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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: We've got earnings coming left and right.

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Speaker 3: Boeing just reported, and George Ferguson is our senior aerospace,

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Speaker 3: defense and airlines analyst.

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Speaker 2: He joins us now from Princeton. George.

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Speaker 3: The headline here that Bloomberg News has highlighted is that

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Speaker 3: Boeing generated better than expected cash flow in the second quarter,

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Speaker 3: and it's still aims to generate one to three billion

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Speaker 3: dollars in free cash flow this year. It sounds like

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Speaker 3: that is the metric that matters the most to investors

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Speaker 3: right now, isn't it?

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Speaker 4: It is, right, So I think that it's all. First,

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Speaker 4: it's always super important to generate cash. You can tell

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Speaker 4: if companies are cheating or not depending on whether or

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Speaker 4: not they're generating cash and the good shown and no cash,

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Speaker 4: and then you're like, doesn't matter. But the second thing

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Speaker 4: for Boeing is they want to pay down some of

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Speaker 4: this debt they have in the balance sheet every time, right,

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Speaker 4: they need to get themselves into a better rating sort

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Speaker 4: of territory, and so that cash generation will go to

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Speaker 4: at some point helping to liquidate some of that debt

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Speaker 4: and tightening up the balance sheet.

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Speaker 5: George, where's Boeing these days on delivery those seven thirty

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Speaker 5: seven max? You've told us in the past that that's

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Speaker 5: really the cash generator for this company. And where are

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Speaker 5: they these days? And wherehere do you expect them to

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Speaker 5: get to?

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Speaker 4: Yeah, so, Kelly orper confirm it. They're at forty seven

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Speaker 4: a month about now. We're seeing a little bit less

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Speaker 4: come out the door of the factory, but that they

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Speaker 4: measure these at different points in the production schedule. But

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Speaker 4: they're forty seven go into fifty two early next year.

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Speaker 4: Another important component of that cash flow story, right. The

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Speaker 4: beauty of this business is it does finance itself as

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Speaker 4: you increase build rate. And so as you increase build rate,

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Speaker 4: airplanes start to you get ready to cut metal in airplanes,

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Speaker 4: you go out and ask the customer to start bringing

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Speaker 4: the deposits, and they bring deposits as the airplane moves

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Speaker 4: down the production process to essentially fund the build of

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Speaker 4: the airplane. So when you're increasing build rates, customers are

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Speaker 4: increasing the send of money into the company. And that's

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Speaker 4: what we saw driving cash flot today. When you slow

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Speaker 4: down build rates, unexpectedly, customers stop sending that money in

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Speaker 4: and you suddenly have to finance it somewhere else. So again,

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Speaker 4: this cash generation a nice positive. Customers are submitting cash

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Speaker 4: because airplanes are about to be cut or in the process,

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Speaker 4: and as you boost that build rate, you bring more

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Speaker 4: of that in, which means it should persist if things

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Speaker 4: go well.

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Speaker 3: Let's talk about Jeff Blue because that company reported earnings

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Speaker 3: as well, and it looks like it posted a loss

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Speaker 3: in the quarter, but it was narrower than what analysts

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Speaker 3: had anticipated. Jet Blue kind of I don't want to

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Speaker 3: call it, and also ran but it's not doing as

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Speaker 3: well as Delta and United with their premium offerings. But

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Speaker 3: it's been trying to make up for that lost ground.

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Speaker 3: How's it doing in that effort.

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Speaker 4: Yeah, I mean yields came in a bit better than

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Speaker 4: we thought. I think there were high single digits, getting

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Speaker 4: close to ten percent. I think that's pretty good. It's

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Speaker 4: pretty challenging right now, I think, you know, for a

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Speaker 4: company like jet Blue, you know, the good portion of

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Speaker 4: their business right now is going to be the premium business,

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Speaker 4: and any loyalty money they can make, it's never going

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Speaker 4: to be as much as Delta and United, and so

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Speaker 4: they kind of operate from from a disadvantage to that standpoint. Again,

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Speaker 4: they do have a bunch of premium you know seats

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Speaker 4: inside those airplanes, especially Transcon they have a pretty loyal following.

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Speaker 4: But that back of the airplane basic economy seat, I

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Speaker 4: think is the challenge seat right now for getting the

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Speaker 4: right price for it. And so there's a bit of

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Speaker 4: a scramble I think going on now between them and

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Speaker 4: Frontier to try to grab those customers that Spirit Airlines

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Speaker 4: left behind. Now, again that's not the that's not a

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Speaker 4: high end customer, but it looked a bit better to

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Speaker 4: us during the quarter than we had originally expected as well.

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Speaker 4: So it does okay, and we're still you know, this

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Speaker 4: is still a very challenging environment for them, but looked

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Speaker 4: at it better than we expected.

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Speaker 3: George, I'm so glad you bring up Spirit because Jet

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Speaker 3: Blue has one quart approval to acquire Spirits LaGuardia slots,

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Speaker 3: it still requires the FA approval, but it's trying to

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Speaker 3: pick up some of the benefits of you know, a

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Speaker 3: competitor going away. Does that change a game for Jet

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Speaker 3: Blue to get these precious slots at LaGuardia Airport.

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Speaker 4: Well, I mean, I don't know that it changes the game,

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Speaker 4: but it's LaGuardia slots are are high value slots. You know,

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Speaker 4: given the proximity to New York City, this is a

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Speaker 4: core market for Jet Blue. You'd like to not only

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Speaker 4: take those slots, but keep competitors out of there to

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Speaker 4: you know, fight for those those for those tickets or

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Speaker 4: those customers. So to me, it'd be a good sign

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Speaker 4: if they can get a hold of them, and it

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Speaker 4: probably well on their way if they've already got the

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Speaker 4: they got water approval.

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Speaker 5: George, I'm not sure if you were aware, but I

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Speaker 5: know you'll you'll value this. I recently became a one

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Speaker 5: million mile flyer for United Airlines. Are you impressed?

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Speaker 4: Very nice? Yes, I don't think I'm there yet.

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Speaker 5: Yeah, that's what happens when you spend you know, forty years.

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Speaker 5: You say, Jacket's shilling for money all across the global

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Speaker 5: Wall Street here. That's kind of my life.

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Speaker 2: What did they give you?

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Speaker 4: What did they give you I got.

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Speaker 5: I had the pilot come up to me before we

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Speaker 5: took off, sat down next to me. We had a

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Speaker 5: nice little conversation. You got him and said, you got

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Speaker 5: a little medallion.

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Speaker 3: Do you get little wings upon in your jacket? But

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Speaker 3: you get the medallion, which is very okay, Medallion's cool.

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Speaker 5: It's very cool. So I got a little plaque and

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Speaker 5: all that kind of stuff. So I'm especially in la

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Speaker 5: in case you didn't know that.

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Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 5: UPS reported some numbers here today. I think the outlook

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Speaker 5: a little disappointing to people. The stocks trading down about

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Speaker 5: four or five percent. Here Thomas black Joints. He's a

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Speaker 5: columnist for Bloomberg Opinion, covers logistics, manufacturing, and aerospace, calling

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Speaker 5: in via that Zoom thing from Dallas, Texas. Thomas, I

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Speaker 5: see the stock trading off a little bit here. What

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Speaker 5: did the company's results say about their business.

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Speaker 6: It's still a tough market. They are cutting costs and

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Speaker 6: trying to increase more profitable packages by calling out some

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Speaker 6: of the Amazon business that they had relied on. And

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Speaker 6: this is all to make up for the most expensive

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Speaker 6: force in the industry. So that's that's the path A're on.

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Speaker 6: And they've already kind of they've done most of their

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Speaker 6: initiatives and now they need to let them play out

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Speaker 6: and see if they're going to work their way through

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Speaker 6: to higher operating margins.

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Speaker 5: Talk talk about their relationship with Amazon. I know they're

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Speaker 5: in the in the process of unwinding that relationship with

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Speaker 5: delivering Amazon dot com packages. What's what's the strategy behind

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Speaker 5: that policy.

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Speaker 6: The strategy is to to not deliver so many of

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Speaker 6: the low cost packages that Amazon likes to dump on

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Speaker 6: other entities, right either the postal service or UPS or

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Speaker 6: other folks. These are a lot of times lightweight packages

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Speaker 6: that go short distances, and UPS doesn't make much money

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Speaker 6: and it has a high cost labor force. Again, so

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Speaker 6: it's trying to get away from that. It's it's not

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Speaker 6: a complete walk away from Amazon. It's more of a

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Speaker 6: glide down. As CEO carold to May likes to say

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Speaker 6: they've gone and they've glided that down to about nine

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Speaker 6: percent of their total sales going to Amazon. It used

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Speaker 6: to be about thirteen percent at the height of the pandemic.

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Speaker 6: So they're not going to break from Amazon completely. They

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Speaker 6: just want the higher profit packages from them.

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Speaker 5: So, you know, it's interesting when I think about it

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Speaker 5: FedEx or UPS. I think about a big fixed cost businesses,

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Speaker 5: you know, the warehouses, the planes, all that kind of stuff,

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Speaker 5: and I would think you'd want to punt as much

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Speaker 5: volume through there as possible. But I guess you know,

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Speaker 5: UPS is saying we need to focus on kind of

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Speaker 5: the unit profitability a little bit more.

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Speaker 6: That's correct, And they're also looking to automate more. They've

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Speaker 6: shut down a lot of facilities in the end by

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Speaker 6: the end of this year, would be one hundred and

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Speaker 6: fifty facilities that they're shutting down. These are older ones

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Speaker 6: that don't have as much automation, so they're moving towards

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Speaker 6: more automation and packages that cost more. That's mostly in healthcare,

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Speaker 6: all businesses. Some businesses. They're getting away really from the

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Speaker 6: e commerce packages which ten which have become commoditized.

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Speaker 5: Interesting you mentioned kind of just technologies you have to

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Speaker 5: kind of weave in and I'm sure I wonder how

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Speaker 5: the company weaves an AI into their operations. What are

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Speaker 5: they saying about that?

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Speaker 6: Yeah, they have a pretty powerful network now because they've

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Speaker 6: introduced RFID, which sounds like an old technology, but it

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Speaker 6: actually has gotten so cheap and so small that they

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Speaker 6: can print RFID labels. So these labels they go on

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Speaker 6: the packages can be picked up without having to physically

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Speaker 6: scan them. So that's a pretty powerful tool. And then

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Speaker 6: you marry that all that data flowing in automatically into

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Speaker 6: the system, and that's where AI takes that data and

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Speaker 6: breaks it down and works its magics.

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Speaker 5: What's the company saying these days about? Maybe it's growth strategy.

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Speaker 5: We've heard over the last couple of years kind of

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Speaker 5: how do they want to focus on profitability? But at

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Speaker 5: some point they need to talk about, you know, how

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Speaker 5: they believe they're going to grow their top line.

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Speaker 6: Right, they're going all in on healthcare, that's a big one.

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Speaker 6: This is where you get into some of the specialized

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Speaker 6: deliveries with cold chain, where the things have to remain

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Speaker 6: cold and sometimes at very very low temperatures throughout the

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Speaker 6: whole network. And UPS has been building on that fedext

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Speaker 6: has also entered into this and small businesses. These are

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Speaker 6: the folks that don't have enough volume to really get

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Speaker 6: those big discounts, so they tend to be more profitable customers.

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Speaker 6: And of course the B to B the business the

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Speaker 6: business deliveries of those are bread and butter deliveries that

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Speaker 6: they won't walk away from. What they are walking away

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Speaker 6: from are some of those e commerce deliveries, especially the

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Speaker 6: residential ones where you don't have a lot of packages

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Speaker 6: going to one stop. That density where you can deliver

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Speaker 6: more packages that one stop is a key to boosting margins.

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Speaker 6: And the residential deliveries they they're never going to be

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Speaker 6: as profitable as business delivers So talk to.

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Speaker 5: Us about just the geographic growth. Did they call out

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Speaker 5: I know they're primarily in the US, but they have

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Speaker 5: a pretty decent international exposure as well. Do they call

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Speaker 5: out any area as a potential opportunity or potential problem area?

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Speaker 6: Yes, they talked about international quite a bit. I think

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Speaker 6: they have some opportunities to do what they did in

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Speaker 6: the US in international, which is to maybe call out

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Speaker 6: some of those low profit packages and concentrate on the

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Speaker 6: higher dollar ones, if you will. And also to automate

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Speaker 6: more and become more efficient. They also talked about some

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Speaker 6: of their trade lanes becoming more normalized. They said that

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Speaker 6: they had growth in their China to US trade lane

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Speaker 6: for the first time in many quarters, and they're working

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Speaker 6: through the elimination of the dominimous packages. I don't know

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Speaker 6: if you remember that whole flat, but that was a

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Speaker 6: lot of volume that was coming through you and at

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Speaker 6: a pretty good price too. That's that that went away

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Speaker 6: very suddenly, and they're starting to lap at so it's

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Speaker 6: looking a little bit better on the numbers.

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Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 5: Let's switch gears to get back to the market and earnings.

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Speaker 5: We've been talking about Coca Cola all morning. They put

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Speaker 5: up some better than expected results, perhaps helped buy the

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Speaker 5: World Cup. Let's check out Ken Shae. He's a Bloomberg

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Speaker 5: Intelligence Senior Consumer Products analyst, can break down Coca Cola's numbers,

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Speaker 5: they seem pretty good. The stocks up six percent to

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Speaker 5: a fifty two week high today.

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Speaker 7: Yeah, Hi, Paul, they certainly were good. You know, we're

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Speaker 7: talking about a sure consumer products company. We're not talking

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Speaker 7: to tech stock here now, Paul. So you know, seven

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Speaker 7: percent sales growth beat the five percent estimates. You know,

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Speaker 7: comparable EPs up eleven. These are good numbers. You know.

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Speaker 7: Consensus was a little bit below that, and a lot

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Speaker 7: of it's because consumer sentiment in a lot of big markets,

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Speaker 7: including the US, continue to be subdued, and so there

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Speaker 7: was some hesitation going in, although we kind of knew

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Speaker 7: World Cup was going to give them a lift, and

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Speaker 7: it did a really nice lift. So it was a

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Speaker 7: high quality performance. It was a very much volume driven,

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Speaker 7: wasn't so dependent on price as it had been in

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Speaker 7: the past few quarters, and balance sheet got stronger. It

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Speaker 7: was just hard to find any fault in this in

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Speaker 7: this quarter.

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Speaker 3: I'm curious about the portfolio of drinks that Coca Cola

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Speaker 3: now has because it's not just Coca Cola or the

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Speaker 3: slim version of it that Paul liked so much, but

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Speaker 3: there's also sugar free soda, sports drinks, water. Because this

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Speaker 3: younger generation seems to you know, not like the sugary

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Speaker 3: soft drinks as much as others in the past. What

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Speaker 3: is the fastest growing part of that beverage portfolio, Ken.

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Speaker 7: That's a good question, Scarlett. You know, Coke would say that,

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Speaker 7: you know, part of the benefits of the FIFA World

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Speaker 7: Cup sponsorship is that it gets them close to the

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Speaker 7: consumer and it hears about trends, you know, in real time,

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Speaker 7: gives them the post what's going on in the market.

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Speaker 7: And so what they said today is look in the

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Speaker 7: second half for Coke zero zero to get a higher

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Speaker 7: level of promotion. What is that, Well, they're very successful.

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Speaker 7: Coke zero reformulated is going to have a no caffeine

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Speaker 7: version that's not exactly novel to the soft drink industry,

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Speaker 7: but it's been probably under marketed, underpromoted for people like me,

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Speaker 7: I can't drink caffeine afternoon or I can't sleep. This

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Speaker 7: is going to be a kind of front and center

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Speaker 7: for them in the second half. But to your point, Scarlet,

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Speaker 7: functionality getting more from your beverage than just hydration is

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Speaker 7: still very key. You know, in terms of consumer demand,

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Speaker 7: they want more protein. Fair Life is a leader and

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Speaker 7: it was of eighteen percent sales in the quarter, really

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Speaker 7: really strong numbers. Advance Hydration, that's power aid, that's getting

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Speaker 7: more marketing muscle now in the second half. So look

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Speaker 7: out for more of that. And I'm sure the company

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Speaker 7: has more innovation up at sleeve. Didn't want to share today,

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Speaker 7: but at least those three products, we can look for

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Speaker 7: a higher level promotion in the second half.

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Speaker 5: So can do Investors and analysts? Do they even look

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Speaker 5: at market share any more Coke versus Pepsi or is

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Speaker 5: that just the thing of the past.

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Speaker 7: Oh, they certainly do. And we get here Bloomberg Intelligence

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Speaker 7: by virtue of Circana. Now got to remember that, Well,

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Speaker 7: it's Kanda. It's really predominantly a US tracking And Pepsi

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Speaker 7: would argue, you know, we're more than just soft drinks. PepsiCo,

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Speaker 7: I think has probably a wider portfolio of different categories

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Speaker 7: than Coca Cola. Does Coke still seventy five percent Sparklings,

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Speaker 7: seventy five percent brand Coca Cola, and so, but they're

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Speaker 7: branching out, you know, beyond that. But Pepsi would say, hey,

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Speaker 7: be fair, we're more than just cola. Yeah, but but

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Speaker 7: but Coke is gaining share in virtually all of its categories.

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Speaker 3: Ken we mentioned how the World Cup was definitely played

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Speaker 3: a role here, but how does a company like Coca Cola.

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Speaker 2: Coca Cola build.

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Speaker 3: On that momentum generated by the World Cup, which is,

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Speaker 3: you know, one time event as far as you know

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Speaker 3: earnings impact is concerned.

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Speaker 7: It is a one time event. But Coke went out

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Speaker 7: of its way to say this morning, look, you know

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Speaker 7: the consumer engagement that we got from the World Cup.

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Speaker 7: You know, they had a lot of activities beyond that

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Speaker 7: innovative packaging. They had games and events outside the stadium

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Speaker 7: going on, They had digital interactivity, they had a lot

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Speaker 7: going on that they feel that there's going to be

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Speaker 7: you know, benefits resonating beyond just the immediate. So we'll look,

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Speaker 7: we'll look for that. But like I said, you know,

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Speaker 7: Coke engaged with its consumers, and I think that pays dividends.

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Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 5: Is Scarlo fil and Paul Sweeney live here in our

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Speaker 5: Bloomberg Interactive Broker studio, streaming live on YouTube as well.

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Speaker 5: We have some ernie's coming out of the payments in

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Speaker 5: fintech space today and break it down. We're gonna go

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Speaker 5: to Dick she Garrett. She's a senior tech and payments

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Speaker 5: analysts for Bloomberg Intelligence's out there in San Francisco. Dicktion,

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Speaker 5: let's first talk about PayPal. I know they reported some

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Speaker 5: numbers that beat estimates. We can talk about that. Talk

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Speaker 5: to us about the strategic opportunities potentially for this company

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Speaker 5: because I'm not sure if it's in play or not

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Speaker 5: in player, but people are interested in it. Talk to

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Speaker 5: us about PayPal.

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Speaker 8: Yeah, Hi, Paul, great to be here with you. As always.

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Speaker 8: I think the results beat was interesting nine percent and

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Speaker 8: just an EPs beat shows that the business is executing

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Speaker 8: better that was feared in this tough environment. Volume was strong,

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Speaker 8: transaction margins were decent. Branded checkout growth also stabilized around

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Speaker 8: two percent, and the companies reaffirmed it's one point five

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Speaker 8: billion savings target and they've said about four hundred million

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Speaker 8: run rate savings by the end of the year. So

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Speaker 8: things seem to be on track, but I think the

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Speaker 8: key issue that remains with PayPal is the core profit driver,

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Speaker 8: which is the branded PayPal button that has seen single

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Speaker 8: digit growth. And the context around that is digital walllets

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Speaker 8: like Apple, pay, like Shop pay Card, auto films are

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Speaker 8: all capturing checkout mind share. So I think the focus

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Speaker 8: needs to shift. Whatever management does, those back, like those

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Speaker 8: old days of milking the branded button are never going

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Speaker 8: to come back, so they need to find alternative ways

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Speaker 8: to monetize the network. And that said, the biggest catalyst

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Speaker 8: for the stock right now is the Stripe and add

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Speaker 8: In bid. They've made a fifty three billion dollar joint

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Speaker 8: offered to acquire PayPal. The board officially hasn't responded to,

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Speaker 8: but one way or the other, it forces the market

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Speaker 8: to value this company appropriately.

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Speaker 3: Now do you expect the board to have any issues

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Speaker 3: with this deal?

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Speaker 8: So here's the deal, right, Scarlet, Why does Stripe want PayPal?

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Speaker 8: Stripe dominates the developer first merchant side payment infrastructure, but

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Speaker 8: what it lacks is a two sided consumer network. So

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Speaker 8: the asset that PayPal has, which is its four hundred

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Speaker 8: million consumer wallets, the Venmo and distribution that it has,

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Speaker 8: and now the stable coin and agentic Ai rails. All

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Speaker 8: of these are valuable assets, and management is in so

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Speaker 8: many ways communicating that. So the board has shown that

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Speaker 8: this low wall offer isn't where they see the company's

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Speaker 8: true potential. If you pay attention to the words in

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Speaker 8: Enriquez commentary today, the message is clear they're open to

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Speaker 8: a deal, but it needs to reflect the true franchise value.

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Speaker 8: And management said that they feel confident about the turnaround

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Speaker 8: execution with fast slane or with margin expansion, and they

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Speaker 8: think that'll yield higher long term shareholder value, and they

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Speaker 8: are willing to do the hard work or at least

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Speaker 8: go down trying. So these comments are likely reflecting in

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Speaker 8: the share price more than the earnings itself today.

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Speaker 5: How credible was this buyer? Can you tell us about

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Speaker 5: who this buyer is and who this bidder is and

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Speaker 5: kind of how credible they are.

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Speaker 8: So Stripe is a very large competitor and a direct

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Speaker 8: competitor for PayPal. They're a private company, and which is why, like,

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Speaker 8: strategically this asset makes sense for Stripe to kind of acquire.

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Speaker 8: It's just that the offer was a low ball offer.

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Speaker 8: This asset gives Stripe direct consumer relationships. So they do

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Speaker 8: the merchant side of the processing. They have all the

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Speaker 8: AI native companies. They have a wonderful new modern tech stack.

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Speaker 8: But the paypals two sided network where they have all

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Speaker 8: the consumers and the merchants. That's something that Stripe would

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Speaker 8: that Stripes envy. That's what they want. A consumer wallet,

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Speaker 8: something like a Venmo, which has become a verb instead

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Speaker 8: of a company acid right, so when I say okay,

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Speaker 8: let me Venmo, you you understand what I'm talking about.

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Speaker 8: So that's something that Stripe would like to acquire.

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