of extremes in 2008. Shares of the Irving, Texas–based company fell from a high of $94.47 in May to a low of $62.35 in October, roughly tracing a decline in the price of oil as the global economy ground to a halt. Shareholders confronted the oil and gas giant with question after question, according to David Rosenthal, vice president of investor relations for Exxon Mobil, where he has worked for the past 30 years. They wanted to know more about its business plans, risk management, capital preservation and counterparty risk.
[Click here to view complete results of the 2009 America’s Best Investor Relations rankings.]
Rosenthal’s team handled the situation by increasing its outreach to investors through phone calls and face-to-face meetings. That eased concerns and helped Exxon Mobil win top honors in the Integrated Oil sector among buy-side portfolio managers and analysts surveyed for Institutional Investor’s second published ranking of America’s Best Investor Relations. The first ranking appeared in 2006.
II canvassed both sides of the Street to determine which U.S. companies boast the best investor relations teams. On the buy side more than 650 portfolio managers and analysts at some 400 investment management firms representing $5.7 trillion in U.S. equity assets participated, while more than 400 analysts at roughly 100 sell-side firms also took part. The result is the accompanying list of winners from 54 sectors in nine categories.
The combination of a troubled economy and volatile markets means there’s more pressure than ever on IR departments to keep their constituents informed and happy. “It’s easy for companies to withdraw from engagement with shareholders in tough times, but when times get tough, that’s when you’re talking the most,” says Clifford Fleet, vice president of investor relations at cigarette maker Altria Group in Richmond, Virginia. His department was formed in March 2008, when Altria spun off its non-U.S. tobacco business, Philip Morris International; much of the existing IR team went with the spin-off. In the short time they have been a team, Altria’s IR pros — led by 12-year company veteran Fleet — have impressed the investment community, which votes the team to the top spot in the Tobacco sector on the buy side.
To satisfy their shareholders’ demand for information, credit card company MasterCard and fast-food franchiser McDonald’s Corp. both stepped up efforts to provide analysis of how currency gyrations would affect their global operations.
“In these times of increased currency fluctuation, we began providing some sensitivity analysis around how the movement of the dollar relative to the euro impacts our revenue and expense lines,” explains Barbara Gasper, group executive of investor relations at Purchase, New York–based MasterCard. “That way analysts and investors can make their own assumptions about currency movements to better estimate our results.” A veteran IR professional, Gasper joined MasterCard in March 2006, two months before the company’s initial public offering; MasterCard’s IR team is No. 1 with both sell- and buy-side voters in the Consumer Finance sector.
At McDonald’s, IR chief Mary Kay Shaw and her team provided investors with the context to understand the challenges the Oak Brook, Illinois–based company faces because of sharply fluctuating global currencies. “We’ve always encouraged investors to have a long-term perspective on our global business” that looks beyond short-term market fluctuations, says Shaw, who has worked in McDonald’s IR department for 13 years. McDonald’s is ranked No. 1 in the Restaurants sector by both the buy and sell sides.
“The McDonald’s team displays a strong knowledge of their businesses, both domestically and globally, and possesses a practical working knowledge of their competition as well as overall business trends in the restaurant segment,” says one portfolio manager. “They were also able to convey a level of confidence in the management team that gave me more comfort as an investor.”
Coca-Cola Co.’s IR pros were tested in October, when a rift became apparent between the Atlanta-based beverage company and its largest bottler, Coca-Cola Enterprises. The bottler reportedly raised its prices to consumers more than Coca-Cola had anticipated. Coke removed its chief financial officer from CCE’s board, cut funding to CCE’s operations by $35 million and raised prices on the syrup it sells to CCE to make bottled drinks. Coke’s IR director, Jackson Kelly, says the issue was a matter of communications, not strategy. To calm nerves among shareholders of both companies (Coke owns 35 percent of CCE) and Wall Street analysts, Kelly’s team rolled out a communications strategy in two stages.
“The first was an immediate outreach to key shareholders and influencers to quell concerns and rumors in the marketplace,” explains the 15-year Coca-Cola veteran. “The entire IR team was heavily engaged in this process, as was much of management. The second was to work with CCE to [develop] a communications strategy that answered the questions of shareholders and highlighted the way the two companies work together.” Sell-siders approved, voting Coke’s IR team to the top spot in the Beverages sector.
In the turbulent world of airlines, Continental Airlines’ IR team soared above its competitors in 2008 by being open and giving detailed information not provided by others in the sector, according to buy-side voters, who name the Houston-based company No. 1 in Airlines. Last year, of course, was a miserable year for U.S. airlines, which suffered from skyrocketing fuel prices during the first half and from the steep drop-off in economic activity in the second half, as many consumers stopped flying. The resulting uncertainty made it difficult for Continental and other U.S. carriers to make concrete forecasts.
“Telling the story is a lot more difficult in tougher times,” says DeAnne Gabel, IR director and 18-year Continental veteran.
Continental’s IR department is known for providing the most transparency in the industry, including monthly projections of revenue growth and jet fuel costs — two of the most important earnings drivers that investors monitor to track trends. “The team is proactive and reaches out to sell-side analysts and investors, trying to anticipate and clarify issues such as pension accounting and fuel hedging,” one investor says.
Gabel notes that it’s important investors know in advance what information they will be getting and when they will receive it. On the first business day of every month, Continental provides investors with a traffic report that contains estimates of consolidated revenue passenger miles and consolidated available seat miles.
“They can count on it,” says Gabel. “It’s not something they have to wonder about.”
For slot machine maker WMS Industries, the economic downturn has meant worrying about its mostly Las Vegas–centered customer base and trying to get its name on portfolio managers’ radar screens. A number of casino companies have been hit hard by the recession, and many are struggling to restructure their debt and stay in the game.
“If there is one proactive element that we [have been] more focused on during the past nine or ten months, it is being much more visible,” says William Pfund, IR director at the Waukegan, Illinois–based company. “Our CEO makes it a point to continually remind all of us on his executive team that we need to be more visible to our key constituencies and [be] communicating and listening — whether it be to employees, our customers or investors. It’s an almost classic textbook principle in crisis management.”
WMS’s IR team is named No. 1 by both buy- and sell-side voters in the Gaming & Lodging sector.
Pfund, a 30-year veteran of the investor relations business, has been at WMS for three years. Over the past year he has increased his efforts to personally meet with investors and analysts, spending nearly twice as much time on the road now than he did at the beginning of 2008. “In a fear-driven market where misperceptions and skepticism are the law of the land, you have to work with investors to make sure they have the perspective they need to make their valuations,” Pfund says.
With the recession far from over and volatility still gripping the equity markets, IR professionals are likely to remain on the go for the foreseeable future. “It’s back to basics: access and responsiveness from the IR person, coupled with greater visibility between quarterly conference calls or other newsworthy events,” Pfund asserts.
