1 00:00:02,720 --> 00:00:11,520 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,640 --> 00:00:13,760 Speaker 1: with Scarletfoo and Paul Sweeney. 3 00:00:13,880 --> 00:00:16,680 Speaker 2: Concerned about rising crisis spooking investors? 4 00:00:16,720 --> 00:00:19,000 Speaker 3: What does renewables investment look like in the US? 5 00:00:19,239 --> 00:00:23,079 Speaker 2: More power talk coming out of this administration. 6 00:00:22,560 --> 00:00:26,279 Speaker 1: Breaking market headlines and corporate news from across the globe. 7 00:00:26,280 --> 00:00:28,280 Speaker 3: The President wants a lower interest rates, He wants a 8 00:00:28,360 --> 00:00:29,160 Speaker 3: rate cut cycle. 9 00:00:29,280 --> 00:00:29,680 Speaker 4: How do you. 10 00:00:29,680 --> 00:00:31,640 Speaker 2: Broaden out the AI play? 11 00:00:31,880 --> 00:00:33,599 Speaker 3: Are people just looking for someone to worry about when 12 00:00:33,640 --> 00:00:34,240 Speaker 3: it comes to China? 13 00:00:34,440 --> 00:00:38,880 Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio 14 00:00:39,080 --> 00:00:41,200 Speaker 1: Originals and the Bloomberg Business App. 15 00:00:42,400 --> 00:00:44,640 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 16 00:00:44,720 --> 00:00:47,000 Speaker 2: business story is impacting Wall Street and the global markets. 17 00:00:47,200 --> 00:00:49,479 Speaker 3: Each and every week we provide in depth research and 18 00:00:49,560 --> 00:00:51,400 Speaker 3: data on some of the two thousand companies and one 19 00:00:51,479 --> 00:00:54,000 Speaker 3: hundred and thirty industries are analysts cover worldwide. 20 00:00:54,080 --> 00:00:56,680 Speaker 2: Today, we'll look at why Kraftthein's new CEO is halting 21 00:00:56,680 --> 00:00:58,800 Speaker 2: the process of splitting the company. 22 00:00:58,440 --> 00:01:00,480 Speaker 3: Plus a look at why T Mobile ad and fewer 23 00:01:00,480 --> 00:01:02,080 Speaker 3: mobile phone subscribers last quarter. 24 00:01:02,200 --> 00:01:04,600 Speaker 2: But first we begin with a deal in the energy space. 25 00:01:04,720 --> 00:01:07,920 Speaker 3: This week, deep water oil rigowner Transocean agree to acquire 26 00:01:08,040 --> 00:01:10,600 Speaker 3: rival Valaris in an all stock deal valued at five 27 00:01:10,640 --> 00:01:11,840 Speaker 3: point eight billion dollars. 28 00:01:12,080 --> 00:01:15,240 Speaker 2: The deal will create the world's largest offshore recontractor by 29 00:01:15,240 --> 00:01:16,120 Speaker 2: market value. 30 00:01:15,920 --> 00:01:18,760 Speaker 3: And this comes as offshore drilling has been booming, especially 31 00:01:18,800 --> 00:01:21,640 Speaker 3: in deep waters for more. We were joined by Scott Levine, 32 00:01:21,720 --> 00:01:23,560 Speaker 3: our senior energy services analysts. 33 00:01:23,760 --> 00:01:26,039 Speaker 2: We asked Scott to break down who these companies are 34 00:01:26,160 --> 00:01:27,480 Speaker 2: and the reasons for the deal. 35 00:01:27,840 --> 00:01:33,160 Speaker 5: Two of the bigger names in offshore drilling. Transocean has 36 00:01:33,200 --> 00:01:38,160 Speaker 5: the largest backlog, Valaris has largest fleet. Valaris's name may 37 00:01:38,200 --> 00:01:40,240 Speaker 5: not be that familiar to a lot of folks here. 38 00:01:40,280 --> 00:01:42,920 Speaker 5: It was actually a combination of a two companies called 39 00:01:43,040 --> 00:01:44,680 Speaker 5: Ensco and row In a few years ago. But there 40 00:01:44,680 --> 00:01:48,240 Speaker 5: are two of the biggest offshore drillers, and I think 41 00:01:48,280 --> 00:01:53,080 Speaker 5: that this deal really has both offensive and defensive motivations. 42 00:01:53,960 --> 00:01:57,920 Speaker 5: Offshore drilling is in a little bit of a recovery mode, 43 00:01:58,040 --> 00:02:02,120 Speaker 5: really kind of has been. Most of the drillers went bankrupt. 44 00:02:02,200 --> 00:02:08,320 Speaker 5: Actually during the twenty twenty one downturn. Transotion was really 45 00:02:08,360 --> 00:02:11,040 Speaker 5: one of the only companies that did not go bankrupt. 46 00:02:11,639 --> 00:02:15,200 Speaker 5: Valaris did, and so Transition has kind of been saddled 47 00:02:15,200 --> 00:02:18,840 Speaker 5: with all this debt as a result of not having 48 00:02:18,840 --> 00:02:22,600 Speaker 5: their balance sheet wipe during a bankruptcy, and so that's 49 00:02:22,639 --> 00:02:25,200 Speaker 5: been a limiting factor on their growth for quite some time. 50 00:02:25,440 --> 00:02:29,000 Speaker 5: And this deal, which is an all stock deal, will 51 00:02:29,040 --> 00:02:32,800 Speaker 5: accelerate their leveraging process and remove some of that burden 52 00:02:32,880 --> 00:02:36,480 Speaker 5: from them and better enable them to capitalize on an 53 00:02:36,560 --> 00:02:40,040 Speaker 5: upturn in offshore drilling. And the second of the thing 54 00:02:40,120 --> 00:02:42,200 Speaker 5: that's important to note here is that it brings a 55 00:02:42,280 --> 00:02:47,320 Speaker 5: jack up fleet jet. So a jackup fleet jackups are 56 00:02:47,360 --> 00:02:51,880 Speaker 5: basically shallow water rigs okay, as opposed to the deep 57 00:02:51,960 --> 00:02:57,040 Speaker 5: water drill ships or floaters, and Transotion had exclusively been 58 00:02:57,280 --> 00:03:01,800 Speaker 5: a floater fleet. Jackups are to the seabed, the seabeds 59 00:03:01,840 --> 00:03:05,079 Speaker 5: lower and shallow water, and Valaris is one of the 60 00:03:05,120 --> 00:03:09,680 Speaker 5: biggest players there, and so this gives Transition exposure to 61 00:03:09,880 --> 00:03:13,720 Speaker 5: the jack up or shallow water market, which has really 62 00:03:13,840 --> 00:03:17,720 Speaker 5: undergone an interesting phase in that it was a bit 63 00:03:17,720 --> 00:03:20,160 Speaker 5: of a downturn the last couple of years. The biggest 64 00:03:20,320 --> 00:03:24,359 Speaker 5: jack up driller is Saudija Ramco, and a couple of 65 00:03:24,400 --> 00:03:29,320 Speaker 5: years ago Saudia Ramco made significant cuts to their drilling program. 66 00:03:29,480 --> 00:03:34,440 Speaker 5: They essentially Saudi Arabia abandoned plans to increase their oil 67 00:03:34,480 --> 00:03:37,720 Speaker 5: production capacity to thirteen million barrels a day, and what 68 00:03:37,760 --> 00:03:40,480 Speaker 5: we've seen since then is a lot of jack up 69 00:03:40,600 --> 00:03:44,080 Speaker 5: rigs being laid off effectively in twenty twenty four and 70 00:03:44,160 --> 00:03:49,040 Speaker 5: twenty twenty five. Indication suggests those rigs will return this year, 71 00:03:49,080 --> 00:03:53,680 Speaker 5: so that market is bottomed and maybe on the cusp 72 00:03:53,720 --> 00:03:57,040 Speaker 5: of an upswing. So this deal will give Transotion the 73 00:03:57,080 --> 00:03:59,480 Speaker 5: ability to participate in that recovery. 74 00:03:59,760 --> 00:04:02,040 Speaker 3: So in terms of why now, when it comes to 75 00:04:02,080 --> 00:04:05,040 Speaker 3: the timing of this deal, the COEO transortion cited a 76 00:04:05,120 --> 00:04:08,640 Speaker 3: multi year drilling upcycle. Where are we in that cycle? 77 00:04:08,680 --> 00:04:08,880 Speaker 5: Are we? 78 00:04:09,200 --> 00:04:10,080 Speaker 3: You know, first inning? 79 00:04:12,080 --> 00:04:14,920 Speaker 5: It's kind of been an interesting upcycle, so we saw 80 00:04:15,560 --> 00:04:20,120 Speaker 5: an inflection in twenty two and twenty three, and twenty 81 00:04:20,120 --> 00:04:22,599 Speaker 5: four and twenty five, we've seen kind of a plateau 82 00:04:22,720 --> 00:04:24,040 Speaker 5: to a slight pullback. 83 00:04:24,120 --> 00:04:24,280 Speaker 4: Now. 84 00:04:24,320 --> 00:04:27,400 Speaker 5: I do believe we're in a recovery and have been, 85 00:04:27,440 --> 00:04:28,880 Speaker 5: and this has kind of been more of a mid 86 00:04:28,920 --> 00:04:34,560 Speaker 5: cycle pause associated rather than a downturn and offshore drilling. 87 00:04:34,600 --> 00:04:37,719 Speaker 5: So I do think the recovery is intact, but I 88 00:04:37,760 --> 00:04:43,560 Speaker 5: think the cadence has certainly slowed and in fact deteriorated 89 00:04:44,120 --> 00:04:49,599 Speaker 5: and offshore drillers, like energy service companies, have been off 90 00:04:49,640 --> 00:04:51,960 Speaker 5: to the races this year. I think the oil price 91 00:04:52,040 --> 00:04:55,000 Speaker 5: is held in better than expected. Some of that is 92 00:04:55,040 --> 00:04:58,479 Speaker 5: due to some of the tensions in the Middle East. 93 00:04:58,560 --> 00:05:03,160 Speaker 5: I Ran et cetera, Venezuela as well. So the punchline 94 00:05:03,200 --> 00:05:04,760 Speaker 5: really is that we're still in I think a mid 95 00:05:04,800 --> 00:05:07,320 Speaker 5: cycle pause until maybe the second half of this year, 96 00:05:07,680 --> 00:05:09,960 Speaker 5: and in terms of what inning we're in, I think 97 00:05:10,000 --> 00:05:12,760 Speaker 5: we're probably like third fourth inning, but it's been in 98 00:05:13,200 --> 00:05:15,240 Speaker 5: kind of an unconventional recovery. 99 00:05:15,640 --> 00:05:17,839 Speaker 2: Will the regulators allow these two companies to get the other? 100 00:05:18,400 --> 00:05:21,480 Speaker 5: Yeah, I think so, And it's a good question. These 101 00:05:21,520 --> 00:05:23,640 Speaker 5: are the two of the largest players that are out there, 102 00:05:24,440 --> 00:05:29,279 Speaker 5: and rig CEO expressed extreme confidence that that will be 103 00:05:29,360 --> 00:05:32,640 Speaker 5: the case. It's a competitive market. There's a lot of 104 00:05:33,160 --> 00:05:38,279 Speaker 5: fragmentation smaller players in the market, and it's generally the 105 00:05:38,400 --> 00:05:42,800 Speaker 5: quality of certain assets that determine which guys win which contracts. 106 00:05:43,480 --> 00:05:46,600 Speaker 5: A lot of it depends on which rigs are capable 107 00:05:46,640 --> 00:05:49,920 Speaker 5: of drilling for which projects, and so no, I do 108 00:05:49,960 --> 00:05:56,800 Speaker 5: think that this should get to relatively quick approval. Certainly 109 00:05:56,920 --> 00:05:59,400 Speaker 5: they're talking second half of this year. That's a much 110 00:05:59,440 --> 00:06:04,120 Speaker 5: shorter time timeline than the last major oil field services merger, 111 00:06:04,440 --> 00:06:07,360 Speaker 5: which was Slumberge champion X that took over a year 112 00:06:08,080 --> 00:06:11,480 Speaker 5: two year and a half to approve and required significant divestures. 113 00:06:11,480 --> 00:06:13,760 Speaker 5: But offshore drilling is a. 114 00:06:13,560 --> 00:06:16,479 Speaker 3: Different market our Thanks to Scott Levigne Bloomberg Intelligence, a 115 00:06:16,480 --> 00:06:18,360 Speaker 3: senior energy services analyst. 116 00:06:18,240 --> 00:06:21,160 Speaker 2: Staying with energy on Bloomberg Intelligence, we often look at 117 00:06:21,160 --> 00:06:25,680 Speaker 2: research from Bloomberg and EF previously known as New Energy Finance. 118 00:06:25,360 --> 00:06:27,760 Speaker 3: So they're the team at Bloomberg that tracks and analyzes 119 00:06:27,800 --> 00:06:32,320 Speaker 3: the energy transition from commodities to power, transport, industries, buildings, 120 00:06:32,320 --> 00:06:33,640 Speaker 3: and agriculture sectors. 121 00:06:33,880 --> 00:06:36,719 Speaker 2: This week we took a look at robotaxis for more 122 00:06:36,760 --> 00:06:39,440 Speaker 2: on this and the state of the automated vehicle industry. 123 00:06:39,680 --> 00:06:41,920 Speaker 2: I was joined by Andrew grant b an EF head 124 00:06:41,920 --> 00:06:45,000 Speaker 2: of Intelligent Mobility. I first asked Andrew to tell us 125 00:06:45,040 --> 00:06:47,560 Speaker 2: where we are with robotaxis and what we should watch 126 00:06:47,560 --> 00:06:48,920 Speaker 2: out for in twenty twenty six. 127 00:06:49,440 --> 00:06:51,600 Speaker 6: So at the end of twenty twenty five, they were 128 00:06:51,640 --> 00:06:55,280 Speaker 6: about eight thousand working robotaxis globally. Some of those had 129 00:06:55,320 --> 00:06:57,960 Speaker 6: safety drivers behind the wheel, Some of the had safety 130 00:06:58,000 --> 00:07:02,600 Speaker 6: drives in the vehicle but a significant number fully driverless 131 00:07:02,760 --> 00:07:06,160 Speaker 6: and operating in various cities around the globe. I'd say 132 00:07:06,600 --> 00:07:09,040 Speaker 6: about half of those eight thousand based in the US, 133 00:07:09,960 --> 00:07:12,880 Speaker 6: but we expect that number in total to more than 134 00:07:12,920 --> 00:07:14,720 Speaker 6: double by the end of the year to around eighteen 135 00:07:14,760 --> 00:07:16,440 Speaker 6: thousand robotaxis globally. 136 00:07:17,480 --> 00:07:21,320 Speaker 2: Who are the players in this business? I names you 137 00:07:21,320 --> 00:07:23,760 Speaker 2: know other than no Tesla, Weimo. How do you think 138 00:07:23,760 --> 00:07:25,559 Speaker 2: about the competitive environment out there? 139 00:07:26,000 --> 00:07:27,680 Speaker 6: I mean, we spend a lot of time looking at 140 00:07:27,800 --> 00:07:30,800 Speaker 6: the actual operations and number of vehicles deployed, so rarely 141 00:07:30,800 --> 00:07:32,920 Speaker 6: you're looking at kind of four companies globally that have 142 00:07:33,040 --> 00:07:36,160 Speaker 6: the biggest fleets of vehicles on the road. So Waimo, 143 00:07:36,240 --> 00:07:39,000 Speaker 6: as you mentioned, alphabet backed and has just raised a 144 00:07:39,040 --> 00:07:42,080 Speaker 6: significant amount of money. But also you're looking at three 145 00:07:42,120 --> 00:07:47,000 Speaker 6: Chinese companies with a big robotaxi fleet and growing so 146 00:07:47,320 --> 00:07:50,680 Speaker 6: Bydou's Apollo, and then we Ride and pony Ai, which 147 00:07:50,680 --> 00:07:53,760 Speaker 6: are robotaxis specialists that are based out of China but 148 00:07:54,000 --> 00:07:55,200 Speaker 6: looking to expand globally. 149 00:07:55,840 --> 00:07:58,760 Speaker 2: You know, I think about the just the battery electric 150 00:07:58,800 --> 00:08:01,200 Speaker 2: vehicle market, and I think the exception of the US 151 00:08:01,360 --> 00:08:04,360 Speaker 2: byd and some of these other Chinese manufacturers, it just 152 00:08:04,400 --> 00:08:06,440 Speaker 2: feels to me at this early stage might be able 153 00:08:06,480 --> 00:08:08,960 Speaker 2: to take over the world of electronic vehicles. Is that 154 00:08:09,040 --> 00:08:11,440 Speaker 2: a similar view for robotaxis? 155 00:08:13,240 --> 00:08:15,440 Speaker 6: Yeah. I mean it's interesting how different geographies are going 156 00:08:15,480 --> 00:08:18,200 Speaker 6: to react and different regulators are going to react to 157 00:08:18,480 --> 00:08:22,520 Speaker 6: foreign companies coming in and deploying their technology in those areas. 158 00:08:22,680 --> 00:08:25,800 Speaker 6: We are really seeing kind of a race at the 159 00:08:25,840 --> 00:08:29,640 Speaker 6: moment for new territories. So you've obviously got the US 160 00:08:29,680 --> 00:08:32,400 Speaker 6: based companies, the Chinese based companies that I just mentioned, 161 00:08:32,440 --> 00:08:35,640 Speaker 6: and kind of in the middle, you've got Europe, Middle East, 162 00:08:35,679 --> 00:08:38,199 Speaker 6: Southeast Asia where a lot of these companies are setting 163 00:08:38,240 --> 00:08:40,480 Speaker 6: up roots and looking to deploy and kind of twenty 164 00:08:40,520 --> 00:08:42,240 Speaker 6: twenty six is the year where they're really looking to 165 00:08:42,280 --> 00:08:47,200 Speaker 6: expand those services. So uber has just announced an earning 166 00:08:47,240 --> 00:08:52,360 Speaker 6: score last week that they'll be expanding to Houston, Hong Kong, Madrid, Zurich. 167 00:08:53,320 --> 00:08:57,679 Speaker 6: There's a variety of really competitive battlegrounds across those kind 168 00:08:57,679 --> 00:08:58,680 Speaker 6: of markets. In the middle. 169 00:08:59,760 --> 00:09:04,480 Speaker 2: What's the safety records so far in these early testing stage. 170 00:09:06,760 --> 00:09:09,079 Speaker 6: I mean, it depends how you measure these safety standards. 171 00:09:09,080 --> 00:09:13,360 Speaker 6: It's whether you're needing some type of intervention with the 172 00:09:13,400 --> 00:09:16,880 Speaker 6: safety driver and the vehicle on the whole. These vehicles 173 00:09:17,160 --> 00:09:21,240 Speaker 6: are tending to kind of show safety records that are 174 00:09:21,320 --> 00:09:24,880 Speaker 6: similar to what humans have displayed, and in some cases 175 00:09:24,880 --> 00:09:27,480 Speaker 6: it's far surpassing that. But again, the measuring of these 176 00:09:27,520 --> 00:09:31,200 Speaker 6: standards is kind of a tricky, nuanced subject. That's a 177 00:09:31,200 --> 00:09:33,240 Speaker 6: lot of regulators are digging into at the moment, and 178 00:09:33,280 --> 00:09:36,520 Speaker 6: it's really about companies working with regulators to try and 179 00:09:36,600 --> 00:09:40,000 Speaker 6: figure out and kind of try to prove their safety 180 00:09:40,040 --> 00:09:42,320 Speaker 6: record over time as they expand their services. 181 00:09:43,480 --> 00:09:48,240 Speaker 2: Talk to us about these things are expensive to develop, maintain, deploy. 182 00:09:48,880 --> 00:09:51,480 Speaker 2: Weimo just raised sixteen billion dollars at one hundred and 183 00:09:51,480 --> 00:09:55,760 Speaker 2: twenty six billion dollar valuation. Tesla's committed twenty billion dollars 184 00:09:55,800 --> 00:10:00,959 Speaker 2: in R and D this year. Where's the money coming from? 185 00:10:01,040 --> 00:10:03,640 Speaker 6: I mean a variety of venture backed investors and kind 186 00:10:03,679 --> 00:10:06,480 Speaker 6: of the big tech companies themselves. So you mentioned Wemo. 187 00:10:06,520 --> 00:10:10,400 Speaker 6: A lot of that money is coming from its majority owner, Alphabet, 188 00:10:11,080 --> 00:10:13,960 Speaker 6: and then Tesla is putting a lot of money into this. 189 00:10:14,000 --> 00:10:16,360 Speaker 6: It's just about where they are putting their money. So 190 00:10:16,679 --> 00:10:19,520 Speaker 6: Tesla is going with a strategy of deploying a much 191 00:10:19,640 --> 00:10:22,160 Speaker 6: cheaper vehicle, but they're putting a lot of money into 192 00:10:22,200 --> 00:10:24,720 Speaker 6: the data centers to try and improve their self driving 193 00:10:24,720 --> 00:10:28,000 Speaker 6: algorithms and their self driving system, whereas Weimo has got 194 00:10:28,040 --> 00:10:30,640 Speaker 6: a more expensive vehicle kind of two to three times 195 00:10:30,679 --> 00:10:33,719 Speaker 6: at a minimum more expensive. So it's going to take 196 00:10:33,760 --> 00:10:36,480 Speaker 6: a lot of ney to kind of build out that 197 00:10:36,600 --> 00:10:39,000 Speaker 6: robotaxi fleet and deploy it in the various parts of 198 00:10:39,000 --> 00:10:41,880 Speaker 6: the globe where they want to deploy. They've just announced 199 00:10:41,880 --> 00:10:44,560 Speaker 6: that they plan to launch a service here in London 200 00:10:44,559 --> 00:10:45,160 Speaker 6: in September. 201 00:10:46,480 --> 00:10:50,200 Speaker 2: Great, some of those little streets, good luck there. What's 202 00:10:50,240 --> 00:10:52,880 Speaker 2: some of the gating issues here? Is it regulatory? Is 203 00:10:52,880 --> 00:10:55,760 Speaker 2: it capital? Is it technology? What's the gating issue here 204 00:10:56,040 --> 00:10:57,240 Speaker 2: for this industry at the moment? 205 00:10:58,280 --> 00:11:00,040 Speaker 6: I mean, it's kind of all of the above, and 206 00:11:00,080 --> 00:11:02,480 Speaker 6: there's improvements that need to be made on all of those, 207 00:11:02,520 --> 00:11:05,520 Speaker 6: but also just finding a business use case for these services. 208 00:11:05,520 --> 00:11:07,079 Speaker 6: I mean, as we've been talking about, it takes a 209 00:11:07,080 --> 00:11:09,760 Speaker 6: lot of money to build them and deploy them. So 210 00:11:09,880 --> 00:11:13,960 Speaker 6: finding a kind of meaningful market for them and completing 211 00:11:14,040 --> 00:11:16,560 Speaker 6: kind of useful rides or meaningful rides rather than just 212 00:11:16,640 --> 00:11:20,040 Speaker 6: kind of being a theme park attraction and driving small 213 00:11:20,080 --> 00:11:21,800 Speaker 6: parts of the city. You actually want to kind of 214 00:11:21,840 --> 00:11:25,439 Speaker 6: get those more lucrative ride heading trips from say city 215 00:11:25,520 --> 00:11:28,560 Speaker 6: center to airports, and that's been a bit tricky for 216 00:11:28,600 --> 00:11:32,280 Speaker 6: some of these robotaxi companies to actually sort out the 217 00:11:33,120 --> 00:11:35,480 Speaker 6: If you look at just about a week and a 218 00:11:35,480 --> 00:11:38,440 Speaker 6: half ago where were announced that they would be opening 219 00:11:38,520 --> 00:11:42,600 Speaker 6: up to San Francisco Airport. But really what you're seeing 220 00:11:42,720 --> 00:11:45,280 Speaker 6: from that is they are doing pickups and drop offs 221 00:11:45,640 --> 00:11:48,120 Speaker 6: at the car rental center, which is kind of a 222 00:11:48,160 --> 00:11:52,400 Speaker 6: fifteen twenty minute journey from there to the actual airport itself, 223 00:11:52,440 --> 00:11:55,520 Speaker 6: so it's kind of compete with curbside dropoffs from ride 224 00:11:55,520 --> 00:11:57,920 Speaker 6: heading vehicles. They still have a bit of way to go. 225 00:11:58,360 --> 00:12:01,600 Speaker 3: Are thanks to Andrew grant, any, head of Intelligent Mobility, 226 00:12:01,840 --> 00:12:04,000 Speaker 3: coming up a look at why Coca Cola offered a 227 00:12:04,040 --> 00:12:06,480 Speaker 3: more conservative full year sales outlook than expected. 228 00:12:06,600 --> 00:12:09,440 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 229 00:12:09,480 --> 00:12:11,600 Speaker 2: depth research and data on two thousand companies and one 230 00:12:11,679 --> 00:12:12,760 Speaker 2: hundred and thirty industries. 231 00:12:12,880 --> 00:12:15,920 Speaker 3: You can access Bloomberg Intelligence via Bigo on the terminal. 232 00:12:16,040 --> 00:12:17,160 Speaker 3: I'm Scarlett Foo and. 233 00:12:17,120 --> 00:12:19,160 Speaker 2: I'm Paul Sweeney, and this is Bloomberg. 234 00:12:23,520 --> 00:12:28,040 Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 235 00:12:28,360 --> 00:12:29,680 Speaker 1: on Bloomberg Radio. 236 00:12:30,440 --> 00:12:32,000 Speaker 2: We moved now to some news at the food and 237 00:12:32,040 --> 00:12:33,600 Speaker 2: beverage company craft Hines. 238 00:12:33,920 --> 00:12:37,120 Speaker 3: So this week, Kraft Heins's new CEO, Steve Kaylane, halted 239 00:12:37,120 --> 00:12:38,560 Speaker 3: the process of splitting the company. 240 00:12:38,880 --> 00:12:41,480 Speaker 2: Its decision, he said, was backed by the board of directors. 241 00:12:41,760 --> 00:12:45,200 Speaker 2: Kaylane will instead invest six hundred million dollars in developing 242 00:12:45,240 --> 00:12:47,840 Speaker 2: new products, marketing them and lowering some prices. 243 00:12:48,040 --> 00:12:50,400 Speaker 3: The shift in strategy was the result of Kaylane spending 244 00:12:50,400 --> 00:12:53,840 Speaker 3: the last few weeks immersing himself in Kraft Heeins's vast portfolio, 245 00:12:53,880 --> 00:12:56,359 Speaker 3: including conversations with retailers and employees. 246 00:12:56,679 --> 00:12:58,800 Speaker 2: For more and all this, we were joined by Christina Peterson, 247 00:12:58,800 --> 00:13:00,320 Speaker 2: Bloomberg News food industry reporter. 248 00:13:00,600 --> 00:13:03,560 Speaker 3: We began by asking Christina to explain Kaylane's thinking with 249 00:13:03,600 --> 00:13:04,040 Speaker 3: the pause. 250 00:13:04,559 --> 00:13:07,160 Speaker 7: He's only been on the job since January first, so 251 00:13:07,200 --> 00:13:09,120 Speaker 7: I think this came as a surprise to folks that 252 00:13:09,200 --> 00:13:12,160 Speaker 7: the split was called off about five months after it 253 00:13:12,200 --> 00:13:15,920 Speaker 7: was announced or paused. There is no end date to 254 00:13:16,000 --> 00:13:18,079 Speaker 7: the pause, so we don't know if it will at 255 00:13:18,080 --> 00:13:22,280 Speaker 7: some point rezuom. But the CEO, Steve Kahlene, said that 256 00:13:22,840 --> 00:13:25,200 Speaker 7: he came on the job knowing that there had been 257 00:13:25,440 --> 00:13:29,520 Speaker 7: levels of under investment in Kraft Heiness's brands and decided 258 00:13:29,520 --> 00:13:31,760 Speaker 7: that after reviewing all of them, that there were brands 259 00:13:31,760 --> 00:13:34,599 Speaker 7: that would respond to more investment. So they announced that 260 00:13:34,640 --> 00:13:37,480 Speaker 7: they would be putting six hundred million dollars into things 261 00:13:37,520 --> 00:13:41,800 Speaker 7: like R and D marketing and lowering some prices in 262 00:13:41,880 --> 00:13:45,319 Speaker 7: hopes that that would bolster the entire company and that 263 00:13:45,320 --> 00:13:47,440 Speaker 7: that would be in a better position put them in 264 00:13:47,440 --> 00:13:50,120 Speaker 7: a better position to evaluate whether they should move forward 265 00:13:50,160 --> 00:13:50,680 Speaker 7: with the split. 266 00:13:51,559 --> 00:13:54,439 Speaker 2: So what if most investors want? Did they you think 267 00:13:54,440 --> 00:13:56,800 Speaker 2: they want the split up? Sometimes split ups work, a 268 00:13:56,880 --> 00:14:00,400 Speaker 2: lot of times they don't. What if investors been saying 269 00:14:00,400 --> 00:14:01,560 Speaker 2: over the past months. 270 00:14:01,960 --> 00:14:06,240 Speaker 7: There's clearly been some anxiety among investors since the news 271 00:14:06,240 --> 00:14:09,360 Speaker 7: of the split was announced. I think that the new 272 00:14:09,480 --> 00:14:13,880 Speaker 7: CEO was seen as there were hopes that he would 273 00:14:13,920 --> 00:14:16,400 Speaker 7: do what he had done with the Kellegg Company, which 274 00:14:16,400 --> 00:14:19,560 Speaker 7: split into two publicly traded entities and then where both 275 00:14:19,840 --> 00:14:22,720 Speaker 7: both of those companies were bought by privately held entities. 276 00:14:23,400 --> 00:14:26,160 Speaker 7: So there was some speculation that the same thing would 277 00:14:26,160 --> 00:14:30,400 Speaker 7: occur at Kraft. Himes and Kaylaine said basically, not yet. 278 00:14:30,640 --> 00:14:33,680 Speaker 3: Really, there's another twist to all of this, which is 279 00:14:33,680 --> 00:14:37,240 Speaker 3: that Kraft Times biggest shareholder is Berkshire Hathway and Warren Buffett, 280 00:14:37,280 --> 00:14:39,720 Speaker 3: who runs Berkshire Hathway until he handed the rains to 281 00:14:39,760 --> 00:14:42,960 Speaker 3: Greg Abel, said he was never a fan of that 282 00:14:43,080 --> 00:14:45,080 Speaker 3: idea to split up the company. I mean, he was 283 00:14:45,160 --> 00:14:47,560 Speaker 3: kind of the mastermind behind Kraft Hims becoming the behemoth 284 00:14:47,640 --> 00:14:49,720 Speaker 3: it was and that didn't work out so well. But 285 00:14:50,000 --> 00:14:51,840 Speaker 3: he made clear that the split was not a good 286 00:14:51,840 --> 00:14:54,480 Speaker 3: thing in his mind. Do we think that has anything 287 00:14:54,520 --> 00:14:55,680 Speaker 3: to do with this about face? 288 00:14:56,840 --> 00:14:59,360 Speaker 7: I don't know. It is clear that he had publicly 289 00:14:59,400 --> 00:15:03,160 Speaker 7: expressed a appointment in the split, and his successor had 290 00:15:03,200 --> 00:15:06,200 Speaker 7: said in a filing that Berkshire Hathaway was taking steps 291 00:15:06,240 --> 00:15:09,240 Speaker 7: to sell its twenty eight percent stake in Craft Times, 292 00:15:09,800 --> 00:15:12,760 Speaker 7: So clearly they were nervous about this and not fans 293 00:15:12,800 --> 00:15:13,640 Speaker 7: of the news. 294 00:15:13,880 --> 00:15:16,320 Speaker 2: So do we have any idea how long this pause 295 00:15:16,920 --> 00:15:20,880 Speaker 2: will last? I mean, is he trying to turn stuff around, 296 00:15:20,960 --> 00:15:23,280 Speaker 2: make it maybe better? So if when they do split 297 00:15:23,320 --> 00:15:25,200 Speaker 2: it up be worth more? What do we know? 298 00:15:26,280 --> 00:15:28,640 Speaker 7: They clearly are not going to make the decision this year. 299 00:15:28,800 --> 00:15:31,360 Speaker 7: They talked about returning to growth in twenty twenty seven, 300 00:15:31,600 --> 00:15:34,440 Speaker 7: so it seems like this is a month's away decision. 301 00:15:35,040 --> 00:15:37,120 Speaker 2: Oh, the investment bankers who had that on their deal 302 00:15:37,120 --> 00:15:38,400 Speaker 2: sheet for twenty twenty six. 303 00:15:39,040 --> 00:15:40,720 Speaker 3: But they get paid in the meantime for the work 304 00:15:40,720 --> 00:15:41,640 Speaker 3: that they've done right now. 305 00:15:41,640 --> 00:15:42,800 Speaker 2: You don't get paid to the closes. 306 00:15:42,880 --> 00:15:44,600 Speaker 3: Oh really, you can't build them along the way. 307 00:15:44,920 --> 00:15:47,720 Speaker 2: We're not lawyers. Okay, we get paid. We take out 308 00:15:47,760 --> 00:15:50,040 Speaker 2: of the I like how you still say we yeah, yeah, 309 00:15:50,080 --> 00:15:50,880 Speaker 2: exactly because you. 310 00:15:50,840 --> 00:15:53,040 Speaker 3: Feel for these guys. Y. 311 00:15:53,120 --> 00:15:55,520 Speaker 2: What's the company want to do now? Is as a 312 00:15:56,160 --> 00:15:57,120 Speaker 2: standalone company. 313 00:15:57,400 --> 00:16:01,440 Speaker 7: Well, they've talked about releasing some healthier products. They are 314 00:16:01,560 --> 00:16:06,280 Speaker 7: launching a Kraft Heinz Mac and cheese PowerMac with proteinage. 315 00:16:06,280 --> 00:16:08,080 Speaker 3: I knew iber, I knew it. I knew it. 316 00:16:09,280 --> 00:16:11,920 Speaker 7: And they will be lowering prices. They talked about the 317 00:16:12,040 --> 00:16:17,000 Speaker 7: opening price points being important for low income families. So 318 00:16:17,040 --> 00:16:18,520 Speaker 7: those are some of the areas that they're going to 319 00:16:18,520 --> 00:16:21,920 Speaker 7: be focusing on, some healthier options, more affordable price points. 320 00:16:22,480 --> 00:16:25,760 Speaker 2: Our thanks to Christina Peterson, Bloomberg News Food industry reporter. 321 00:16:26,080 --> 00:16:28,880 Speaker 3: We move now to the beverage giant, Coca Cola. This week, 322 00:16:29,000 --> 00:16:31,720 Speaker 3: Coca Cola reported weaker than expected quarterly sales. 323 00:16:32,040 --> 00:16:34,800 Speaker 2: Soda maker also offered a more conservative twenty twenty six 324 00:16:35,080 --> 00:16:38,000 Speaker 2: for your sales outlook. Then expected. Shares of Coca Cola 325 00:16:38,080 --> 00:16:39,040 Speaker 2: fell after the news. 326 00:16:39,200 --> 00:16:41,920 Speaker 3: The outlook points to the challenges faced by the incoming CEO, 327 00:16:41,960 --> 00:16:44,880 Speaker 3: Henrique Braun, as the company works to win over shoppers 328 00:16:44,920 --> 00:16:46,960 Speaker 3: with its widening portfolio of beverages. 329 00:16:47,320 --> 00:16:51,080 Speaker 2: For more, we heard Kencha Bloomberg Intelligence, senior consumer products analysts. 330 00:16:51,200 --> 00:16:53,680 Speaker 2: We first asked Ken to tell us what's concerning investors 331 00:16:53,680 --> 00:16:54,760 Speaker 2: about Coca Cola. 332 00:16:54,920 --> 00:16:57,960 Speaker 4: I think what maybe concerning the mark a little bit 333 00:16:58,000 --> 00:17:02,520 Speaker 4: about Coke is that the mix was not as favorable 334 00:17:02,560 --> 00:17:05,000 Speaker 4: as it had been. Also, the company over the past 335 00:17:05,040 --> 00:17:07,960 Speaker 4: couple of years had been relying heavily on price mix 336 00:17:08,119 --> 00:17:09,920 Speaker 4: to boost the top line. 337 00:17:09,960 --> 00:17:10,440 Speaker 6: Is it was a. 338 00:17:10,359 --> 00:17:14,280 Speaker 4: Considerable slowing in the quarter. Having said that, there's always 339 00:17:14,280 --> 00:17:16,080 Speaker 4: some noise in the fourth quarter. It's hard to draw 340 00:17:16,160 --> 00:17:19,240 Speaker 4: too many conclusions from the fourth quarter. But I think 341 00:17:19,240 --> 00:17:22,160 Speaker 4: the market is also being spooked a little bit by 342 00:17:22,320 --> 00:17:25,679 Speaker 4: the guidance for next year, which came in a bit 343 00:17:25,720 --> 00:17:29,600 Speaker 4: a little bit light. The company's long term algorithm is 344 00:17:30,000 --> 00:17:33,679 Speaker 4: to generate about four to six percent organic revenue and 345 00:17:33,800 --> 00:17:37,399 Speaker 4: from that it can generate high comparable EPs growth, and 346 00:17:37,440 --> 00:17:40,360 Speaker 4: it did that in twenty twenty five, in twenty twenty six, 347 00:17:40,440 --> 00:17:43,480 Speaker 4: other saying four to five percent top line and four 348 00:17:43,520 --> 00:17:47,920 Speaker 4: to five percent EPs growth, And so that's EPs growth again, 349 00:17:47,960 --> 00:17:53,200 Speaker 4: that's excluding currency effects. It's not only below their long 350 00:17:53,280 --> 00:17:57,120 Speaker 4: term algorithm, but also below consensus expectations going in. 351 00:17:57,880 --> 00:18:01,080 Speaker 2: What's the You know, we always talk a lot of 352 00:18:01,119 --> 00:18:03,760 Speaker 2: your companies, the consumer products companies and staples companies that 353 00:18:03,800 --> 00:18:05,639 Speaker 2: you think about him as kind of GDP maybe a 354 00:18:05,640 --> 00:18:07,600 Speaker 2: little bit GDP plus kind of growth here. Is there 355 00:18:07,640 --> 00:18:10,280 Speaker 2: any secret sauce to the Coca Cola story or is 356 00:18:10,280 --> 00:18:11,600 Speaker 2: that the way we should think about it? 357 00:18:12,680 --> 00:18:15,480 Speaker 4: Well, there's a lot of truth of that, Paul, because 358 00:18:15,560 --> 00:18:17,720 Speaker 4: Coca is in the two hundred markets around the world. 359 00:18:17,880 --> 00:18:20,879 Speaker 4: You know, I guess the way for growth is lunar 360 00:18:20,880 --> 00:18:24,000 Speaker 4: at this point. I mean, they're everywhere. But I think 361 00:18:25,480 --> 00:18:27,600 Speaker 4: there's gonna be a new CEO on March thirty first, 362 00:18:27,880 --> 00:18:30,520 Speaker 4: Henry Barraun. He's a long time veteran at Coca Cola 363 00:18:30,600 --> 00:18:33,600 Speaker 4: who was the COO used to head up Latin American operations. 364 00:18:33,760 --> 00:18:35,760 Speaker 4: I think there's a lot of confidence in his ability 365 00:18:36,040 --> 00:18:40,000 Speaker 4: to take the reins here, and I think what he's 366 00:18:40,040 --> 00:18:43,000 Speaker 4: going to spell out in his vision next week at Cagney. 367 00:18:43,160 --> 00:18:44,959 Speaker 4: That's when they oh usually do it. 368 00:18:45,000 --> 00:18:45,600 Speaker 2: That's where you'll be. 369 00:18:47,000 --> 00:18:51,119 Speaker 4: Yeah. Well, I think he's gonna say that they need 370 00:18:51,160 --> 00:18:54,200 Speaker 4: to step up their marketing and innovation here to boost 371 00:18:54,280 --> 00:18:56,800 Speaker 4: that top line growth. And I think they're going to 372 00:18:56,960 --> 00:19:01,320 Speaker 4: talk a lot about functionality that we talked about with PepsiCo. 373 00:19:01,880 --> 00:19:04,800 Speaker 4: What I mean by functionality, well, well, consumers want more 374 00:19:04,840 --> 00:19:07,440 Speaker 4: from their beverages than just taste good and hydrate them. 375 00:19:07,840 --> 00:19:11,720 Speaker 4: They want to not only have zero sugar, but if 376 00:19:11,720 --> 00:19:15,040 Speaker 4: they wants to have more electrolytes in their water, it 377 00:19:15,080 --> 00:19:17,800 Speaker 4: wants to have more protein in their drinks. Particularly the 378 00:19:17,880 --> 00:19:22,600 Speaker 4: JLP one crowd, they want to have fiber coke offers 379 00:19:22,640 --> 00:19:25,800 Speaker 4: in its probiotic sodas like simply Pop. So these are 380 00:19:25,800 --> 00:19:27,240 Speaker 4: the kind of things they're going to talk about in 381 00:19:27,280 --> 00:19:31,080 Speaker 4: terms of product innovation, I believe next week. In addition 382 00:19:31,119 --> 00:19:32,640 Speaker 4: to that, I think the company's going to spend more 383 00:19:32,640 --> 00:19:35,520 Speaker 4: in marketing digital marketing to get the message out to 384 00:19:35,680 --> 00:19:37,080 Speaker 4: new young consumers. 385 00:19:37,440 --> 00:19:39,000 Speaker 3: I guess the idea is to just have your drink 386 00:19:39,080 --> 00:19:39,919 Speaker 3: or place your food. 387 00:19:40,359 --> 00:19:41,040 Speaker 6: I guess. 388 00:19:42,560 --> 00:19:46,120 Speaker 3: Zero sugar actually was a standout right with Coca Cola 389 00:19:46,200 --> 00:19:49,399 Speaker 3: Zero sugar posting double digit volume growth in the quarter. 390 00:19:49,640 --> 00:19:51,159 Speaker 3: When you say that they want to focus on the 391 00:19:51,160 --> 00:19:53,280 Speaker 3: innovation and get the word out, what does that mean 392 00:19:53,320 --> 00:19:56,160 Speaker 3: in terms of spending on marketing? What does that mean 393 00:19:56,200 --> 00:19:58,520 Speaker 3: on in terms of capital expenses? 394 00:20:00,000 --> 00:20:03,199 Speaker 4: Think broadly speaking, more social media advertising. I mean on 395 00:20:03,240 --> 00:20:06,040 Speaker 4: a purview basis, that's a lot more cost efficient and 396 00:20:06,119 --> 00:20:09,080 Speaker 4: the you know traditional ways like television, Paul, you would 397 00:20:09,080 --> 00:20:12,040 Speaker 4: know that right media analyst days. So it's more of that. 398 00:20:12,240 --> 00:20:15,359 Speaker 4: It's also working more closely with their bottlers in terms 399 00:20:15,359 --> 00:20:18,880 Speaker 4: of co marketing ventures. That could be a wide range 400 00:20:18,920 --> 00:20:22,280 Speaker 4: of things, not only digital marketing, but perhaps coming out 401 00:20:22,320 --> 00:20:25,719 Speaker 4: new packaging, whether it's multi packs to attract you know, 402 00:20:25,840 --> 00:20:32,520 Speaker 4: an economical consumer to spending more on its fountain dispenser. 403 00:20:32,720 --> 00:20:36,359 Speaker 4: You see a lot of fast food restaurants where they 404 00:20:36,400 --> 00:20:39,399 Speaker 4: can make their own sodas and so on. It's just 405 00:20:39,680 --> 00:20:42,520 Speaker 4: spread that out more to have more consumer engagement matter 406 00:20:42,560 --> 00:20:45,639 Speaker 4: where they are. Yep, so I see more of that. 407 00:20:45,720 --> 00:20:48,679 Speaker 3: Our thanks to Ken shah Our, senior consumer products analysts. 408 00:20:48,760 --> 00:20:50,680 Speaker 2: We move next to news on the toy and board 409 00:20:50,680 --> 00:20:51,720 Speaker 2: game maker Hasbro. 410 00:20:52,200 --> 00:20:54,679 Speaker 3: This week, Hasbro reported that it more than doubled year 411 00:20:54,720 --> 00:20:57,080 Speaker 3: over year revenue from its popular card game Magic. The 412 00:20:57,160 --> 00:21:00,600 Speaker 3: gathering in the fourth quarter, shares of Hasbro jumped the news. 413 00:21:00,880 --> 00:21:03,919 Speaker 3: So we brought in Lindsay Dutch, our consumer Hardline senior analyst, 414 00:21:04,000 --> 00:21:06,840 Speaker 3: and began by asking her to break down Hasbro's results. 415 00:21:07,080 --> 00:21:09,560 Speaker 8: So the story for Hasbro is, you know, the result 416 00:21:09,640 --> 00:21:12,400 Speaker 8: in twenty five, including the fourth quarter, is really being 417 00:21:12,480 --> 00:21:16,000 Speaker 8: driven by their Wizard of the Coast digital gaming segment. 418 00:21:17,080 --> 00:21:20,479 Speaker 8: That that segment has been growing rapidly forty five percent 419 00:21:20,560 --> 00:21:23,280 Speaker 8: on the year, sixty percent I think for Magic the 420 00:21:23,359 --> 00:21:26,960 Speaker 8: gathering in the quarter, so just tremendous growth coming out 421 00:21:26,960 --> 00:21:30,879 Speaker 8: of that brand, better than expected, and that unit is 422 00:21:30,880 --> 00:21:33,480 Speaker 8: really going to carry the growth in twenty twenty six. 423 00:21:33,600 --> 00:21:36,880 Speaker 8: The outlook for the consumer products with their toy segment 424 00:21:37,240 --> 00:21:40,200 Speaker 8: is still kind of weak, So it's really coming out 425 00:21:40,240 --> 00:21:43,720 Speaker 8: of that digital gaming segment. But I think investors are 426 00:21:43,760 --> 00:21:47,160 Speaker 8: pleased with the outlook there just because they're lapping very 427 00:21:47,160 --> 00:21:50,080 Speaker 8: difficult comps. So to see solid growth in twenty six 428 00:21:50,160 --> 00:21:52,840 Speaker 8: coming out of that, it was a good surprise. 429 00:21:53,320 --> 00:21:56,000 Speaker 3: Lindsay, what about tariffs? Is this something that Hasbro has 430 00:21:56,040 --> 00:22:00,320 Speaker 3: figured out and it's no longer something that lead it's 431 00:22:00,320 --> 00:22:03,199 Speaker 3: earnings to be kind of unreliable and they've kind of 432 00:22:03,200 --> 00:22:04,200 Speaker 3: smooth things out. 433 00:22:06,200 --> 00:22:09,680 Speaker 8: So it definitely affected the year, so about forty million 434 00:22:09,760 --> 00:22:13,960 Speaker 8: dollars in the fourth quarter. A headwind for margin there, 435 00:22:14,080 --> 00:22:17,720 Speaker 8: especially on that consumer products segment, so that margin did 436 00:22:17,760 --> 00:22:21,560 Speaker 8: decline year over year, which was a disappointment. It's certainly 437 00:22:21,600 --> 00:22:25,040 Speaker 8: going to be a headwind for profitability at least in 438 00:22:25,080 --> 00:22:27,560 Speaker 8: the first half, and comps will get easier in the 439 00:22:27,600 --> 00:22:31,400 Speaker 8: second half. But Hasbro did note that, you know, much 440 00:22:31,480 --> 00:22:34,520 Speaker 8: of the cost savings program that they're working on and 441 00:22:34,600 --> 00:22:37,879 Speaker 8: other supply chain efficiencies, they were able to offset a 442 00:22:37,960 --> 00:22:42,159 Speaker 8: significant portion of that cost so that is a good sign, 443 00:22:42,560 --> 00:22:44,320 Speaker 8: but there's still a little bit of a headwind for 444 00:22:44,359 --> 00:22:45,480 Speaker 8: the next two quarters. 445 00:22:46,320 --> 00:22:49,080 Speaker 2: I'm just looking at the FA function on the Bloomberg terminal, 446 00:22:49,119 --> 00:22:52,080 Speaker 2: gives me all the financial analysism ploy the operating income 447 00:22:52,119 --> 00:22:54,280 Speaker 2: profit for the Wizards of the Coast and the digital 448 00:22:54,320 --> 00:22:58,960 Speaker 2: segment is huge, whereas the profitability of their regular toy 449 00:22:59,000 --> 00:23:02,399 Speaker 2: business not so much. Is a company just throwing all 450 00:23:02,440 --> 00:23:05,880 Speaker 2: the resources into their digital stuff? Is that the strategy? 451 00:23:06,200 --> 00:23:10,119 Speaker 8: So they have definitely been pushing for several years now 452 00:23:10,160 --> 00:23:13,040 Speaker 8: to become a bigger player in that digital world, but 453 00:23:13,080 --> 00:23:16,440 Speaker 8: also really to become known for that. So I would say, 454 00:23:16,480 --> 00:23:19,480 Speaker 8: you know, one of Hasbro's big brands Monopoly that that's 455 00:23:19,520 --> 00:23:22,560 Speaker 8: what many people know that the company for is that 456 00:23:22,600 --> 00:23:25,800 Speaker 8: traditional Monopoly board game. But are they are pushing into 457 00:23:25,840 --> 00:23:28,520 Speaker 8: this world of digital games? You know, they want to 458 00:23:28,560 --> 00:23:31,359 Speaker 8: be valued as such. And I will say, you know, 459 00:23:31,400 --> 00:23:34,000 Speaker 8: they do have a digital version of Monopoly, Monopoly Go, 460 00:23:34,280 --> 00:23:36,159 Speaker 8: and that has done. 461 00:23:36,200 --> 00:23:38,240 Speaker 2: Very, very well over the past couple of years. 462 00:23:38,280 --> 00:23:42,480 Speaker 8: It continues to surprise, including in the fourth quarter. So 463 00:23:42,480 --> 00:23:45,840 Speaker 8: they're definitely moving in that direction. But that toy segment 464 00:23:45,960 --> 00:23:48,080 Speaker 8: consumer products, you know, still. 465 00:23:47,960 --> 00:23:48,840 Speaker 2: Is pretty large. 466 00:23:49,040 --> 00:23:52,439 Speaker 8: It was still around fifty percent of revenue for twenty five. 467 00:23:53,000 --> 00:23:55,320 Speaker 8: I do think that will that mix will come down 468 00:23:55,400 --> 00:23:58,000 Speaker 8: over time, but it's still a big piece of their 469 00:23:58,040 --> 00:23:59,400 Speaker 8: business that they can't ignore. 470 00:24:00,240 --> 00:24:02,640 Speaker 3: Lindsay. I also noticed that in this latest earning support 471 00:24:02,680 --> 00:24:06,040 Speaker 3: they announced a one billion dollar stock buyback authorization. I 472 00:24:06,080 --> 00:24:09,080 Speaker 3: believe this is the first FIBACK since twenty eighteen. What 473 00:24:09,200 --> 00:24:11,920 Speaker 3: does that signal to you? 474 00:24:11,920 --> 00:24:14,280 Speaker 8: You know, I think that their Hasbro is still working 475 00:24:14,359 --> 00:24:18,800 Speaker 8: through their capital allocation priorities. They are still focused on 476 00:24:18,880 --> 00:24:22,480 Speaker 8: reducing leverage. You know, their dividend has been flat for 477 00:24:22,560 --> 00:24:25,879 Speaker 8: quite some time, So I think they're looking at different 478 00:24:25,920 --> 00:24:29,640 Speaker 8: avenues now that they're in a much better financial position 479 00:24:29,720 --> 00:24:31,840 Speaker 8: than they had been maybe a year or two ago. 480 00:24:32,680 --> 00:24:34,520 Speaker 8: So I think it's just a signal that that that 481 00:24:34,560 --> 00:24:39,200 Speaker 8: position is solidly better and they're looking to redeploy cash 482 00:24:39,200 --> 00:24:41,639 Speaker 8: in different ways that they maybe couldn't have done a 483 00:24:41,680 --> 00:24:42,520 Speaker 8: year or so ago. 484 00:24:43,200 --> 00:24:46,800 Speaker 2: Thanks to Lindsay Dutch, Bloomberg Intelligence, Consumer Hardline's senior analyst. 485 00:24:47,160 --> 00:24:49,680 Speaker 3: Coming up, look at why CBS Health is repeating its 486 00:24:49,720 --> 00:24:51,320 Speaker 3: profit guidance for twenty twenty six. 487 00:24:51,600 --> 00:24:54,359 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio for riding 488 00:24:54,400 --> 00:24:56,520 Speaker 2: in depth research and data on two thousand companies in 489 00:24:56,520 --> 00:24:57,720 Speaker 2: one hundred and thirty industries. 490 00:24:57,800 --> 00:25:00,679 Speaker 3: You can access Bloomberg Intelligence through Bigo on the terminal. 491 00:25:00,760 --> 00:25:01,800 Speaker 3: I'm Scarlett Foo. 492 00:25:01,720 --> 00:25:03,720 Speaker 2: And I'm Paul Sweeney, and this is Bloomberg. 493 00:25:10,800 --> 00:25:15,280 Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 494 00:25:15,640 --> 00:25:16,960 Speaker 1: on Bloomberg Radio. 495 00:25:17,520 --> 00:25:17,920 Speaker 9: Good move. 496 00:25:17,960 --> 00:25:21,040 Speaker 2: Next to earnings from the telecommunications company T Mobile. 497 00:25:20,800 --> 00:25:24,040 Speaker 3: This week, the company reported quarterly revenue that beat estimates 498 00:25:24,040 --> 00:25:27,359 Speaker 3: but had earnings that missed analyst projections. T Mobile also 499 00:25:27,400 --> 00:25:30,640 Speaker 3: reported it added fewer mobile phone subscribers and analysts expected 500 00:25:30,760 --> 00:25:31,359 Speaker 3: last quarter. 501 00:25:31,760 --> 00:25:34,280 Speaker 2: This comes as the company aims to distinguish itself from 502 00:25:34,320 --> 00:25:38,280 Speaker 2: competitors in value and network quality with promotions like free 503 00:25:38,320 --> 00:25:40,800 Speaker 2: Netflix subscriptions and wing Stop Chicken. 504 00:25:41,119 --> 00:25:43,920 Speaker 3: For more, we brought in John Butler, our senior telecom analyst. 505 00:25:44,040 --> 00:25:45,960 Speaker 2: We first Askedjohn to break down why this could be 506 00:25:45,960 --> 00:25:48,280 Speaker 2: considered a disappointing quarter at T Mobile. 507 00:25:48,520 --> 00:25:51,320 Speaker 10: I think one of the things that really impacted them 508 00:25:51,440 --> 00:25:55,480 Speaker 10: is we've seen Verizon, which now has a new CEO 509 00:25:55,720 --> 00:25:59,800 Speaker 10: who's come in. He's very volume focused, so he's out there. 510 00:26:00,359 --> 00:26:04,439 Speaker 10: They're promoting heavily. They're trying to win new subscribers, and 511 00:26:04,520 --> 00:26:06,520 Speaker 10: I think it took a bit of a den out 512 00:26:06,520 --> 00:26:09,960 Speaker 10: of T mobiles growth in the fourth quarter. I think 513 00:26:10,040 --> 00:26:12,880 Speaker 10: one thing T Mobile did which was smart is they 514 00:26:12,920 --> 00:26:18,000 Speaker 10: combined the four Q report with a Capital Markets Day update. 515 00:26:18,119 --> 00:26:22,840 Speaker 10: They updated their twenty twenty seven guidance, and they increased 516 00:26:22,840 --> 00:26:26,520 Speaker 10: their free cash flow outlook for twenty seven by one 517 00:26:26,560 --> 00:26:29,600 Speaker 10: point five billion. And so when you saw them do that, 518 00:26:30,200 --> 00:26:35,880 Speaker 10: you saw an inflection and investor sentiment almost instantly, because 519 00:26:36,080 --> 00:26:40,199 Speaker 10: again this has this has gone from a story of 520 00:26:40,840 --> 00:26:44,480 Speaker 10: revenue growth. Now they're pivoting more to free cash flow growth. 521 00:26:44,480 --> 00:26:50,520 Speaker 10: They're really pointing investors to that bottom line to you know, 522 00:26:50,800 --> 00:26:54,080 Speaker 10: get the focus off of revenue growth as things get 523 00:26:54,119 --> 00:26:57,560 Speaker 10: more promotional and as industry growth slows. 524 00:26:58,040 --> 00:27:00,720 Speaker 2: So is this a new wave of just I guess 525 00:27:00,720 --> 00:27:02,840 Speaker 2: across the board, if you Verizon's getting a little bit 526 00:27:02,880 --> 00:27:06,119 Speaker 2: more promotional this T Mobile to AT and T, do 527 00:27:06,160 --> 00:27:08,719 Speaker 2: they have to respond or the other things they can do? 528 00:27:09,560 --> 00:27:14,040 Speaker 10: So great question, Paul. Right, We're in a mature industry backdrop. Now, 529 00:27:14,160 --> 00:27:18,800 Speaker 10: growth overall is slowing for everyone. T Mobile is not 530 00:27:19,000 --> 00:27:23,120 Speaker 10: alone in pointing to pre cash flow growth. You've got 531 00:27:23,160 --> 00:27:26,560 Speaker 10: AT and T and Verizon doing the same thing. And 532 00:27:26,680 --> 00:27:30,480 Speaker 10: so I think again, with that new CEO in place, 533 00:27:30,600 --> 00:27:34,479 Speaker 10: now you've got T Mobiles sort of driving a growth 534 00:27:34,520 --> 00:27:39,760 Speaker 10: story that centers on not only smart promotion, but also 535 00:27:40,000 --> 00:27:45,640 Speaker 10: driving into adjacent markets like advertising and even credit cards. 536 00:27:46,040 --> 00:27:46,240 Speaker 6: Yeah. 537 00:27:46,240 --> 00:27:48,400 Speaker 3: I'm a Team Mobile subscriber and there's always a ton 538 00:27:48,440 --> 00:27:51,000 Speaker 3: of emails from the company offering all kinds of different 539 00:27:51,040 --> 00:27:53,439 Speaker 3: services and deals, and it really feels like they're just 540 00:27:53,440 --> 00:27:56,880 Speaker 3: trying to develop you into their ecosystem. John, I kind 541 00:27:56,880 --> 00:28:00,479 Speaker 3: of call the effort to sell internet access to ad 542 00:28:00,520 --> 00:28:03,800 Speaker 3: broadband customers a side hustle for these telecoms companies. But 543 00:28:03,880 --> 00:28:06,080 Speaker 3: this is how they can make sure that they continue 544 00:28:06,080 --> 00:28:09,080 Speaker 3: to build out their customer base even as they try 545 00:28:09,080 --> 00:28:11,520 Speaker 3: to fight for market share when it comes to mobile 546 00:28:11,520 --> 00:28:14,679 Speaker 3: phone subscribers. How is that side hustle going for T Mobile. 547 00:28:16,440 --> 00:28:19,000 Speaker 10: So the side hustle, as you call it, and I 548 00:28:19,040 --> 00:28:22,320 Speaker 10: think that's a good word for it, is still small 549 00:28:22,440 --> 00:28:25,600 Speaker 10: right now. I think their real opportunity for them in 550 00:28:25,640 --> 00:28:29,520 Speaker 10: the near term scarlet lies in the broadband business. They're 551 00:28:29,680 --> 00:28:34,560 Speaker 10: pushing into fiber, another side hustle. It's small, but I 552 00:28:34,600 --> 00:28:37,920 Speaker 10: think over the next couple of years it could increasingly 553 00:28:38,000 --> 00:28:41,240 Speaker 10: contribute to growth. And then at the core of the 554 00:28:41,280 --> 00:28:46,600 Speaker 10: broadband business is their fixed wireless access business, so delivering 555 00:28:46,640 --> 00:28:51,800 Speaker 10: broadband to the home over cellular spectrum. That's been very 556 00:28:51,840 --> 00:28:55,920 Speaker 10: popular and T Mobile remains a real leader there. It 557 00:28:56,040 --> 00:28:59,040 Speaker 10: continues to be a growth engine for them. And so 558 00:28:59,160 --> 00:29:02,240 Speaker 10: I think when you air that with the ad business, 559 00:29:02,720 --> 00:29:06,480 Speaker 10: the credit card business, and more importantly the fiber business, 560 00:29:07,040 --> 00:29:11,080 Speaker 10: it all adds up to help sustain that free cash 561 00:29:11,120 --> 00:29:16,080 Speaker 10: flow growth and call it the five to six percent range, 562 00:29:16,160 --> 00:29:18,760 Speaker 10: maybe even more as we go forward over the next 563 00:29:18,760 --> 00:29:19,680 Speaker 10: three years. 564 00:29:20,120 --> 00:29:23,200 Speaker 2: John about thirty seconds dividend policy. T Mobile's got a 565 00:29:23,200 --> 00:29:26,440 Speaker 2: one point eight percent yield, Verizon five point six percent, 566 00:29:26,520 --> 00:29:28,680 Speaker 2: and AT and T three point nine percent, So there's 567 00:29:28,720 --> 00:29:31,240 Speaker 2: something for everybody. In terms of investors, does T Mobile 568 00:29:31,280 --> 00:29:33,000 Speaker 2: do They worry about their dividend yield. 569 00:29:35,000 --> 00:29:37,760 Speaker 10: Little less so than share buybacks. In fact, one of 570 00:29:37,760 --> 00:29:40,880 Speaker 10: the things they did with Capital Markets Day was announced 571 00:29:40,920 --> 00:29:44,400 Speaker 10: that they're buying back five billion in shares over the 572 00:29:44,400 --> 00:29:47,479 Speaker 10: course of the first quarter here, which is double the 573 00:29:47,520 --> 00:29:51,160 Speaker 10: normal rate. So you know, I think they're leaning more 574 00:29:51,200 --> 00:29:54,720 Speaker 10: into that than dividend growth, although it's part of that 575 00:29:54,800 --> 00:29:57,800 Speaker 10: share buyback program and it's going to continue to be 576 00:29:57,840 --> 00:29:58,880 Speaker 10: as we go forward. 577 00:29:58,920 --> 00:30:02,560 Speaker 3: Here our thanks to On Butler, Bloomberg Intelligence, Senior Telecom analyst. 578 00:30:02,760 --> 00:30:05,600 Speaker 2: We moved next to some newsom to healthcare company CVS Health. 579 00:30:05,760 --> 00:30:08,520 Speaker 3: This week, the company disappointed Wall Street by repeating its 580 00:30:08,560 --> 00:30:09,960 Speaker 3: profit guidance for the full year. 581 00:30:10,160 --> 00:30:12,600 Speaker 2: It's a move analysts are calling a letdown after a 582 00:30:12,640 --> 00:30:14,680 Speaker 2: strong fourth quarter performance. 583 00:30:14,400 --> 00:30:17,440 Speaker 3: And it comes as CBS faces scrutiny from lawmakers and 584 00:30:17,480 --> 00:30:20,480 Speaker 3: regulators in Washington who are concerned about the rising cost 585 00:30:20,520 --> 00:30:21,080 Speaker 3: of healthcare. 586 00:30:21,360 --> 00:30:21,680 Speaker 5: For more. 587 00:30:21,720 --> 00:30:24,440 Speaker 2: We were joined by Jonathan Palmer, Senior Equity Research analyst 588 00:30:24,440 --> 00:30:25,480 Speaker 2: at Bloomberg Intelligence. 589 00:30:25,560 --> 00:30:27,360 Speaker 3: We first asked Jonathan to give us his take on 590 00:30:27,400 --> 00:30:28,760 Speaker 3: the latest results at CBS. 591 00:30:29,000 --> 00:30:31,840 Speaker 11: I think what investors were really focused on was twenty 592 00:30:31,960 --> 00:30:34,640 Speaker 11: twenty six. They had done an investor day in December 593 00:30:34,880 --> 00:30:38,520 Speaker 11: and already weigh out twenty twenty six guidance and they 594 00:30:38,600 --> 00:30:40,600 Speaker 11: kept it the same, So that was a little bit 595 00:30:40,600 --> 00:30:43,200 Speaker 11: of a sigh of relief for investors in managed care. 596 00:30:43,560 --> 00:30:46,440 Speaker 11: Managed care has had a pretty challenging couple of years. 597 00:30:47,320 --> 00:30:51,640 Speaker 11: Most recently, the Center for Medicare and Medicaid came out 598 00:30:51,640 --> 00:30:55,120 Speaker 11: with some advanced rates for Medicare payments in twenty seven. 599 00:30:55,240 --> 00:30:57,760 Speaker 11: That caused all the stocks, whether it was United Health 600 00:30:57,880 --> 00:31:02,040 Speaker 11: or Humanity, a pullback pretty Significecantly, the important takeaway, I 601 00:31:02,080 --> 00:31:05,240 Speaker 11: think was that even though that happened and CBS is 602 00:31:05,240 --> 00:31:09,560 Speaker 11: going to advocate for better payment rates, their goal of 603 00:31:09,640 --> 00:31:14,040 Speaker 11: turning their healthcare benefits business around isn't really dependent on that, 604 00:31:14,160 --> 00:31:15,840 Speaker 11: and they're still going to hit their margin targets in 605 00:31:15,880 --> 00:31:16,360 Speaker 11: the future. 606 00:31:17,040 --> 00:31:20,400 Speaker 3: Did they talk about what kind of risks are involved. 607 00:31:20,440 --> 00:31:24,560 Speaker 3: I mean, obviously big policy risks remain a headwind here 608 00:31:24,640 --> 00:31:27,040 Speaker 3: for not just CBS, but for the entire sector. But 609 00:31:27,160 --> 00:31:29,800 Speaker 3: did they address how they're thinking through those challenges. 610 00:31:29,920 --> 00:31:33,920 Speaker 11: Well, the industry has been in the crosshairs of Washington 611 00:31:34,000 --> 00:31:38,560 Speaker 11: forever and that hasn't really changed. I mean, interestingly enough, 612 00:31:39,040 --> 00:31:42,440 Speaker 11: Senator Warren and one of the Republican senators actually just 613 00:31:42,440 --> 00:31:45,880 Speaker 11: introduced another bill to break up these companies. So you 614 00:31:45,880 --> 00:31:49,160 Speaker 11: know that's I think table stakes for them. You know, 615 00:31:49,160 --> 00:31:52,560 Speaker 11: they're always in the crosshairs here. Whether we actually see 616 00:31:52,600 --> 00:31:55,560 Speaker 11: some huge sea change out of Washington. I mean, do 617 00:31:55,600 --> 00:31:57,000 Speaker 11: I think the odds are better than they were in 618 00:31:57,040 --> 00:31:59,160 Speaker 11: the past, Yes, But I don't know that a lot 619 00:31:59,160 --> 00:32:01,920 Speaker 11: of people or investors worry about that on the day 620 00:32:01,960 --> 00:32:03,680 Speaker 11: to day. I think it's a pretty wee percent chance 621 00:32:03,720 --> 00:32:06,000 Speaker 11: that these companies get broken up anytime soon. 622 00:32:06,240 --> 00:32:08,720 Speaker 2: What's the call on the CBS and and this peer 623 00:32:08,760 --> 00:32:11,560 Speaker 2: group here of healthcare? Is it supply chain? Is that 624 00:32:11,720 --> 00:32:16,040 Speaker 2: the sector or it could be Okay, I have your industry. 625 00:32:16,080 --> 00:32:19,240 Speaker 11: I have no idea of it as healthcare services more broadly, 626 00:32:19,320 --> 00:32:21,840 Speaker 11: and so that encompasses everything from the managed care companies 627 00:32:21,840 --> 00:32:25,000 Speaker 11: to hospitals, shriters, everything under the sun. 628 00:32:25,200 --> 00:32:27,600 Speaker 2: I watched the pit though, so I'm getting smarter about 629 00:32:27,600 --> 00:32:28,760 Speaker 2: the whole emergency room thing. 630 00:32:30,360 --> 00:32:32,440 Speaker 11: I think the call here is we're very much in 631 00:32:32,440 --> 00:32:36,520 Speaker 11: a holding pattern in this world of managed care. There's 632 00:32:36,560 --> 00:32:39,680 Speaker 11: a lot of things swirling around in terms of these 633 00:32:39,880 --> 00:32:43,560 Speaker 11: Medicare rates and star ratings and really like the nuances 634 00:32:43,640 --> 00:32:46,400 Speaker 11: of how they run their businesses, and there's been a 635 00:32:46,960 --> 00:32:51,320 Speaker 11: there's been a real hard how do I say, this 636 00:32:51,640 --> 00:32:56,320 Speaker 11: era of compression and margin for those businesses, and everybody's 637 00:32:56,320 --> 00:32:59,200 Speaker 11: trying to build that back up, and it's you know, 638 00:32:59,240 --> 00:33:02,280 Speaker 11: when your contract and you have members coming in and 639 00:33:02,280 --> 00:33:04,200 Speaker 11: out of plans and you're dealing with the government. These 640 00:33:04,200 --> 00:33:07,680 Speaker 11: things don't get fixed overnight. So I think a lot 641 00:33:07,720 --> 00:33:10,400 Speaker 11: of people are waiting for more quarity on where things 642 00:33:10,440 --> 00:33:13,000 Speaker 11: are going and can the improvements that a lot of 643 00:33:13,000 --> 00:33:15,640 Speaker 11: these companies have talked about actually show up in the numbers. 644 00:33:16,320 --> 00:33:19,800 Speaker 3: Who would you say is CBS's main competitor, because it's 645 00:33:19,840 --> 00:33:23,520 Speaker 3: a vertically integrated healthcare company. It's no longer a drug store. 646 00:33:24,680 --> 00:33:26,880 Speaker 3: Managed care is a big part of its business. Once 647 00:33:26,960 --> 00:33:28,800 Speaker 3: upon a time, I might have said Walgreens, but that's 648 00:33:28,840 --> 00:33:29,800 Speaker 3: not the case anymore. 649 00:33:29,960 --> 00:33:32,920 Speaker 11: Yeah, I mean, they're very clearly the best run pharmacy 650 00:33:32,960 --> 00:33:36,280 Speaker 11: out there. Now that Walgreens has succumbed to private equity 651 00:33:36,600 --> 00:33:38,920 Speaker 11: and we've seen right aid just go out of business. 652 00:33:39,440 --> 00:33:42,760 Speaker 11: I mean, the best peer comparison is United Healthcare, but 653 00:33:42,800 --> 00:33:46,440 Speaker 11: even then they're very different animals because United Healthcare owns 654 00:33:46,440 --> 00:33:49,040 Speaker 11: a lot of technology assets that CBS doesn't. They also 655 00:33:49,160 --> 00:33:53,160 Speaker 11: own a ton of provider assets that CBS doesn't. But 656 00:33:53,440 --> 00:33:56,400 Speaker 11: in the areas of managed care and the PBM they 657 00:33:56,440 --> 00:33:59,560 Speaker 11: match up pretty well. And then there's sigmas in that 658 00:33:59,600 --> 00:34:01,720 Speaker 11: business those two businesses as well. 659 00:34:01,880 --> 00:34:04,560 Speaker 2: Our thanks to Jonathan Palmer, Senior Equity Research Achannels at 660 00:34:04,560 --> 00:34:06,120 Speaker 2: Bloomberg Intelligence. 661 00:34:05,760 --> 00:34:09,160 Speaker 3: We move next to news from the hospitality giant Hilton Worldwide. 662 00:34:09,200 --> 00:34:12,640 Speaker 2: This week, Hilton reported fourth quarter earnings that beat analyst expectations. 663 00:34:12,760 --> 00:34:15,320 Speaker 3: The company's ability to add new hotels to its global 664 00:34:15,360 --> 00:34:16,840 Speaker 3: network ended up driving growth. 665 00:34:17,000 --> 00:34:18,880 Speaker 2: For more on this, we were joined by Brian Eggert, 666 00:34:18,960 --> 00:34:22,239 Speaker 2: Bloomberg Intelligence Senior Gaming and Launching analysts. We first asked 667 00:34:22,239 --> 00:34:24,880 Speaker 2: Brian about what Hilton reported from an earnings perspective. 668 00:34:25,120 --> 00:34:26,920 Speaker 9: Yeah, so, I mean what we saw in the quarter 669 00:34:27,280 --> 00:34:30,319 Speaker 9: was kind of mixed in terms of us being down 670 00:34:30,360 --> 00:34:32,040 Speaker 9: a little bit or maybe a little blow rep part 671 00:34:32,080 --> 00:34:35,200 Speaker 9: in the fourth quarter, mostly because of the government shutdown, 672 00:34:35,320 --> 00:34:39,319 Speaker 9: so a bit weaker in bound travel to the US 673 00:34:39,360 --> 00:34:41,239 Speaker 9: a little bit weaker governor travel, But the ALC for 674 00:34:41,320 --> 00:34:43,879 Speaker 9: next year, I should say, this year one twenty six 675 00:34:43,960 --> 00:34:45,960 Speaker 9: is pretty good, one to two percent report growth. 676 00:34:46,200 --> 00:34:48,160 Speaker 2: That's revenue per available. 677 00:34:47,760 --> 00:34:51,920 Speaker 9: Per available room. Yeah, and so leisure group, luxury all 678 00:34:52,280 --> 00:34:55,479 Speaker 9: kind of strong. International, a little stronger than the US. 679 00:34:55,560 --> 00:34:58,320 Speaker 9: But although this is an aging up cycle in the 680 00:34:58,360 --> 00:35:00,440 Speaker 9: lodging industry, it's still got some white to it. 681 00:35:01,280 --> 00:35:01,480 Speaker 7: Now. 682 00:35:01,600 --> 00:35:04,719 Speaker 3: Hilton, along with many of the other hotel companies like Marriott, 683 00:35:05,080 --> 00:35:07,640 Speaker 3: has an asset light business model, which means that it's 684 00:35:07,680 --> 00:35:10,440 Speaker 3: brand licensing right. They don't actually own and manage any 685 00:35:10,480 --> 00:35:13,279 Speaker 3: of their own properties, and that, you know, allows it 686 00:35:13,320 --> 00:35:15,600 Speaker 3: to move more nimbly. The profit margins are much higher. 687 00:35:15,760 --> 00:35:17,160 Speaker 3: What's the downside of that, Brian? 688 00:35:17,800 --> 00:35:19,719 Speaker 9: So, I mean, there's some benefit actually owning the real 689 00:35:19,840 --> 00:35:22,040 Speaker 9: estate when you're really in an upcycle. But this kind 690 00:35:22,040 --> 00:35:25,440 Speaker 9: of fee base model is a very capital efficient way 691 00:35:25,680 --> 00:35:27,920 Speaker 9: to expand and grow. You get your franchise fees and 692 00:35:27,960 --> 00:35:30,319 Speaker 9: management fees. They've got a little bit of an hotel 693 00:35:30,560 --> 00:35:34,880 Speaker 9: exposure as well. But most of the lodging companies, separate 694 00:35:34,880 --> 00:35:39,120 Speaker 9: from the Reeds, are actually asset white manager franchisers with 695 00:35:39,200 --> 00:35:40,800 Speaker 9: some own assets. 696 00:35:40,480 --> 00:35:42,240 Speaker 2: Yeah, I'm looking at you know, you've got a company 697 00:35:42,280 --> 00:35:45,319 Speaker 2: with you know, thirteen billion of revenue call it, you know, 698 00:35:45,719 --> 00:35:49,600 Speaker 2: four billion of EBATA, one hundred million of CAPEX. Are 699 00:35:49,640 --> 00:35:53,560 Speaker 2: you kidding me? That is awesome? So we build who 700 00:35:53,680 --> 00:35:56,080 Speaker 2: builds a If Hilton wants to build a new hotel 701 00:35:56,120 --> 00:35:58,920 Speaker 2: in South Beach, they don't build it. Somebody else builds it. 702 00:35:58,960 --> 00:36:01,799 Speaker 9: Yeah, so you're you have like ownership entities. Obviously you've 703 00:36:01,800 --> 00:36:05,040 Speaker 9: got the rates like park hotels, resorts and others that 704 00:36:05,160 --> 00:36:07,399 Speaker 9: own the real estate. So this is, as you said, 705 00:36:07,440 --> 00:36:10,840 Speaker 9: like an asset light franchised management tree driven business with 706 00:36:10,920 --> 00:36:13,480 Speaker 9: someone hotels. There is some otel exposure. 707 00:36:14,120 --> 00:36:15,319 Speaker 2: So what do they do with all the free cash 708 00:36:15,400 --> 00:36:17,239 Speaker 2: interview they get? You know, most of that ebadad goes 709 00:36:17,280 --> 00:36:18,399 Speaker 2: down to the free cash line. 710 00:36:18,440 --> 00:36:20,920 Speaker 9: They have been returning capital, right, so they've got capital 711 00:36:20,920 --> 00:36:25,040 Speaker 9: returns and you know, there is real opportunity for growth 712 00:36:25,480 --> 00:36:28,239 Speaker 9: within their business model and a lot of that is international, 713 00:36:28,400 --> 00:36:30,160 Speaker 9: a lot of conversions, you know, a lot of conversions 714 00:36:30,200 --> 00:36:33,160 Speaker 9: from other assets that fit very well under their brand flags. 715 00:36:33,200 --> 00:36:35,719 Speaker 9: And they have also been launching some new brands as 716 00:36:35,760 --> 00:36:38,000 Speaker 9: well and kind of that lifestyle category. 717 00:36:38,040 --> 00:36:39,760 Speaker 3: How many brands do they have right now. 718 00:36:40,040 --> 00:36:42,319 Speaker 9: So where are they now? I know Marriott's thirty one. 719 00:36:42,320 --> 00:36:45,680 Speaker 9: I'm turning member, Well that's all those thirty one is 720 00:36:45,680 --> 00:36:48,640 Speaker 9: such a slice it is. I mean, you know, I 721 00:36:48,680 --> 00:36:51,920 Speaker 9: think over all of you slice the market segment wise. 722 00:36:52,440 --> 00:36:55,440 Speaker 9: Hyatt and Marriott are more prominent in the luxury high stand. 723 00:36:56,440 --> 00:36:58,759 Speaker 9: Hilton has some luxury, but it's also got a very 724 00:36:58,800 --> 00:37:02,200 Speaker 9: solid kind of mid scale women at service portfolio. And 725 00:37:02,239 --> 00:37:04,480 Speaker 9: so what you tend to see is that in this environment, 726 00:37:04,880 --> 00:37:10,080 Speaker 9: luxury upscale tends to outperforming, and the limited services is 727 00:37:10,239 --> 00:37:13,880 Speaker 9: somewhat weaker, partly because that's where you've got the government travel, 728 00:37:14,320 --> 00:37:18,040 Speaker 9: you've got the transit, independent business travel, But stuff like 729 00:37:18,360 --> 00:37:25,520 Speaker 9: leisure group luxury, particularly international markets UA, Europe, Non China, Asia, 730 00:37:25,880 --> 00:37:27,240 Speaker 9: all have been really quite strong. 731 00:37:27,640 --> 00:37:31,000 Speaker 3: That was Brian Egger, Bloomberg Intelligence, Senior Gaming and Lodging analyst. 732 00:37:31,320 --> 00:37:34,040 Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, 733 00:37:34,120 --> 00:37:36,600 Speaker 2: providing in depth research and data on two thousand companies 734 00:37:36,600 --> 00:37:37,920 Speaker 2: and one hundred and thirty industries. 735 00:37:38,040 --> 00:37:40,640 Speaker 3: And remember you can access Bloomberg Intelligence via b I 736 00:37:40,760 --> 00:37:42,960 Speaker 3: go on the terminal. I'm Scarlett Foo. 737 00:37:42,760 --> 00:37:45,200 Speaker 2: And I'm Paul Sweeney. Stay with us. Today's top stories 738 00:37:45,200 --> 00:37:48,839 Speaker 2: and global business headlines are coming up right now.