Speaker 1: This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye.
Speaker 2: The real app performance has been the US corporate high yield.
Speaker 3: Are the companies lean enough? Have they trimmed all the fats?
Speaker 2: The semiconductor business is a really cyclical business.
Speaker 1: Breaking market headlines and corporate news from across the globe.
Speaker 3: Do investors like the M and A that we've seen?
Speaker 2: These are two big time blue chip companies.
Speaker 3: The window between the peak and cut changing super fast.
Speaker 1: Bloomberg Intelligence with Alex Steinhl and Paul'sweenye.
Speaker 4: On Bloomberg Radio.
Speaker 2: Today's Bloomberg Intelligence Show, we dig inside the big business
Speaker 2: stories impacting Wall Street and the global markets.
Speaker 3: Each and every week we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries are analysts cover worldwide.
Speaker 2: Today we take a look at momentum for cruise lines
Speaker 2: in twenty twenty four.
Speaker 3: Plus the future of award shows may be at risk.
Speaker 3: But first, it was a real week of earnings with
Speaker 3: names like Netflix, Tesla, and IBM reporting. For more on
Speaker 3: the numbers from IBM, we spoke with Bloomberg Intelligence Senior
Speaker 3: technology analyst an Arab Rana.
Speaker 5: One of the biggest things we talked about was the
Speaker 5: free cash flow number came out at twelve billion. I
Speaker 5: think we were you know, we were slightly above the
Speaker 5: street and saying that, you know, I'll be happy if
Speaker 5: they do eleven billion. So I think that really speaks
Speaker 5: both to the organic growth rate of the company, operational efficiencies,
Speaker 5: you know, improving margins, taking care of accounts, receivers, all
Speaker 5: sorts of things. So I think it's really good print
Speaker 5: for IBM in terms of free cash flow, but also
Speaker 5: the you know, the guidance on the you know, organic
Speaker 5: growth rate because we were going in so in fourth
Speaker 5: quarter they did three percent growth rate in constant currency.
Speaker 5: We thought, at least for the first you know, few quarters,
Speaker 5: they're going to talk about three to four percent and
Speaker 5: then accel rate, but they strayed away went with a
Speaker 5: mid single digit number. So I think overall, good for IBM,
Speaker 5: good for the rest of the tech space, and I
Speaker 5: feel pretty happy about it.
Speaker 3: What I know, this is kind of a probably dumb question,
Speaker 3: but like what in IBM's business model to let it
Speaker 3: like me, are they doing well, like break down the
Speaker 3: different categories in a way that makes sense to alex
Speaker 3: So they I mean.
Speaker 5: They still are a very big piece of the entire
Speaker 5: tech ecosystem. They have very strong relationships, they have a
Speaker 5: good consulting business, they have red hat, they tell mainframes. Now,
Speaker 5: remember one thing, I mean, I know people got very
Speaker 5: getting very excited. But if software spending is climbing between
Speaker 5: ten to twelve percent, IBM still growing you know, six
Speaker 5: to seven, So they are still underperforming the entire broader
Speaker 5: software space. But that's okay because you know, when you
Speaker 5: go from three to six, that's a big change. Also
Speaker 5: in terms of the growth rates. This is just a
Speaker 5: matter of overall tech spending improving after two years of
Speaker 5: under investment. This is something that we have been saying
Speaker 5: for so long. Tick as a portion of total GDP
Speaker 5: is a very small number. Most of the companies around
Speaker 5: the world, barring the consumer technology companies that we see,
Speaker 5: have underinvested in technology. So when you have rail companies
Speaker 5: or airlines or auto insurance companies, they really need to
Speaker 5: be more digital. And one way to get digital is
Speaker 5: to move a lot of their infrastructure to the cloud.
Speaker 5: So all of those things play in well. We have
Speaker 5: not seen good spending in two years. I'm pretty happy
Speaker 5: that twenty twenty four May we may see a rebound.
Speaker 2: How does IBM and fit into the AI discussion, because
Speaker 2: I know the CEO called out the client demand for
Speaker 2: AI is accelerating. How do they play in that space.
Speaker 5: The majority of the stuff that they're going to do
Speaker 5: is on the consulting side. So if you are a
Speaker 5: large company, you need to figure out what to do.
Speaker 5: They have a lot of consultants that can help you
Speaker 5: clean up the data. You know, use whichever model we
Speaker 5: want to use. You want to use something from open
Speaker 5: ai Andthropic, all these companies that are out there. They'll
Speaker 5: help you with that, help you train the models, and
Speaker 5: then at the end of the day make it for
Speaker 5: your business case. It's not as easy as just you know,
Speaker 5: using chat, GPD and answering questions for this. For an
Speaker 5: enterprise use, you need to do a lot of data
Speaker 5: clean up, data aggregation because that's what's needed to clean
Speaker 5: up your you know, the models itself.
Speaker 3: How fast and long can that kind of growth rate
Speaker 3: six seven percent go?
Speaker 5: I think if this year they are able to go
Speaker 5: to six seven percent, you know, I could expect then
Speaker 5: you know, another one hundred to two hundred basis points
Speaker 5: improvement next year. And that's actually not a bad deal
Speaker 5: because you remember the old IBM just about four or
Speaker 5: five years ago, they were not growing at all. So
Speaker 5: in order for them to actually come up with a
Speaker 5: high single legit number next year would be would be
Speaker 5: really welcome by the market.
Speaker 2: So what's the read through here, Anna rog for you know,
Speaker 2: greater tech here from IBM? Is can I say I'm
Speaker 2: just going to go out and start buying more of
Speaker 2: these stats I'm looking at like Nvidia for example, up
Speaker 2: twenty five percent year to date and of course up
Speaker 2: two hundred and twenty percent over the trailing twelve months.
Speaker 2: I guess this is a pretty good readthrough? Is that?
Speaker 2: Can I do that?
Speaker 5: Yeah? So, for you know, we had run a CIO
Speaker 5: survey back in December, and you know, we were we
Speaker 5: kind of got the indication that it's going to be
Speaker 5: a year of spending more aggressively compared to the last
Speaker 5: two in twenty twenty four. But you know, the way
Speaker 5: we had built that and you know, we got the
Speaker 5: chip strength going on right now that probably carries on
Speaker 5: the summer, and then after that we see you know,
Speaker 5: strength in the software and the consulting area, which are
Speaker 5: more of the downstream play. But it's possible that we
Speaker 5: may see that bounce back, you know, as early as
Speaker 5: second quarter road, you know, going into it because you
Speaker 5: know things, I think the leading indicators are good at
Speaker 5: this point. So so I'm pretty optimistic that you know,
Speaker 5: when we were thinking about a second half recovery for
Speaker 5: tech spending, you know it may actually happen in second
Speaker 5: quarter road, maybe even as late late as first.
Speaker 3: Quarter our thanks to Bloomberg Intelligence senior technology analyst and
Speaker 3: er Agrana.
Speaker 2: Let's turn out to airlines or names like American, Southwest
Speaker 2: and Alaska air surprised analysts by beating expectations for more.
Speaker 2: We spoke with Bloomberg Intelligence senior defense and airlines analysts
Speaker 2: George Ferguson.
Speaker 6: You know we got American, Alaska and Southwest yields were
Speaker 6: down in the domestic business on all three. Alaska yields
Speaker 6: were down six or seven percent, American yields down similar number.
Speaker 6: Southwest really just let a load factor fade away into
Speaker 6: the seventies and took a yield down to two percent.
Speaker 6: So to me, you know they're guiding to better results
Speaker 6: is as you know, next year, as we get into
Speaker 6: one que doesn't look great, but as we get past
Speaker 6: one queue, the overall guidance for the year looks a
Speaker 6: bit better. So airlines, I think, I think things are
Speaker 6: going to affirm as they get into next year, but
Speaker 6: I don't think it looks like a healthy market at all.
Speaker 6: From the numbers I'm seeing huge.
Speaker 2: Forour So give us a sense of where we are
Speaker 2: and just in terms of air travel, have we established
Speaker 2: a new post pandemic normality in terms of where leisure
Speaker 2: traffic is and where business traffic is? Do we kind
Speaker 2: of know how that market looks?
Speaker 6: So comments from United where that business traffic wasn't back
Speaker 6: to the twenty nineteen levels, They said they saw hopeful
Speaker 6: signs in one queue, So business hasn't come back fully.
Speaker 6: Is this the new normal? I would guess it is
Speaker 6: right because we're, you know, we're I don't know when
Speaker 6: the pandemic actually sort of ended, but we're probably a
Speaker 6: year and a half passed, and I would expect most
Speaker 6: of you know, normality to have returned to our lives.
Speaker 6: So it seems like we still have some level of
Speaker 6: deficit on pre pandemic business travel, but leisure travel has
Speaker 6: definitely exceeded that. I think the airlines are just sold capacity.
Speaker 6: They would have sold the businesses into the leisure side,
Speaker 6: and I think that's making the fair softer.
Speaker 3: So you say that the quarter did that great, first
Speaker 3: quarter looks soft. I get that, But then you said
Speaker 3: that after Q one things start to look a little better.
Speaker 3: What's going to look a little better. Is it business travel?
Speaker 3: Is it we just keep doing vacation stuff, we do
Speaker 3: it domestically rather internationally, or is it still across the board.
Speaker 6: I said that after Q one, the airlines, I think
Speaker 6: it's going to look better. I don't see it right.
Speaker 6: I think the big leisure bounce back was last year
Speaker 6: twenty twenty three, and I think that you could see
Speaker 6: software domestic yields all through the year. But you know,
Speaker 6: we had Scott Kirby at United Airlines earning earlier in
Speaker 6: the week and he's telling us how you know, he's
Speaker 6: getting traction from premium products and that's going to help
Speaker 6: and drive better profitability through next year. I mean, you know,
Speaker 6: companies like Alaska they have premium product, but I think
Speaker 6: they're a roughly the same amount, unlike United that's adding it.
Speaker 6: Southwest has no premium products, and there's a lot of
Speaker 6: other airlines that have no premium product, and I think
Speaker 6: they're going to be fighting for the base leisure traveler.
Speaker 6: I think it's going to be difficult. But George against
Speaker 6: the airline that they see it coming.
Speaker 2: Sorry, George, you're at in Los Angeles the Aerospace Supply
Speaker 2: Chain Conference. How is the supply chain for the airline industry?
Speaker 2: Can they get the planes they need?
Speaker 6: That's rough. So we saw the news. I'm boeing about
Speaker 6: not allowing them to increase the discussion that the Aerospace
Speaker 6: Supplier Conference is all about labor, labor and labor. There's
Speaker 6: been a lot of turnover. Yeah, there's a lot of
Speaker 6: turnover in the industry. The backfill needs to be trained.
Speaker 6: They're not fully trained, they're not efficient, and there's still
Speaker 6: people having a hard time finding and so the US
Speaker 6: aerospace industry is in pretty tough, tough straits. I think
Speaker 6: I think young kids, you know, a lot of discussion
Speaker 6: here is that young kids, you know, young professionals don't
Speaker 6: want to come to this industry. They'd rather work for Amazon,
Speaker 6: they'd rather work for Google than go to work in
Speaker 6: the aerospace industry. And so having a real hard time
Speaker 6: backfilling and training and keeping people in the industry.
Speaker 3: So to that point, what happens if Boeing isn't allowed
Speaker 3: to produce the plane that the FAA said, I can't
Speaker 3: even treat keep track, to be honest with you. But
Speaker 3: if they can't produce it, what happens to those that
Speaker 3: have ordered it?
Speaker 6: I mean, right now, what the FA said is that
Speaker 6: Bowing can't increase production right, increase of the mits they're
Speaker 6: already building. They were building about thirty one a month
Speaker 6: last year. They were supposed to rate break to about
Speaker 6: thirty eight a month at the end of the year.
Speaker 6: The question is have they so will the FA let
Speaker 6: them continue at thirty eight? And then as I understand that,
Speaker 6: the FA is going to inspect their manufacturing processes because
Speaker 6: they're quite concerned obviously after the Alaska incident, to make
Speaker 6: sure it's stable, make sure that Bone can build aircraft safely.
Speaker 6: So my guess is you've got something that's going to
Speaker 6: last part of this quarter. I mean, there's only so
Speaker 6: many sites that can really inspect, right. You've got a
Speaker 6: lot of inspection down in Wichita, a lot of inspection
Speaker 6: up in Renton, Washington. Those are the two main factories.
Speaker 6: If they could go deeper into so many other suppliers,
Speaker 6: which they probably will, but there's not a lot of
Speaker 6: sites to inspect. My guess is that deliveries for customers
Speaker 6: that expect the airplanes in twenty twenty four could get
Speaker 6: pushed out, probably will get pushed out, maybe into twenty
Speaker 6: twenty five. Could be customers core customers like United Southwest, Ryanair,
Speaker 6: Alaska Airlines. They've taken the majority of the orders recently,
Speaker 6: so you'll hear some howling from them. I think you
Speaker 6: already hurd some howling from United CEO Kirby right on
Speaker 6: the Max ten. So I think that's what's you go
Speaker 6: to see deliveries getting pushed out and pushed into next year.
Speaker 6: Hopefully boll And can recover that and bounce to higher rates.
Speaker 6: That's all about their recovery.
Speaker 2: I mean, I just kind of feel like they're kind
Speaker 2: of too big to fail, or too big for anybody
Speaker 2: to really do anything, because it's a daopoly them an airbus.
Speaker 2: But what is it like a downside scenario here for Fox?
Speaker 2: It would it be government regulation, would it be what's
Speaker 2: kind of spooking the market?
Speaker 6: Well, I think you already have part of that downside,
Speaker 6: right and that's more intense oversighting regulation. Frankly, that probably
Speaker 6: should have occurred anyways. You know, the FAA has also
Speaker 6: going through some difficult time during the pandemic, lost a
Speaker 6: bunch of personnel. They need their skill sets developed sharpened,
Speaker 6: so this process could be slow.
Speaker 1: But I don't.
Speaker 6: I mean, I do think they're you know, I think
Speaker 6: they are close to too big to fail, given that
Speaker 6: there's such an important government contractor you know, one of
Speaker 6: the few big primes that can make airplanes in serial production.
Speaker 6: Question is, you know, what could the government do if
Speaker 6: they had real big problems on the commercial side. I
Speaker 6: don't think we're there yet, though, I think it still
Speaker 6: isn't duopoly. If you wanted to get in the back
Speaker 6: of the line for an Airbus eight three twenty, the
Speaker 6: competitor right now, you know, if we just add up
Speaker 6: all the orders they have in their production increases, you're
Speaker 6: out eight years. I think some of those orders are
Speaker 6: definitely long data orders, so maybe if you got in
Speaker 6: the back of that mind, you'd be out five or
Speaker 6: six years before you started getting airplanes. That alone is
Speaker 6: going to keep Boeing, keep folks going towards Boeing for airplanes.
Speaker 6: But that's only if things don't degrade from air things
Speaker 6: degrave from here, you got a much bigger problem.
Speaker 2: Thanks to the Bloomberg Intelligence senior Defense and Airlines analyst
Speaker 2: George Ferguson.
Speaker 3: All right, coming up on the program, Baker Hughes breaks
Speaker 3: free from rivals with a lower shale view. This year
Speaker 3: we speak to the CEO.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing depth
Speaker 2: research and data on two thousand companies and one hundred
Speaker 2: and thirty industries. You can access Bloomberg Intelligence via b
Speaker 2: I go on the terminal.
Speaker 3: I'm Paul Sweeney and am Alex Steel, and this is Boomberg.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Saturdays
Speaker 1: at noon Eastern on Bloomberg dot Com, the iHeartRadio app
Speaker 1: and the Bloomberg Business App, or listening on demand wherever
Speaker 1: you get your podcasts.
Speaker 3: Conflict in the Middle East and uncertainty in the global
Speaker 3: economy have the energy sector facing a lot of unknowns.
Speaker 2: Baker Hughes, the world's number three oil field contracted by
Speaker 2: market value, is also filling the pressure. This week, the
Speaker 2: firm announced earnings that will blow expectations and analysts are
Speaker 2: raising concerns, all right.
Speaker 3: To take us through how Baker Hughes plans to manage
Speaker 3: all the risks facing oil, we spoke to Lorenzo Simonelli, Chairman,
Speaker 3: president and CEO at Baker Hughes.
Speaker 7: First of all, we're coming off some great results in
Speaker 7: twenty twenty three, and also we've laid out a clear
Speaker 7: strategy as Baker Hughes over the coming years. As you
Speaker 7: look at twenty twenty four, we've given a guidance that
Speaker 7: is the balanced approach with all of the geopolitical and
Speaker 7: also onsetty that's happening around the globe. So we stick
Speaker 7: to our guidance and we think that we're executing and
Speaker 7: as you look at the guidance, we've got considerable growth
Speaker 7: in twenty twenty four and great performance as well.
Speaker 3: So if you're more conservative than your peers, where is
Speaker 3: the question mark? Is it going to be the new
Speaker 3: energy orders? Is it going to be on shore demand
Speaker 3: or is it going to be offshore? Is it domestic
Speaker 3: or international that has you thinking questioning the most.
Speaker 7: You look at what's happening around the world, and you
Speaker 7: see the geopolitics, you see what's happening from the opequ cuts.
Speaker 7: You see what's happening from the consolidation in North America,
Speaker 7: and that leads some uncertainty relative to the activity levels
Speaker 7: within North America Land. We still see that North America
Speaker 7: should be flatish, but US Land will likely be negative
Speaker 7: for the year given some of the consolidation, and also
Speaker 7: some of the activity international again will be in the
Speaker 7: high single digits, So we still see that being robot
Speaker 7: and I think again, as we look at giving guidance,
Speaker 7: we're taking a balanced approach to what's taking place around
Speaker 7: the world at this moment, and also giving a predictability
Speaker 7: to our investors on what can be achieved and also
Speaker 7: confidence in what we can achieve.
Speaker 2: Lorenzo, I just looking at your business here and I
Speaker 2: see that about three quarters of your revenue has comes
Speaker 2: from outside of the United States. So obviously you are
Speaker 2: attuned as much as anyone to the geopolitical risks around
Speaker 2: the world. What are you telling your investors about what's
Speaker 2: happening in Eastern Europe, what's happening in the Middle East,
Speaker 2: and how that may impact your business.
Speaker 7: We're telling them that we've taken every caution and also
Speaker 7: we're managing the situation. We haven't seen any impact and
Speaker 7: we don't anticipate a big impact, but we do think
Speaker 7: some of the development plans may be delayed slightly over
Speaker 7: the long term. No change in what the NOCs and
Speaker 7: also large customers are laying out from a capital spend,
Speaker 7: but there may be some i would say delays. Again,
Speaker 7: as we look at the outlook internationally, we're still anticipating
Speaker 7: high single digit growth and we think that international is
Speaker 7: a key place for us to be and we look
Speaker 7: to perform there over the coming years.
Speaker 3: Lolrenzo, what's your take on the demand side.
Speaker 7: Well, Alex, it's always difficult to predict some of these elements,
Speaker 7: just like it is oil price and you know this
Speaker 7: space well, I think demand continues to be robust. A
Speaker 7: lot of it's going to depend on the economic situation
Speaker 7: as you look at some of the events unfolding also globally,
Speaker 7: and we anticipate that again demand will increase this year
Speaker 7: and continue to be strong, especially in the developing world.
Speaker 2: What are your customers telling you here? I know obviously
Speaker 2: close contact with them. What are they telling you about
Speaker 2: their spending plans over the next couple of years?
Speaker 7: Again, it varies. You've seen in North America obviously some consolidation,
Speaker 7: so people are going through that consolidation and they'll be
Speaker 7: looking to adjust some of their spending plans in the
Speaker 7: short term, but again continuing to be robust on the
Speaker 7: long term as you continue to see the demand be there.
Speaker 7: On the international side, these NOCs have multi year projects
Speaker 7: that they're executing. There'll be some variation in the timing
Speaker 7: of those, but again the long term continues to be solid,
Speaker 7: and as you look at our guidance, again we're anticipating
Speaker 7: that maybe there's some tempered view on some of the
Speaker 7: case of the developments, but the developments are going to happen.
Speaker 3: NC Paul just you know, national oil companies just pull
Speaker 3: up with the oil jargon there, Lorenzo, you mentioned the
Speaker 3: M and A situation, and I find that so interesting
Speaker 3: because that was one of my questions to all these
Speaker 3: CEOs when they announce these big mergers, is are you
Speaker 3: actually going to be slowing your oil production growth over time?
Speaker 3: And they're all like, no, no, no, no, no, it's
Speaker 3: going to be really good, it's going to keep growing.
Speaker 3: What do you think that timeline actually looks like? In
Speaker 3: the beginning, their synergies, they get more out of the ground,
Speaker 3: but then that tapers off. What do you notice?
Speaker 7: So as you look at the normal evolution of consolidation
Speaker 7: we've seen this cycle before. You are going to continue
Speaker 7: to see production increases, but you're also going to see
Speaker 7: synergies between the consolidation and as they go through their
Speaker 7: integration activities, I think you'll likely see some temperate measures
Speaker 7: relative to some of their procurement, but again production, they're
Speaker 7: going to seize the opportunity to continue to increase production
Speaker 7: as the demand is there.
Speaker 2: You know, I'm not an expert in this, unlike Alex,
Speaker 2: but a term you see here a lot, and I
Speaker 2: don't hear it that much anymore is peak oil? When
Speaker 2: are we going to be at peak oil? Are we
Speaker 2: at peak? I don't hear that discussion anymore. So when
Speaker 2: you're talking to investors, how do you talk to them
Speaker 2: about the long term kind of demand for oil?
Speaker 7: You've got to look at it from a standpoint of
Speaker 7: the energy transition is going to be multi decades and
Speaker 7: it's going to require an energy mix that is abundant
Speaker 7: of providing as clean as possible fuel sources to the public,
Speaker 7: and that means oil is going to have a role
Speaker 7: to play, and we see oil and gas in particular
Speaker 7: having a strong robust outlook as we go forward. And
Speaker 7: the question on PEA coil has been asked many times.
Speaker 7: There will be a time when PEA coil comes. I
Speaker 7: think it's not at this stage, and we continue to
Speaker 7: focus very much on gas and also LNG.
Speaker 3: Lorenzo somehow restricting LNG exports in the US is becoming
Speaker 3: something people are talking about. The permit process has gotten
Speaker 3: a lot slower.
Speaker 7: What is going on, alex It has gotten slower, and
Speaker 7: again we're monitoring the situation, and I'm disappointed because as
Speaker 7: you look at the benefits of USLNG not only for
Speaker 7: the US, but also for the world and also what's
Speaker 7: been achieved with the geopolitical uncertainty and also providing to Europe,
Speaker 7: there's been commitments that have been made and we should
Speaker 7: continue the USLNG exports and also the permitting of these projects.
Speaker 7: That being said, international projects are continuing to move forward,
Speaker 7: and we have an expectation that again in twenty twenty
Speaker 7: four there'll be sixty five mtpa FIDD, and we're again
Speaker 7: seeing about thirty to sixty mtpa FIDD in twenty five
Speaker 7: and twenty six and by twenty thirty there'll be a
Speaker 7: global capacity in place of eight hundred mtpa. So you know,
Speaker 7: we'll monitor the US situation. It's disappointing. I think it
Speaker 7: will sort itself out. There's been a lot of commitments
Speaker 7: that have been made to international partners.
Speaker 3: Lorenzo, I really appreciate that, the conservative approach and then
Speaker 3: sort of moving a lot faster in the next couple
Speaker 3: of years. Thanks a lot. I look forward to seeing
Speaker 3: you next week in Florence, Italy. Thank you, Lorenzo Semonelli
Speaker 3: for what good He's chairman, CEO and president of Baker Hughes.
Speaker 3: Now we're going to do something that only Paul and
Speaker 3: I can do. Talk to a CEO, then bring a
Speaker 3: Bloomberg Intelligence analyst who's been covering the company for years
Speaker 3: on to then talk about it. This is what we
Speaker 3: can offer you. On the Bloomberg Inteligence Show every day
Speaker 3: Scott Levine, he covers oil services for Bloomberg Intelligence. What
Speaker 3: did you make of the numbers? And just talking with
Speaker 3: Lorenzo in the last ten minutes.
Speaker 8: Frankly, the guidance that Baker gave for mid teens EBITDA
Speaker 8: growth is almost identical to what SLB gave. I think
Speaker 8: the difference here is probably the conservatism around the messaging.
Speaker 8: Number one, certainly the mid load to mid single digit
Speaker 8: decline that they're calling for spending growth in North America,
Speaker 8: high single digit growth in international trails what we saw
Speaker 8: out of both of those two companies. And then secondarily,
Speaker 8: you know LNG, as you mentioned, is a really big
Speaker 8: driver for Baker, that's unique to them, certainly much more
Speaker 8: so for them as a producer of modules for LNG plants,
Speaker 8: which neither SLB and holl do. And I would say
Speaker 8: that the commentary there was maybe a little bit more
Speaker 8: downbeat as well. They're looking for modest growth FID capacity
Speaker 8: this year. They focused more on some of the businesses
Speaker 8: outside of that. So I think it's probably more so
Speaker 8: the tone out of Baker being a bit more sober
Speaker 8: than the guidance per se, which was in line with consensus.
Speaker 8: And the growth outlooks similar to what we saw it
Speaker 8: at the piers there.
Speaker 2: So I'm looking at the an R function for Baker, Hughes, Hallibert,
Speaker 2: all the comps. Street likes this stuff. They like these
Speaker 2: oil services companies. What's the bull call on this? Is
Speaker 2: this people you're going to need oil forever.
Speaker 8: Yeah, well, you know, they are investing in the future
Speaker 8: with the energy transition and the new energy business as well.
Speaker 1: But I think you.
Speaker 8: Know, so, look two years ago, twenty twenty two, this
Speaker 8: group was outstanding, right, you know, the group was up
Speaker 8: sixty percent, the market was down closed to twenty percent.
Speaker 8: Last year, the group performed okay in a much stronger market,
Speaker 8: and the growth expectations for the group have moderated and
Speaker 8: are moderating still in twenty twenty four. I think within
Speaker 8: that context, folks are still comfortable with large cap globally
Speaker 8: diversified oil field service companies like Baker Hughes, like SLB,
Speaker 8: to a lesser extent, Haliburton because they're more focused on
Speaker 8: North America. But they're still comfortable with these companies. They're large,
Speaker 8: they're global, the balance sheets are in good shape, they're
Speaker 8: returning more than fifty percent of the free cash to investors,
Speaker 8: and so that appeals to investors that kind of are
Speaker 8: attuned to this new energy environment where it's discipline, growth
Speaker 8: and capital returns rather than the wildcatter mentality. So I
Speaker 8: think it's what I like.
Speaker 5: I like the wildcatter.
Speaker 3: I like that yeah, I called SLB slumbers. I'm definitely
Speaker 3: gonna hear from them later, but SLB. So to that point, though,
Speaker 3: I feel like if you talk to SLB they'll talk
Speaker 3: a lot about digitalization and all that kind of stuff,
Speaker 3: whereas Baker Hughes talks really about LNG and they build
Speaker 3: these big terminals they help to do that, like with
Speaker 3: the likes of Bechtel, for example. Do you feel like
Speaker 3: at some point these guys are going to be you
Speaker 3: can really bet on them different ways, Like I'm gonna
Speaker 3: bet on Baker Hughes for LNG. I'm gonna bet an
Speaker 3: SLB for an AI component and digitalization, Like can I
Speaker 3: do that yet?
Speaker 8: You can? And I think those are accurate depictions of
Speaker 8: the business. But I wouldn't overstate their significance, Like I
Speaker 8: feel like Halliburton gets maligned a lot for the North
Speaker 8: American exposure, and.
Speaker 3: They're also solid international.
Speaker 8: It's over half their business.
Speaker 3: I totally didn't know that until yeah, no the other day.
Speaker 8: But SLB is eighty percent international, and these guys are
Speaker 8: closer to SLB than they are to HOL in terms
Speaker 8: of that geographic split. So you know, while the statement
Speaker 8: is true, I think it's it's equal parts branding as
Speaker 8: it is the business mix, and investors are naturally going
Speaker 8: to look for ways to differentiate between the companies, and
Speaker 8: so they'll, you know, they'll gravitate towards the differences more
Speaker 8: than they will the similarities. But I think there are
Speaker 8: a lot of similarities in the balance sheet. All the
Speaker 8: companies are focused on global markets to more or lesser extent,
Speaker 8: and so with Baker, the LNG emphasis is a differentiator.
Speaker 3: For sure.
Speaker 8: They have a much bigger equipment business than either SLB
Speaker 8: or Halliburton does, and so it's natural folks to focus
Speaker 8: on that specifically. And some of the weakness and demand
Speaker 8: out of Europe maybe is weighing on that story a
Speaker 8: little bit, but it's still a very strong business for them.
Speaker 2: That's Bloomberg Intelligence senior Industrial Services analyst Scott Levine talking
Speaker 2: outlook for oil. Following up on our conversation with Baker
Speaker 2: Hughes Chairman, president and CEO, Lorenzo Simonelli.
Speaker 3: Coming up on the program, We're going to get the
Speaker 3: outlook on the cruise industry and our award shows Fading
Speaker 3: from the Spotlight.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 2: b I go on the terminal.
Speaker 3: I'm Paul Sweeney and a Malex Steel and this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Saturdays
Speaker 1: at noon Eastern on Bloomberg dot com, the iHeartRadio app
Speaker 1: and the Bloomberg Business app, or listen on demand wherever
Speaker 1: you get your podcasts.
Speaker 2: Royal Caribbeans Icon of the Seas embarks on its first
Speaker 2: official voyage this weekend and the journey is short to
Speaker 2: make ways.
Speaker 3: Oh nice one. Bloomberg Intelligence Senior credit analyst Jody Lourie
Speaker 3: covers a leisure sector and we spoke with her about it,
Speaker 3: her sneak peek at the world's largest cruise ship, as
Speaker 3: well as what to expect from the cruising business in
Speaker 3: twenty twenty four.
Speaker 9: So when you think of a cruise, it's your standard
Speaker 9: cruise is you have just rooms on the outside right,
Speaker 9: the balcony rooms that you can see the oceans. Then
Speaker 9: you have the internal rooms with no windows, and so
Speaker 9: you just have two rows of that of those sets
Speaker 9: and then you have a bunch of floors that have
Speaker 9: things like dining hall experiences that are main big dining room.
Speaker 9: Then you have shows, right.
Speaker 2: So this is Royal Caribbean owns Icon of the.
Speaker 9: Seas, right, So Royal Caribbean owns Icon on the Seas.
Speaker 2: Talk to us about the cruise business. You covered from
Speaker 2: the credit side for Bloomberg Intelligence. Are these good credits?
Speaker 9: These credits have been a very interesting set to cover.
Speaker 9: You think about the pandemic and they were sort of
Speaker 9: written off for dead yep. Now they've had this massive turnaround.
Speaker 9: The momentum around them has been pretty palpable, and I
Speaker 9: think the Icon of the Seas, the reason why it's
Speaker 9: so important is that the narrative around it speaks to
Speaker 9: this rebirth in the cruise market that we've been seeing.
Speaker 9: These companies have been generating cash flow, they've been repaying debt,
Speaker 9: they've been setting their sits on investment grade and have
Speaker 9: been targeting it as much as they can. They're really
Speaker 9: trying to bring down their debt loads. I mean, you're
Speaker 9: talking Carnival's thirty six billion now down to thirty billion,
Speaker 9: and it's going far farther down.
Speaker 3: So I appreciate that Paul wants to make this about
Speaker 3: finance and stuff because that's what we do. But I
Speaker 3: want to go back to what it looks like. So okay,
Speaker 3: so you laid out sort of what cruise ships normally are, right,
Speaker 3: So then why is icon of the Seas different? And
Speaker 3: I'm asking really, because that's where the money's going to
Speaker 3: come from thro that paydown debt, So like it's kind
Speaker 3: of a market question.
Speaker 9: It is definitely a market question. So it's the wire
Speaker 9: people going to be willing to be one of the
Speaker 9: seventy six hundred people on this ship in addition to
Speaker 9: the twenty three twenty four hundred crew. Well, they have
Speaker 9: things like six water slides. They have ginormous areas for
Speaker 9: children as well as, of course the Kids Club for
Speaker 9: you to just check your kids in and leave them
Speaker 9: there for the whole day. They have different specialty restaurants
Speaker 9: where they try to rival something like a Las Vegas casino.
Speaker 9: The feel of it, the look of it. If you
Speaker 9: look at it at night, which I got to see
Speaker 9: at the night before I drove by it, it looks
Speaker 9: like it's lit up like your Vegas. It's like Vegas
Speaker 9: on water, And I think that's what they're trying to
Speaker 9: compete with. And I do know for a fact that
Speaker 9: you know, we actually got to sit down with management
Speaker 9: a month ago at the Celebrity Ascent naming and they.
Speaker 3: Be Celebrity naming. What now what celebrity a scent?
Speaker 9: So Celebrity is one of Royal Caribbean's cruise lines, right,
Speaker 9: So they have Celebrity and they have Royal Caribbean. The
Speaker 9: Ascent is their newest ship. It's one of their Edge
Speaker 9: series and they had a naming so all ships have
Speaker 9: this big naming ceremony where they break the bottle of champagne.
Speaker 9: They have a godmother or godfather of the ship and
Speaker 9: they have this whole big ceremony and it's a big party.
Speaker 9: So they invited us finance folks on there as well,
Speaker 9: and we got done with management and it was before
Speaker 9: they were in their quiet period. They basically told us
Speaker 9: that they don't see the other cruise lines as competition.
Speaker 9: What they see is competition is on land vacations.
Speaker 5: It's interesting.
Speaker 9: So your casinos, your theme parks, that's where they see
Speaker 9: them taking share or that's where they see people convincing
Speaker 9: people to go elsewhere, not to the hotels. And the
Speaker 9: casinos and the theme parks, but on the cruise ship entirely.
Speaker 2: What are the cruise companies telling me about businesses? Revenge
Speaker 2: travel over Hou's business in twenty four.
Speaker 9: So more so than what management is saying. We actually
Speaker 9: ran a survey that we did. The results quite a
Speaker 9: substantial number of people want to travel and want to
Speaker 9: spend more when they travel this year. So even though
Speaker 9: revenge travel as they call it, post pandemic revenge travel,
Speaker 9: that's the people who are cooped up inside want to
Speaker 9: go play, don't care how much they spend, even though
Speaker 9: that might be fading, and a lot of companies have
Speaker 9: indicated that. At the same time, the conversation around people
Speaker 9: spending on experiences is still very much there. Whether that
Speaker 9: holds up into the end of the year as we
Speaker 9: see what the FED does, as we see all the
Speaker 9: different sort of economic points and pain points come out,
Speaker 9: I think it remains to be seen. But we are
Speaker 9: seeing that people are prioritizing experiences over stuff and they
Speaker 9: continue to do so. And the way that the cruise
Speaker 9: lines benefit is that they get to encourage people to
Speaker 9: spend on onboard spending, so all the add on features,
Speaker 9: so you go to their perfect day Coco Kae Island.
Speaker 9: Guess what you want? A cabana and no other fifteen
Speaker 9: hundred two thousand dollars for the day.
Speaker 2: All right, Speaking of this research, you can go to
Speaker 2: you can just get Jody Louri's bio if you're sitting
Speaker 2: in front of a terminal and put a buyo up
Speaker 2: there and the list all her research and that's the
Speaker 2: top research notice point published today focus on cruising in
Speaker 2: twenty twenty four BI survey. So check that out.
Speaker 3: I'm still were well, here's the thing.
Speaker 2: We went down to rub but we went to a resort.
Speaker 2: They give you the little bracelet. Yeah, oh man, that's
Speaker 2: your key to your room. You want to buy anything,
Speaker 2: you just go bank.
Speaker 1: Wow.
Speaker 2: They make it so easy and you know you're.
Speaker 3: Doing it, and all of a sudden you're paying. You're like, wait,
Speaker 3: what this was all?
Speaker 2: That's why this year we went to an all inclusive.
Speaker 5: Yeah, oh that was the way.
Speaker 3: Aren't there also addams for all inclusives too, Like all inclusive,
Speaker 3: but this super fancy restaurant isn't included.
Speaker 2: Now, I mean, if you want to buy like a
Speaker 2: bottle wine, that was extra, but I should have done
Speaker 2: that one I had four kids. Because you check out
Speaker 2: every resort and your bill is like fifty pages.
Speaker 9: I mean, we're seeing that Marriott, we're seeing four seasons.
Speaker 9: They're going into the smaller vessel ships. We're seeing that
Speaker 9: people who used to like Crystal, which was the high
Speaker 9: end and it went through a little bit of a restructuring,
Speaker 9: just a little bit that people are then going over
Speaker 9: to these higher end ships, and they are also going
Speaker 9: to the Norwegian higher end line. So Norwegian has a
Speaker 9: few higher end lines, Carnival has a few higher end lines.
Speaker 9: So people are moving to their from these other ships.
Speaker 9: Because they are smaller vessel, they are much more manageable.
Speaker 9: You're you're viewing it both as a way to lounge
Speaker 9: but as a way to get to a room.
Speaker 3: But what kind of like this reminds me of is
Speaker 3: what people are doing with the airlines. Right, no one
Speaker 3: wants basic economy. They all want to trade up. So
Speaker 3: everyone goes to business class, and then all people who
Speaker 3: normally fly business class, like get me out of here,
Speaker 3: they go to first class, where they go to private
Speaker 3: Like I feel like it's it's just sort of the
Speaker 3: up tier at the end of all everything.
Speaker 9: So everybody wants to feel like a VIP.
Speaker 3: That's that we're not VIP.
Speaker 9: I know, that's the model. I mean you look at
Speaker 9: all the rooms. I mean they have the suite room,
Speaker 9: and they have this sweet room, and the presidential suite,
Speaker 9: and then this suite and then that suite, and that's
Speaker 9: all designed to make everybody feel special and feel like
Speaker 9: they're a VIP, and also to make it instagrammable, because
Speaker 9: that's the age where.
Speaker 2: Jordy was posting on social and she had a lovely
Speaker 2: room with a lovely view.
Speaker 9: That it was great fe I mean, any view of
Speaker 9: the water is a great view.
Speaker 3: So just to end for a moment on finance stuff,
Speaker 3: would you like any of these credits? Like what's your
Speaker 3: favorite play?
Speaker 9: So I do think that the cruise lines in general
Speaker 9: still have some room to run as compared to other
Speaker 9: parts of leisure. I think that other parts of leisure,
Speaker 9: it's really more of a company by company's story. So
Speaker 9: something like a SeaWorld has been repaying debt, they've been
Speaker 9: restructuring their capital structure and it's been very positive for
Speaker 9: them in that sense. But from a momentum in terms
Speaker 9: of travel, that top line isn't necessarily going to grow
Speaker 9: as much. We're still seeing that the cruise lines are
Speaker 9: benefiting from that booking. Similarly, we're seeing a mixed result
Speaker 9: in the hotel space. So you have the Marryouts of
Speaker 9: the world, you have the Hiltons of the world. Those
Speaker 9: companies have been improving from a growth standpoint and have
Speaker 9: been focusing on other parts of the market. But you
Speaker 9: have something like a Choice that's in a hostile takeover
Speaker 9: with Windham and so that kind of throws it out
Speaker 9: the water and you say, Okay, we don't really know
Speaker 9: what we're going to do with this, but this is
Speaker 9: a company that is not necessarily in good standing from
Speaker 9: a credit quality standpoint.
Speaker 3: That was Bloomberg Intelligence and your credit endless, Jody Lori.
Speaker 2: Let's turn out to entertainment, where waning audience numbers are
Speaker 2: causing big concern for ward shows.
Speaker 1: Like the Oscars.
Speaker 3: We spoke with Bloomberg Opinion columns Bobby Ghosh about viewers
Speaker 3: are less inclined to watch a three and a half
Speaker 3: hour TV extravaganza.
Speaker 4: So you know, all the award shows, Oscars, Emmy's Golden Globes,
Speaker 4: the audiences have been dropping precipitously over the past decade,
Speaker 4: It used to be that an Oscar night would be
Speaker 4: forty million viewers, and then it became about thirties. Now
Speaker 4: it's down to you know, if they get ten twelve,
Speaker 4: then they're lucky. Last year there was a little bit
Speaker 4: of an uptick. I think a lot of people sort
Speaker 4: of basically dialed in to see if there'd be a
Speaker 4: repeater of Will Smith's slap on Chris Rock. There wasn't
Speaker 4: a slap This year. Ironically, the nominations are going to
Speaker 4: get a lot of buzz for the reasons we've just
Speaker 4: been talking about. Because Margot Robbie gets snubbed, because Greta
Speaker 4: Gervik gets snobbed. There'll be a lot of buzz around
Speaker 4: the nominations, but for those exact same reasons. I suspect
Speaker 4: few people will watch the actual oscars. It's too long,
Speaker 4: it's you know, they're just too much sort of pomp
Speaker 4: and circumstances, very little actual content, and most people will
Speaker 4: will consume the highlights on YouTube and on TikTok on.
Speaker 2: That's not what the ABC Television network wants. They hear
Speaker 2: that means because they I mean that's historically these events
Speaker 2: which the CEO of former CEO of CBS would call
Speaker 2: oh wow, events, that's what brings in huge advertising dollars.
Speaker 2: So well, that's just another emblematic of the overall issue
Speaker 2: of TV cord cutting.
Speaker 4: And so yeah, they'll sell out the ads. They sold
Speaker 4: out the ads the last time as well, last year
Speaker 4: as well, but at a lower rate. So that's something
Speaker 4: that they need to worry about. If they'll you know,
Speaker 4: sufficient numbers of people will tune in that advertisers will
Speaker 4: still remain interested in the event, but for progressively or
Speaker 4: you know, smaller and smaller amounts of money.
Speaker 2: Here goes this. This is the sales pitch that broadcast
Speaker 2: and cable television have been making the Madison Avenue for
Speaker 2: thirty years. Yeah, okay, here's the pitch. Right, I'm going
Speaker 2: to give you no inferior product what I gave you
Speaker 2: last year. I'm gonna charge you more.
Speaker 3: That's not going this way.
Speaker 2: And it works every single year.
Speaker 3: So they're charge more for the space right now.
Speaker 2: Every year up until the last couple of years when
Speaker 2: court cutting became so bad. But broadcasting cable television, which
Speaker 2: is yeah, I know my ratings are down because there's
Speaker 2: five hundred and more channels, but still I have the
Speaker 2: biggest audience at CBS. Yes, it's half of what it
Speaker 2: was ten years ago, but it's still bigger than anything
Speaker 2: else out there. Oh by the way, for that, I'm
Speaker 2: gonna charge another five six seventy percent. And that worked forever.
Speaker 2: Now the issue is, I.
Speaker 4: Don't think that can be sustainedful very well.
Speaker 2: So yeah, I don't know.
Speaker 4: Yeah, I think again. You know, unless you're.
Speaker 2: The super Bowl. If you're the super Bowl, you can go.
Speaker 4: This is a different category. Yeah, But you know, sports,
Speaker 4: if you're a fan, you don't want to just watch
Speaker 4: the highlights. You want to watch the live performance. But
Speaker 4: with Oscars, with any award show, more and more people
Speaker 4: are quite happy just to see the highlights immediately after
Speaker 4: the award is announced. They don't want to watch the
Speaker 4: whole awkward moments, the awkward moments, the songs, the skits.
Speaker 4: You know, it seems like too much of them.
Speaker 2: Used to be that used to be must watch it really,
Speaker 2: I know it does that. John Tucker's the whole World's
Speaker 2: coming to an end.
Speaker 3: I would have oscar parties. Literally, we'd like do both.
Speaker 3: We put in money. We like people walk home with
Speaker 3: a couple hundred bucks, like it was it was like,
Speaker 3: I guess you can the people in my home. Sure,
Speaker 3: I mean, oh, like in the reality of the maybe maybe.
Speaker 3: But but what I also wonder too is do you
Speaker 3: think that these kind of live events will go the
Speaker 3: way of sports in different ways of viewing it like
Speaker 3: we saw WW and Netflix for example, Like would Paramount
Speaker 3: be like, hey, let's just air it streaming and save
Speaker 3: something like that thing?
Speaker 4: Well, I think you probably if the audience continues to shrink,
Speaker 4: they'll have to find new ways of making it relevant.
Speaker 4: You know. In time, I think you'll see the duration
Speaker 4: of its shrink. I don't think a three and a
Speaker 4: half hour program, which invariably goes closer to four hours,
Speaker 4: I don't think that's sustainable anymore. This year, they're bringing
Speaker 4: it forward. They're starting broadcast in an hour early because
Speaker 4: they're conscious that in that last hour past bedtime in
Speaker 4: the East Coast, a lot of people the next day
Speaker 4: is a school day, lots of people just switch off,
Speaker 4: and that's a real problem for them. So they're bringing
Speaker 4: it forward to try and see can sort of juice
Speaker 4: the audience that way. I think you'll probably see certain
Speaker 4: amount of stunt casting in the in the people who
Speaker 4: are host to presenters that we've seen that happen in
Speaker 4: the in the Olympics, for instance. You know, Olympic audiences
Speaker 4: have been down. NBC has been bringing in people like
Speaker 4: Snoop Dogg right to try and get audiences interested. I say, okay,
Speaker 4: let's have a let's have a switch and get some
Speaker 4: Olympic performers to present the oscars. I'll watch them on bios.
Speaker 7: ABC doesn't totally.
Speaker 2: ABC doesn't have the rights of the Olympics, that's true,
Speaker 2: but you can bring an athlete in. So yeah, exactly,
Speaker 2: Well that's the good thing. I mean, bringing in athletes
Speaker 2: to just some stunt hosting.
Speaker 3: Yeah.
Speaker 4: I think you'll see progressively more and more desperate attempts
Speaker 4: to try and hold on to that audience. But I
Speaker 4: think that ship has said O right.
Speaker 3: Thanks to Bloomberg Opinion columnist Bobby.
Speaker 2: Goesch, that's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
Speaker 2: providing in depth research and data on two thousand companies
Speaker 2: and one hundred and thirty industries.
Speaker 3: And remember, you can access Bloomberg Intelligence through b I
Speaker 3: go on the terminal. I'm Alex Steel, Paul Sweeney, and
Speaker 3: this is Bloomberg, m