WEBVTT - Palantir Jumps After ‘Otherworldly Demand Lifts Outlook 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple Coarclay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:24.160 --> 0:00:24.960 Again, I'm just looking. 0:00:25.040 --> 0:00:25.239 I'm not. 0:00:25.400 --> 0:00:28.720 I don't really know Palenteer technologies that well, but the 0:00:28.760 --> 0:00:31.000 shares jump by the most almost sixteen months after the 0:00:31.000 --> 0:00:34.640 company boosted four year revenue and income forecast as described 0:00:34.880 --> 0:00:37.680 and described commercial demand for its data analytics tools as 0:00:37.760 --> 0:00:40.560 quote otherworldly. I don't know, so I know man deep 0:00:40.600 --> 0:00:44.640 seeing those he covers all this tech stuff for Bloomberg Intelligence. Bendy, 0:00:44.760 --> 0:00:47.800 can you just briefly describe what Palenteer is and what 0:00:47.840 --> 0:00:49.360 you took away from their earnings last night. 0:00:50.520 --> 0:00:54.640 I mean, this is a company pre AI before LMS 0:00:54.680 --> 0:00:57.080 came to the scene, and they have done a lot 0:00:57.120 --> 0:01:03.040 of customized work for government, ment entities, large defense companies 0:01:03.120 --> 0:01:07.360 where it helps make sense of big data. Basically, it 0:01:07.440 --> 0:01:10.720 goes back to that big data days where are those 0:01:11.640 --> 0:01:14.640 dealing with large amounts of data. They can help you 0:01:14.760 --> 0:01:17.760 create a pretty dashboard that can you know, give you 0:01:17.840 --> 0:01:22.720 the insights from unstructured data. Now, with all the LMS 0:01:22.760 --> 0:01:26.080 coming to this scene, they clearly have made a pivot 0:01:26.120 --> 0:01:30.760 towards incorporating LMS as part of the solution. And what 0:01:31.120 --> 0:01:36.479 we have seen is accelerating growth over the last thirteen quarter. 0:01:36.640 --> 0:01:40.560 So this is the thirteenth consecutive quarter of top line acceleration. 0:01:41.240 --> 0:01:44.119 And you know, ninety three percent growth is very impressive 0:01:44.200 --> 0:01:48.320 for a software company. But when I look at, you know, 0:01:48.400 --> 0:01:53.200 the customer base, we're talking about thousand customers, so it's 0:01:53.520 --> 0:01:58.520 very high. SP's very high monetization at their customer base, which, 0:01:58.840 --> 0:02:02.120 like I said, half of this is coming from the government. 0:02:02.560 --> 0:02:06.360 And so from that perspective, a typical enterprise company like 0:02:06.440 --> 0:02:09.880 Microsoft has got over one hundred thousand customers. Even a 0:02:09.960 --> 0:02:13.720 Snowflake or data Bricks has got twenty thousand plus customers. 0:02:14.040 --> 0:02:18.320 Talenteer is just catering to thousand customers. And that's the 0:02:18.360 --> 0:02:20.960 real risk for me when I look at the growth 0:02:20.960 --> 0:02:23.440 tragictory next couple of years. 0:02:23.440 --> 0:02:25.800 So you're saying that's a source of fragility rather than 0:02:25.800 --> 0:02:27.399 a source of strength for Palenteer. 0:02:28.120 --> 0:02:30.680 What could disrupt that? I mean, does that make it 0:02:30.720 --> 0:02:33.680 a Palenter more vulnerable to a competitor coming in. 0:02:33.960 --> 0:02:34.160 Yeah. 0:02:34.200 --> 0:02:36.440 I mean the fact that the CEO has been so 0:02:36.680 --> 0:02:40.560 vocal about Inthropic and open Ai and how suddenly, out 0:02:40.600 --> 0:02:45.239 of all the companies, Palenteer is supporting open source. I mean, 0:02:45.280 --> 0:02:48.840 this is a company that has benefited greatly from selling 0:02:48.840 --> 0:02:52.640 a proprietary solution and now it's coming out and being 0:02:52.680 --> 0:02:54.600 so vocal about open source support. 0:02:54.680 --> 0:02:56.040 So that I think. 0:02:55.880 --> 0:02:59.560 Gives you an indication that they do see the competition 0:02:59.639 --> 0:03:02.480 coming from the likes of open ai and Tropic. 0:03:02.560 --> 0:03:04.160 As well as the hyperscalers. 0:03:04.200 --> 0:03:07.200 I mean, what Palenteer did really well was they have 0:03:07.320 --> 0:03:11.920 this concept called FDE forver deployed engineers that were part 0:03:12.000 --> 0:03:15.360 of their employee base. So when you're installing a solution, 0:03:16.440 --> 0:03:21.240 the FDEs actually help you get there faster. And now 0:03:21.320 --> 0:03:24.720 all of these companies, whether it's Microsoft, Amazon, they have 0:03:24.840 --> 0:03:28.760 this FDE team that they are using to deploy their 0:03:28.800 --> 0:03:32.880 own lms. So I think competition. 0:03:32.360 --> 0:03:34.320 Wise, I feel there will. 0:03:34.200 --> 0:03:37.000 Be more competition from Palenteer and they can see that, 0:03:37.520 --> 0:03:40.240 which is why they are being so vocal with open 0:03:40.240 --> 0:03:44.840 weight support. And I mean the growth trajectory they guide 0:03:44.840 --> 0:03:47.280 it to increase top line growth, So it was a 0:03:47.280 --> 0:03:50.280 bat and raise quarterer. But to my mind, the growth 0:03:50.320 --> 0:03:54.160 rates will normalize and that's where the higher valuation kind 0:03:54.200 --> 0:03:55.240 of creates a risk. 0:03:55.560 --> 0:03:59.120 You mentioned Anthropic as we're looking for potential IPO maybe 0:03:59.160 --> 0:04:02.120 later this year year, Bloomberg News has got a story 0:04:02.120 --> 0:04:04.560 that Anthropic has struck a ten billion dollars deal for 0:04:04.600 --> 0:04:11.120 computing capacity from a month's old infrastructure startup okay, making 0:04:11.160 --> 0:04:13.600 the cloudmaker's latest effort to keep pace with demand for 0:04:13.640 --> 0:04:14.400 its products. 0:04:14.960 --> 0:04:15.760 What is that all about? 0:04:16.040 --> 0:04:19.120 I mean right now and Tropic is just getting compute 0:04:19.120 --> 0:04:23.760 from wherever they can, whether it's SpaceX or Meta or 0:04:24.000 --> 0:04:27.080 you know these In this case, this small company bitcoin 0:04:27.160 --> 0:04:28.840 mining company that has compute to. 0:04:28.880 --> 0:04:32.280 Hold on, hold on a bitcoin mining company is now 0:04:32.320 --> 0:04:34.640 providing compute for an AI play. 0:04:35.160 --> 0:04:37.200 Yeah, because at the end it's a data center. 0:04:37.440 --> 0:04:40.160 That's the dream for these coin mining companies wants they 0:04:40.160 --> 0:04:40.880 make the transition. 0:04:41.520 --> 0:04:46.240 I mean, compute is agnostic off where you know that 0:04:46.400 --> 0:04:50.280 data center is set up, what purpose it was used 0:04:50.279 --> 0:04:53.480 for in the past, It doesn't matter. Compute is you 0:04:53.560 --> 0:04:58.039 neque processing capability with life power connected to a grid. 0:04:58.240 --> 0:04:59.760 That's all you can And just to be clear, we 0:04:59.839 --> 0:05:02.400 never use the term compute before, did we not? 0:05:02.480 --> 0:05:02.960 In that way? 0:05:03.080 --> 0:05:05.960 We used as a verb, Yes, we would never said 0:05:05.960 --> 0:05:08.520 as a noun. Yeah, right, See, I just want to 0:05:08.520 --> 0:05:10.120 make sure I'm calling you. Just check people out on 0:05:10.160 --> 0:05:10.800 some of this stuff. 0:05:11.120 --> 0:05:12.920 Well, they make up a lot of words, they do. 0:05:13.240 --> 0:05:14.960 You know, I need more compute? 0:05:15.640 --> 0:05:17.640 Is that what you all these alms? 0:05:17.720 --> 0:05:21.240 Net? If you listen to any conference they are on, 0:05:21.640 --> 0:05:25.479 they'll tell you the world needs ten times fifty times 0:05:25.560 --> 0:05:27.960 more compute than currently available. 0:05:28.440 --> 0:05:31.360 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:35.480 --> 0:05:39.200 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:05:39.279 --> 0:05:42.359 weekdays at ten am Eastern on Apple Coplay and Android 0:05:42.360 --> 0:05:45.680 Auto with the Bloomberg Business app. Listen on demand wherever 0:05:45.760 --> 0:05:48.839 you get your podcasts, or watch us live on YouTube. 0:05:49.560 --> 0:05:51.480 It is, of course the thick of earning season, and 0:05:51.560 --> 0:05:56.080 this morning we got indication from McDonald's that US sales 0:05:56.120 --> 0:05:58.720 perhaps not living up to what was promised or what 0:05:58.800 --> 0:06:02.599 was expected. Sales in the US coming in a little 0:06:02.600 --> 0:06:05.440 bit lighter than anticipated. Michael Halen is our senior restaurant 0:06:05.440 --> 0:06:08.200 and food service analysts enjoys US in studio. 0:06:08.320 --> 0:06:10.760 So Michael I thought McDonald's. 0:06:10.240 --> 0:06:12.919 Was one of the companies that would benefit from consumers 0:06:12.960 --> 0:06:19.000 seeking value, seeking perhaps lower cost and more convenient food options. 0:06:19.120 --> 0:06:21.760 And it certainly looked that way in quarters past. What 0:06:21.880 --> 0:06:22.919 happened this last quarter. 0:06:23.360 --> 0:06:25.160 Yeah, so last year they did a good job of 0:06:25.440 --> 0:06:27.960 re establishing themselves as the value leader. 0:06:29.000 --> 0:06:32.520 They were also lapping really weak comps due to E. 0:06:32.640 --> 0:06:36.080 Coli, and so as a result, they had very strong 0:06:36.120 --> 0:06:37.679 results last year. 0:06:38.040 --> 0:06:39.400 This year, we thought it was. 0:06:40.839 --> 0:06:42.359 We didn't think it was a great idea to just 0:06:42.440 --> 0:06:45.839 try to lap these really strong comps with just value 0:06:46.279 --> 0:06:49.839 A B. They kind of screwed up the whole value thing. 0:06:49.920 --> 0:06:54.360 They pulled the bogos buy one, get one offers, they 0:06:54.400 --> 0:06:56.919 took away a lot of discounts on the app which 0:06:57.080 --> 0:07:00.920 their lower income consumers use all the time, and they 0:07:00.960 --> 0:07:05.320 pushed a ten items for three dollars menu that kind 0:07:05.360 --> 0:07:08.719 of fell flat. And so all of those changes that 0:07:08.880 --> 0:07:14.640 happening that happened to actually created an increase of prices 0:07:14.680 --> 0:07:18.600 for their their consumers. So, you know, that, paired with 0:07:18.680 --> 0:07:21.760 a tough year over year comparison, you know, showed up 0:07:21.800 --> 0:07:22.840 in their results today. 0:07:23.760 --> 0:07:26.160 The company is embarking on a multi year plan to 0:07:26.200 --> 0:07:28.880 become more than just a fast cheap meal with the 0:07:28.920 --> 0:07:31.440 aim of being the first choice for family outings and 0:07:31.480 --> 0:07:33.840 other occasions. How are they going to do that? 0:07:34.800 --> 0:07:37.400 You know, listen, we'll probably see more tie ins. 0:07:37.520 --> 0:07:37.680 You know. 0:07:37.800 --> 0:07:41.360 Last year was was the Minecraft meal that was absolutely 0:07:41.400 --> 0:07:44.920 a monster for them globally, right, so they're gonna have 0:07:44.960 --> 0:07:48.920 to use some more tie ins. You know, it's gonna 0:07:48.960 --> 0:07:51.800 be tough, you know. I think what we're seeing is 0:07:51.880 --> 0:07:56.000 McDonald's kind of taking some of these family family occasions 0:07:56.360 --> 0:07:59.200 away from McDonald's this year. You know, Burger King has 0:07:59.240 --> 0:08:02.040 remodeled their restaurants, improve the quality of the food, and 0:08:03.440 --> 0:08:07.720 really done a nice job of building back sales over 0:08:07.760 --> 0:08:10.280 the last few quarters. And I think McDonald's is feeling 0:08:10.360 --> 0:08:13.360 it and that that's why they're kind of talking about 0:08:13.400 --> 0:08:15.480 set that segment because it seems like they may be 0:08:15.640 --> 0:08:19.520 losing some share there. I think what the real drivers 0:08:19.600 --> 0:08:23.280 of this will be are, you know, beverages. I think 0:08:23.280 --> 0:08:25.760 beverages is a very good opportunity for them to grow 0:08:25.840 --> 0:08:27.680 sales in the afternoon day part. 0:08:27.720 --> 0:08:27.880 You know. 0:08:27.920 --> 0:08:30.360 I think they can take seems they can take sales 0:08:30.400 --> 0:08:33.240 away from Sonic, who is a big competitor in the 0:08:33.280 --> 0:08:35.840 beverage space that does a nice job in that you 0:08:35.880 --> 0:08:40.120 know two to four pm lull where the restaurants are staffed, 0:08:41.240 --> 0:08:43.760 and so they're primed to do more business. It's very 0:08:43.840 --> 0:08:47.000 incremental sales in that day part. You know, they're going 0:08:47.080 --> 0:08:50.400 to do some more training, some retraining in the fourth 0:08:50.480 --> 0:08:53.360 quarter to help boost their operations. I think they're gonna 0:08:53.600 --> 0:08:55.280 they're not going to do what they did this quarter, 0:08:55.280 --> 0:08:58.720 which was just throw too many different marketing initiatives against 0:08:58.760 --> 0:09:01.800 the wall. Right, you have to be more disciplined in 0:09:01.840 --> 0:09:08.240 today's market because you know, these windows, everyone's marketing, and 0:09:08.320 --> 0:09:12.080 everyone's putting in ltos and new food items and discounts 0:09:12.160 --> 0:09:15.120 out there all the time because the low income consumer 0:09:15.240 --> 0:09:17.320 is struggling. And so what we're seeing now is that 0:09:19.040 --> 0:09:22.600 promotions are only giving you these chains a lift for one. 0:09:22.480 --> 0:09:24.959 Or two weeks and then it fades and then it fades. 0:09:25.000 --> 0:09:28.240 And so you know, if you're constantly marketing something new 0:09:28.280 --> 0:09:30.000 every couple of weeks, you know. 0:09:30.360 --> 0:09:31.400 People just show you out. 0:09:31.600 --> 0:09:35.040 It gets confusing for the consumer, consumer, for the confusing 0:09:35.080 --> 0:09:35.839 for the employees. 0:09:36.480 --> 0:09:39.320 It just kind of makes a mess of things which 0:09:39.320 --> 0:09:40.120 happen this quarter. 0:09:40.200 --> 0:09:42.800 Yeah, it just becomes noise in the background. A lot 0:09:42.880 --> 0:09:45.120 of analysts are saying that the results are kind of 0:09:45.120 --> 0:09:48.520 the secondary story. The bigger story here is a change 0:09:48.559 --> 0:09:54.040 in McDonald's USA leadership. Joe Erlinger is out and Sky Anderson, 0:09:54.559 --> 0:09:57.440 who was the COEO, comes in. Do you see this 0:09:57.640 --> 0:10:00.720 changing things dramatically for McDonald's. 0:10:00.200 --> 0:10:01.840 Uh, I don't think so. 0:10:02.120 --> 0:10:06.560 I mean, Erlinger did a great job, you know, so 0:10:07.400 --> 0:10:10.520 you know that may be viewed as a loss by some, 0:10:10.920 --> 0:10:12.800 but Sky Anderson has been there. 0:10:12.640 --> 0:10:15.600 For a long time. She's worked very closely with Joe 0:10:15.640 --> 0:10:16.440 and the US team. 0:10:16.640 --> 0:10:20.120 UH in charge of operations, so you know, she has 0:10:20.160 --> 0:10:22.840 a long track, strong track record at McDonald So I 0:10:22.840 --> 0:10:24.680 don't expect too much of a change there. 0:10:25.559 --> 0:10:27.880 Cyclo what is it again? 0:10:28.080 --> 0:10:29.280 Cyclospora? Yeah? 0:10:29.480 --> 0:10:30.040 What is that? 0:10:31.200 --> 0:10:38.280 Let's a site that causes you know, very very bad diarrhea. 0:10:38.000 --> 0:10:42.360 And so this is something that's impacting the lettuce Yes. 0:10:42.080 --> 0:10:44.480 Yes, this is impacting let us. There was a pretty 0:10:44.480 --> 0:10:46.000 big recall Taylor. 0:10:45.800 --> 0:10:48.160 Forms is a big and Taco Bell getting caught up 0:10:48.160 --> 0:10:48.480 in it. 0:10:48.520 --> 0:10:49.960 And Taco Bell got caught up. 0:10:50.000 --> 0:10:52.520 There was some news today that wasn't a good look 0:10:52.559 --> 0:10:55.080 for them, right, so they you know, some somebody got 0:10:55.120 --> 0:10:57.280 a hold of some emails that showed they knew about 0:10:57.720 --> 0:11:01.080 this this outbreak maybe a weeks before they let their 0:11:01.120 --> 0:11:05.120 consumers know, and so yeah, not a good look for them. 0:11:05.240 --> 0:11:06.679 Also, there was a couple of deaths. 0:11:06.760 --> 0:11:09.520 I think they were people that were had health issues 0:11:09.600 --> 0:11:14.040 prior to cycle spore. But that's uncommon for cyclospora deaths, right, 0:11:14.080 --> 0:11:17.800 that's more of like an E. Coli thing, So not 0:11:18.160 --> 0:11:20.640 great for young brands. But you know, at the same time, 0:11:20.679 --> 0:11:23.440 they just divested Pizza Hut. People are going to forget 0:11:23.480 --> 0:11:26.960 about the cyclospora outbreak, and you know, this company is 0:11:27.000 --> 0:11:29.719 set up for much much stronger top and bottom line 0:11:29.760 --> 0:11:32.679 growth over the next twelve months because of you know, 0:11:32.720 --> 0:11:35.520 they got rid of that yoke on its neck, which 0:11:35.559 --> 0:11:36.040 so they just. 0:11:36.000 --> 0:11:37.160 Have to get through this period. 0:11:37.280 --> 0:11:40.400 In other words, you know, with all the bad news 0:11:40.400 --> 0:11:43.920 and figuring out a solution to this. I want to 0:11:43.920 --> 0:11:45.840 go back to something you said earlier, Michael, about how 0:11:45.920 --> 0:11:48.640 McDonald's is trying to get more people into its stores 0:11:48.679 --> 0:11:50.520 in the afternoon hours, you know. 0:11:50.559 --> 0:11:51.360 Like with drinks. 0:11:51.600 --> 0:11:53.280 I think about Starbucks and how it's trying to get 0:11:53.320 --> 0:11:56.920 more people into its stores through food items. So everyone's 0:11:57.000 --> 0:11:59.640 just trying to get away to get consumers to come 0:11:59.679 --> 0:12:02.280 in around what two to four pm? That's the lull 0:12:02.400 --> 0:12:06.040 and that's like the time of day they've targeted. And 0:12:06.120 --> 0:12:08.120 if you sell food, then you want to provide drinks. 0:12:08.120 --> 0:12:11.760 If you sell drinks, things want to provide food. What 0:12:11.840 --> 0:12:14.480 did people do? What did companies do with that timeslot 0:12:14.520 --> 0:12:18.200 before this, before this focused attention, they just kind of 0:12:18.200 --> 0:12:18.880 gave up on it. 0:12:18.920 --> 0:12:22.199 And no, I mean, you know, it makes a lot 0:12:22.240 --> 0:12:26.120 of sense because your stores are staffed, right, you have 0:12:26.200 --> 0:12:27.920 people in the stores, but you don't have a lot 0:12:27.960 --> 0:12:31.360 of customers coming in. So any of those sales that 0:12:31.400 --> 0:12:33.720 you can bring in in those types of times, since 0:12:33.720 --> 0:12:37.199 they call them the shoulder periods, are very high margin. Right, 0:12:37.240 --> 0:12:38.760 it's basically all incremental. 0:12:39.320 --> 0:12:42.200 Samantha writes in says they need to offer happy hours. 0:12:42.400 --> 0:12:44.720 That's a concept that works. Oh yeah, the bar business. 0:12:44.760 --> 0:12:47.439 Why not in like a Bounce or Starbucks. 0:12:48.600 --> 0:12:51.520 Stay with us more from Bloomberg Intelligence coming up after this. 0:12:55.840 --> 0:12:59.960 You're listening to the Bloomberg Intelligence podcast. Catch us live weekday. 0:13:00.000 --> 0:13:02.720 He's at ten am Eastern on Apple, Cocklay and Android 0:13:02.720 --> 0:13:06.040 Auto with the Blueberg Business app. Listen on demand wherever 0:13:06.080 --> 0:13:10.240 you get your podcasts, or watch us live on YouTube. 0:13:10.480 --> 0:13:14.520 We also have earnings out from Caterpillar, which normally you 0:13:14.559 --> 0:13:18.160 know it's a maker of earth moving machines, bulldozers the like, 0:13:18.280 --> 0:13:20.840 But now it's become an AI play, not just in 0:13:20.840 --> 0:13:23.040 a construction and mining equipment company, it's. 0:13:22.840 --> 0:13:23.480 So much more. 0:13:23.760 --> 0:13:28.040 Chris Ricilino is our senior US machinery analyst here at 0:13:28.080 --> 0:13:30.880 Bloomberg Intelligence, and he joins us now with more on 0:13:31.240 --> 0:13:35.520 these results, which some people have called blowout results, especially 0:13:35.880 --> 0:13:39.480 the upside to Wall Street estimates for a second quarter profit. Chris, 0:13:39.480 --> 0:13:42.920 give us a quick read here on Caterpillar's latest results. 0:13:44.160 --> 0:13:46.880 Yeah, it's hard to refute those comments. It was really 0:13:46.920 --> 0:13:51.559 a monster quarter you had against pretty lofty expectations heading 0:13:51.559 --> 0:13:54.160 into the print. You had a really convincing bet and 0:13:54.280 --> 0:13:58.719 raise better than expected sales and margins across all three businesses. 0:13:58.760 --> 0:14:01.720 So it's not just the the AI power gen business. 0:14:02.480 --> 0:14:04.520 And actually, I would say one of the more encouraging 0:14:04.559 --> 0:14:08.160 takeaways from this print was a performance in their construction business, 0:14:09.040 --> 0:14:12.120 so which really suggests that this recovery is broadening out 0:14:12.800 --> 0:14:15.320 where you have a lot of the cyclical tailwind starting 0:14:15.360 --> 0:14:18.520 to kick in and kind of enhance what we're seeing 0:14:19.000 --> 0:14:21.840 on the secular side with the data center build out 0:14:22.880 --> 0:14:26.120 orders again very strong in the quarter, push backlog to 0:14:26.200 --> 0:14:29.560 another record level. We're north of seventy two billion dollars 0:14:29.600 --> 0:14:32.280 on the backlog. They're already starting to take some orders 0:14:32.280 --> 0:14:36.440 out to twenty thirty so above average production visibility. There's 0:14:36.480 --> 0:14:40.960 really a lot to liken. This report. Question now becomes 0:14:41.600 --> 0:14:44.240 is this as good as it gets? So we shall 0:14:44.280 --> 0:14:44.920 see from here. 0:14:45.320 --> 0:14:48.840 So Chris, as I understand your coverage of machinery and 0:14:49.120 --> 0:14:50.840 the Deers of the world, the cats of the world, 0:14:50.880 --> 0:14:54.520 I mean, I think that is classic cyclical stuff. But 0:14:54.560 --> 0:14:57.640 these stocks are trading thirty five times earnings. I mean, 0:14:57.720 --> 0:15:00.760 you're like a growth stock industry. Now, what's going on 0:15:00.800 --> 0:15:02.360 with your industry is it's still cyclical. 0:15:03.200 --> 0:15:04.840 It's hard to wrap your head around some of the 0:15:04.880 --> 0:15:07.960 valuations in the space, even the small So we had 0:15:07.960 --> 0:15:10.440 a Caterpillar. If you look over to last year, it's 0:15:10.480 --> 0:15:13.640 really traded in line with a lot of the AI 0:15:13.880 --> 0:15:16.880 and hyperscaler names in terms of just the moves and 0:15:16.920 --> 0:15:19.960 the trajectory. It's been one of the top performers in 0:15:20.000 --> 0:15:24.400 the industrials world because of that data center exposure in 0:15:24.440 --> 0:15:27.600 their power generation business. At the end of the day, 0:15:27.680 --> 0:15:30.920 I still believe this is still a cyclical company. They 0:15:30.960 --> 0:15:34.680 had just been you know, uh, fortunately positioned to capitalize 0:15:34.760 --> 0:15:38.400 on some of this build out with their large engines 0:15:38.440 --> 0:15:42.040 and reciprocating the natural gas engines, which you know, initially 0:15:42.040 --> 0:15:44.560 we're used more for backup power on the data centers, 0:15:44.560 --> 0:15:48.400 but are becoming increasingly used in prime power applications. But 0:15:48.480 --> 0:15:51.440 this is more than just a data center play. You're 0:15:51.560 --> 0:15:53.640 just beginning to see. I think the fruits of that 0:15:53.760 --> 0:15:57.080 in terms of the construction and mining recovery, which we 0:15:57.120 --> 0:15:59.920 think have some legs into twenty seven and twenty eight. 0:16:00.880 --> 0:16:03.000 You know, if Caterpillar has more demand than it knows 0:16:03.040 --> 0:16:05.600 what to do with, and that power and Energy unit 0:16:05.640 --> 0:16:08.760 has grown to be the largest for Caterpillar by sales 0:16:09.280 --> 0:16:12.119 for the stuff that it can't take on. Who benefits 0:16:12.200 --> 0:16:15.160 what other companies are kind of, you know, getting some 0:16:15.240 --> 0:16:16.880 of the business that Caterpillar can't take on. 0:16:18.040 --> 0:16:20.640 Right, So it's a race to add capacity. At this point, 0:16:21.120 --> 0:16:25.120 Caterpillar is increasing their large engine capacity by three x 0:16:25.400 --> 0:16:29.440 through the end of the decade, turbines by two and 0:16:29.520 --> 0:16:31.440 a half times through the end of the decade. Come Ins, 0:16:31.480 --> 0:16:36.960 another one of their competitors. They're also significantly increasing their capacity. Really, 0:16:36.960 --> 0:16:39.640 it's just a matter of who has product availability is 0:16:39.840 --> 0:16:42.600 to who's getting some of these contracts. Right now, the 0:16:42.640 --> 0:16:46.960 industry really can't add capacity fast enough. That is one 0:16:47.040 --> 0:16:50.960 of the overarching concerns now where we're adding too much capacity. 0:16:51.720 --> 0:16:54.640 But right now, I mean, from all indications from this report, 0:16:54.960 --> 0:16:58.080 it doesn't seem like there's any signs of that slowing down. 0:16:58.120 --> 0:17:00.000 And in fact, some of their lead times have actually 0:17:00.200 --> 0:17:03.360 extended this quarter. Like I mentioned, some of their customers 0:17:03.400 --> 0:17:06.080 already taken orders out to twenty thirty, which you know, 0:17:06.200 --> 0:17:07.959 highly unusual for them at this point. 0:17:09.200 --> 0:17:12.120 Stay with us. More from Bloomberg Intelligence coming up after this. 0:17:16.240 --> 0:17:19.920 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:20.000 --> 0:17:23.120 weekdays at ten am Eastern on Apple, Cocklay and Android 0:17:23.119 --> 0:17:26.440 Auto with the Bloomberg Business App. Listen on demand wherever 0:17:26.480 --> 0:17:30.000 you get your podcasts, or watch us live on YouTube. 0:17:30.600 --> 0:17:32.760 All right, let's not go to the healthcare sector. 0:17:32.800 --> 0:17:35.480 I'm not sure that those stocks are trading those kinds 0:17:35.480 --> 0:17:38.199 of multiples. Let's bring Sam Fazzelli, who knows a thing 0:17:38.280 --> 0:17:41.560 or two about the healthcare sector. He is our director 0:17:41.560 --> 0:17:44.159 of research covering healthcare, defense industrials, and autos and he 0:17:44.200 --> 0:17:47.800 joins us right now from London. So Sam, Pfizer and 0:17:47.920 --> 0:17:50.320 Merk both coming out with the results. What is the 0:17:50.400 --> 0:17:53.320 narrative here for these two big pharma companies. 0:17:54.280 --> 0:17:57.800 Yeah, Scarlett, So the story here really is that you've 0:17:57.840 --> 0:18:03.640 got two companies both heading and facing some significant patent expiries, 0:18:03.680 --> 0:18:06.080 which means some of their big drugs are going to 0:18:06.119 --> 0:18:10.359 go generic. And therefore they're going to say but things 0:18:10.400 --> 0:18:13.200 like aliquists that fires the cells are going to fall 0:18:13.240 --> 0:18:15.199 off a cliff literally, and they do call it a 0:18:15.240 --> 0:18:19.240 pat cliff too. So within six months and eight ninety 0:18:19.280 --> 0:18:22.080 percent of the volume can be eroded depending on the 0:18:22.080 --> 0:18:25.480 way the generics come in. If there's any ones I 0:18:25.760 --> 0:18:28.440 have six months exclusivity, then they don't drop the price 0:18:28.480 --> 0:18:31.280 that much. But in the end, pretty much the business 0:18:31.359 --> 0:18:33.800 goes away, which is great because that's what farmer companies 0:18:33.840 --> 0:18:37.800 should do. They get their phenomenal dollars behind the R 0:18:37.800 --> 0:18:39.800 and D, make a new drug, make a lot of 0:18:39.800 --> 0:18:42.320 profit for ten years, eleven years, eight years, whatever the 0:18:42.359 --> 0:18:45.560 length of time is. Then everybody gets gets access to 0:18:45.600 --> 0:18:47.920 it at a much lower price, and work is the 0:18:47.960 --> 0:18:49.800 same because they've got tutor coming up. So Both of 0:18:49.840 --> 0:18:53.720 these companies are looking ahead to this issue. Both are 0:18:53.840 --> 0:18:57.680 therefore stories about pipeline. What have I got to replace 0:18:57.720 --> 0:19:01.639 this lost sales? Mark's holy potentially bigger at least just 0:19:01.720 --> 0:19:05.520 basing that on the volume of sales today or value 0:19:05.520 --> 0:19:08.360 of sales today. But yet, if you need to kind 0:19:08.359 --> 0:19:09.800 of just done the chart. He I was looking at 0:19:09.800 --> 0:19:11.840 it and playing with it. Now you look at Murg, 0:19:12.080 --> 0:19:16.440 it's up sixty percent in twelve months. Sixty percent. That's 0:19:16.480 --> 0:19:20.040 pretty much not far from where the SMP five hundred is. 0:19:20.520 --> 0:19:25.720 Pfizer is up seven percent, So massive underperformance. Why because 0:19:25.920 --> 0:19:28.920 one has been able to convince that they've got the pipeline, 0:19:29.160 --> 0:19:30.199 the other one hasn't. 0:19:32.560 --> 0:19:36.320 So sam are we is the number of drugs and 0:19:36.320 --> 0:19:39.320 the amount of sales associated with those drugs potentially you know, 0:19:39.320 --> 0:19:41.080 at risk or scheduled to come off? Pattern? 0:19:41.520 --> 0:19:42.960 Is it more today. 0:19:42.600 --> 0:19:44.080 Than it's been in the pass? It just seems like 0:19:44.080 --> 0:19:46.160 we hear about it more and more from these big companies. 0:19:47.119 --> 0:19:51.000 Well, yes and no, because you know we've had these 0:19:51.040 --> 0:19:53.840 big patterners. The biggest pattern cliff was around the twenty 0:19:53.880 --> 0:19:57.760 ten time frame where Pfizers themselves went on board sharing PLOW. 0:19:58.320 --> 0:20:00.439 If I'm not mistaken. It's a long time, you know, 0:20:00.480 --> 0:20:04.520 one is allowed a little bit of memory. Last in 0:20:04.600 --> 0:20:06.560 my I think it was a sharing planer and bought 0:20:06.600 --> 0:20:10.160 another company. Anyway, they bought. They did these mega mergers. 0:20:10.200 --> 0:20:11.960 No remember the one we were talking about yesterday with 0:20:12.359 --> 0:20:15.000 what Astro is doing, which is why I'm incredulous because 0:20:15.040 --> 0:20:17.719 they don't have a patent expiry issue to deal with anyway, 0:20:18.880 --> 0:20:22.640 there are Remember, the drugs are bigger now, the sales 0:20:22.640 --> 0:20:25.480 are bigger now. So when you have a Cutruder that 0:20:25.560 --> 0:20:27.679 I don't think anyone you go back and use our 0:20:27.800 --> 0:20:30.440 modl function and have a look and see what people 0:20:30.480 --> 0:20:33.040 thought Cutruder would be selling, which is a cancer drug 0:20:33.119 --> 0:20:38.080 by Mark back in twenty sixteen, seventeen, maybe ten billion. 0:20:38.440 --> 0:20:40.800 The thing is heading for forty billion dollars of sales 0:20:41.119 --> 0:20:44.879 because it turned into a pipeline their product, and that 0:20:45.240 --> 0:20:47.640 is a big number to play. Imagine our GLP wants 0:20:47.680 --> 0:20:52.080 for Lily one day when when Munjaro goes off pattern 0:20:52.240 --> 0:20:55.080 or whatever. Uh, how do you do deal with a 0:20:55.119 --> 0:20:59.480 thirty forty billion dollar sales implosion? That is tougher, which 0:20:59.480 --> 0:21:02.120 is why they talking about it more and investors are 0:21:02.840 --> 0:21:04.399 if you want more focused. 0:21:04.000 --> 0:21:06.199