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Speaker 2: Again, I'm just looking.
Speaker 3: I'm not.
Speaker 4: I don't really know Palenteer technologies that well, but the
Speaker 4: shares jump by the most almost sixteen months after the
Speaker 4: company boosted four year revenue and income forecast as described
Speaker 4: and described commercial demand for its data analytics tools as
Speaker 4: quote otherworldly. I don't know, so I know man deep
Speaker 4: seeing those he covers all this tech stuff for Bloomberg Intelligence. Bendy,
Speaker 4: can you just briefly describe what Palenteer is and what
Speaker 4: you took away from their earnings last night.
Speaker 5: I mean, this is a company pre AI before LMS
Speaker 5: came to the scene, and they have done a lot
Speaker 5: of customized work for government, ment entities, large defense companies
Speaker 5: where it helps make sense of big data. Basically, it
Speaker 5: goes back to that big data days where are those
Speaker 5: dealing with large amounts of data. They can help you
Speaker 5: create a pretty dashboard that can you know, give you
Speaker 5: the insights from unstructured data. Now, with all the LMS
Speaker 5: coming to this scene, they clearly have made a pivot
Speaker 5: towards incorporating LMS as part of the solution. And what
Speaker 5: we have seen is accelerating growth over the last thirteen quarter.
Speaker 5: So this is the thirteenth consecutive quarter of top line acceleration.
Speaker 5: And you know, ninety three percent growth is very impressive
Speaker 5: for a software company. But when I look at, you know,
Speaker 5: the customer base, we're talking about thousand customers, so it's
Speaker 5: very high. SP's very high monetization at their customer base, which,
Speaker 5: like I said, half of this is coming from the government.
Speaker 5: And so from that perspective, a typical enterprise company like
Speaker 5: Microsoft has got over one hundred thousand customers. Even a
Speaker 5: Snowflake or data Bricks has got twenty thousand plus customers.
Speaker 5: Talenteer is just catering to thousand customers. And that's the
Speaker 5: real risk for me when I look at the growth
Speaker 5: tragictory next couple of years.
Speaker 6: So you're saying that's a source of fragility rather than
Speaker 6: a source of strength for Palenteer.
Speaker 2: What could disrupt that? I mean, does that make it
Speaker 2: a Palenter more vulnerable to a competitor coming in.
Speaker 4: Yeah.
Speaker 5: I mean the fact that the CEO has been so
Speaker 5: vocal about Inthropic and open Ai and how suddenly, out
Speaker 5: of all the companies, Palenteer is supporting open source. I mean,
Speaker 5: this is a company that has benefited greatly from selling
Speaker 5: a proprietary solution and now it's coming out and being
Speaker 5: so vocal about open source support.
Speaker 7: So that I think.
Speaker 5: Gives you an indication that they do see the competition
Speaker 5: coming from the likes of open ai and Tropic.
Speaker 7: As well as the hyperscalers.
Speaker 5: I mean, what Palenteer did really well was they have
Speaker 5: this concept called FDE forver deployed engineers that were part
Speaker 5: of their employee base. So when you're installing a solution,
Speaker 5: the FDEs actually help you get there faster. And now
Speaker 5: all of these companies, whether it's Microsoft, Amazon, they have
Speaker 5: this FDE team that they are using to deploy their
Speaker 5: own lms. So I think competition.
Speaker 7: Wise, I feel there will.
Speaker 5: Be more competition from Palenteer and they can see that,
Speaker 5: which is why they are being so vocal with open
Speaker 5: weight support. And I mean the growth trajectory they guide
Speaker 5: it to increase top line growth, So it was a
Speaker 5: bat and raise quarterer. But to my mind, the growth
Speaker 5: rates will normalize and that's where the higher valuation kind
Speaker 5: of creates a risk.
Speaker 4: You mentioned Anthropic as we're looking for potential IPO maybe
Speaker 4: later this year year, Bloomberg News has got a story
Speaker 4: that Anthropic has struck a ten billion dollars deal for
Speaker 4: computing capacity from a month's old infrastructure startup okay, making
Speaker 4: the cloudmaker's latest effort to keep pace with demand for
Speaker 4: its products.
Speaker 2: What is that all about?
Speaker 5: I mean right now and Tropic is just getting compute
Speaker 5: from wherever they can, whether it's SpaceX or Meta or
Speaker 5: you know these In this case, this small company bitcoin
Speaker 5: mining company that has compute to.
Speaker 4: Hold on, hold on a bitcoin mining company is now
Speaker 4: providing compute for an AI play.
Speaker 2: Yeah, because at the end it's a data center.
Speaker 6: That's the dream for these coin mining companies wants they
Speaker 6: make the transition.
Speaker 5: I mean, compute is agnostic off where you know that
Speaker 5: data center is set up, what purpose it was used
Speaker 5: for in the past, It doesn't matter. Compute is you
Speaker 5: neque processing capability with life power connected to a grid.
Speaker 4: That's all you can And just to be clear, we
Speaker 4: never use the term compute before, did we not?
Speaker 2: In that way?
Speaker 4: We used as a verb, Yes, we would never said
Speaker 4: as a noun. Yeah, right, See, I just want to
Speaker 4: make sure I'm calling you. Just check people out on
Speaker 4: some of this stuff.
Speaker 2: Well, they make up a lot of words, they do.
Speaker 4: You know, I need more compute?
Speaker 2: Is that what you all these alms?
Speaker 5: Net? If you listen to any conference they are on,
Speaker 5: they'll tell you the world needs ten times fifty times
Speaker 5: more compute than currently available.
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 6: It is, of course the thick of earning season, and
Speaker 6: this morning we got indication from McDonald's that US sales
Speaker 6: perhaps not living up to what was promised or what
Speaker 6: was expected. Sales in the US coming in a little
Speaker 6: bit lighter than anticipated. Michael Halen is our senior restaurant
Speaker 6: and food service analysts enjoys US in studio.
Speaker 2: So Michael I thought McDonald's.
Speaker 6: Was one of the companies that would benefit from consumers
Speaker 6: seeking value, seeking perhaps lower cost and more convenient food options.
Speaker 6: And it certainly looked that way in quarters past. What
Speaker 6: happened this last quarter.
Speaker 8: Yeah, so last year they did a good job of
Speaker 8: re establishing themselves as the value leader.
Speaker 7: They were also lapping really weak comps due to E.
Speaker 8: Coli, and so as a result, they had very strong
Speaker 8: results last year.
Speaker 7: This year, we thought it was.
Speaker 8: We didn't think it was a great idea to just
Speaker 8: try to lap these really strong comps with just value
Speaker 8: A B. They kind of screwed up the whole value thing.
Speaker 8: They pulled the bogos buy one, get one offers, they
Speaker 8: took away a lot of discounts on the app which
Speaker 8: their lower income consumers use all the time, and they
Speaker 8: pushed a ten items for three dollars menu that kind
Speaker 8: of fell flat. And so all of those changes that
Speaker 8: happening that happened to actually created an increase of prices
Speaker 8: for their their consumers. So, you know, that, paired with
Speaker 8: a tough year over year comparison, you know, showed up
Speaker 8: in their results today.
Speaker 4: The company is embarking on a multi year plan to
Speaker 4: become more than just a fast cheap meal with the
Speaker 4: aim of being the first choice for family outings and
Speaker 4: other occasions. How are they going to do that?
Speaker 7: You know, listen, we'll probably see more tie ins.
Speaker 5: You know.
Speaker 8: Last year was was the Minecraft meal that was absolutely
Speaker 8: a monster for them globally, right, so they're gonna have
Speaker 8: to use some more tie ins. You know, it's gonna
Speaker 8: be tough, you know. I think what we're seeing is
Speaker 8: McDonald's kind of taking some of these family family occasions
Speaker 8: away from McDonald's this year. You know, Burger King has
Speaker 8: remodeled their restaurants, improve the quality of the food, and
Speaker 8: really done a nice job of building back sales over
Speaker 8: the last few quarters. And I think McDonald's is feeling
Speaker 8: it and that that's why they're kind of talking about
Speaker 8: set that segment because it seems like they may be
Speaker 8: losing some share there. I think what the real drivers
Speaker 8: of this will be are, you know, beverages. I think
Speaker 8: beverages is a very good opportunity for them to grow
Speaker 8: sales in the afternoon day part.
Speaker 5: You know.
Speaker 8: I think they can take seems they can take sales
Speaker 8: away from Sonic, who is a big competitor in the
Speaker 8: beverage space that does a nice job in that you
Speaker 8: know two to four pm lull where the restaurants are staffed,
Speaker 8: and so they're primed to do more business. It's very
Speaker 8: incremental sales in that day part. You know, they're going
Speaker 8: to do some more training, some retraining in the fourth
Speaker 8: quarter to help boost their operations. I think they're gonna
Speaker 8: they're not going to do what they did this quarter,
Speaker 8: which was just throw too many different marketing initiatives against
Speaker 8: the wall. Right, you have to be more disciplined in
Speaker 8: today's market because you know, these windows, everyone's marketing, and
Speaker 8: everyone's putting in ltos and new food items and discounts
Speaker 8: out there all the time because the low income consumer
Speaker 8: is struggling. And so what we're seeing now is that
Speaker 8: promotions are only giving you these chains a lift for one.
Speaker 7: Or two weeks and then it fades and then it fades.
Speaker 8: And so you know, if you're constantly marketing something new
Speaker 8: every couple of weeks, you know.
Speaker 2: People just show you out.
Speaker 8: It gets confusing for the consumer, consumer, for the confusing
Speaker 8: for the employees.
Speaker 7: It just kind of makes a mess of things which
Speaker 7: happen this quarter.
Speaker 6: Yeah, it just becomes noise in the background. A lot
Speaker 6: of analysts are saying that the results are kind of
Speaker 6: the secondary story. The bigger story here is a change
Speaker 6: in McDonald's USA leadership. Joe Erlinger is out and Sky Anderson,
Speaker 6: who was the COEO, comes in. Do you see this
Speaker 6: changing things dramatically for McDonald's.
Speaker 7: Uh, I don't think so.
Speaker 8: I mean, Erlinger did a great job, you know, so
Speaker 8: you know that may be viewed as a loss by some,
Speaker 8: but Sky Anderson has been there.
Speaker 7: For a long time. She's worked very closely with Joe
Speaker 7: and the US team.
Speaker 8: UH in charge of operations, so you know, she has
Speaker 8: a long track, strong track record at McDonald So I
Speaker 8: don't expect too much of a change there.
Speaker 4: Cyclo what is it again?
Speaker 7: Cyclospora? Yeah?
Speaker 4: What is that?
Speaker 7: Let's a site that causes you know, very very bad diarrhea.
Speaker 4: And so this is something that's impacting the lettuce Yes.
Speaker 8: Yes, this is impacting let us. There was a pretty
Speaker 8: big recall Taylor.
Speaker 2: Forms is a big and Taco Bell getting caught up
Speaker 2: in it.
Speaker 7: And Taco Bell got caught up.
Speaker 8: There was some news today that wasn't a good look
Speaker 8: for them, right, so they you know, some somebody got
Speaker 8: a hold of some emails that showed they knew about
Speaker 8: this this outbreak maybe a weeks before they let their
Speaker 8: consumers know, and so yeah, not a good look for them.
Speaker 7: Also, there was a couple of deaths.
Speaker 8: I think they were people that were had health issues
Speaker 8: prior to cycle spore. But that's uncommon for cyclospora deaths, right,
Speaker 8: that's more of like an E. Coli thing, So not
Speaker 8: great for young brands. But you know, at the same time,
Speaker 8: they just divested Pizza Hut. People are going to forget
Speaker 8: about the cyclospora outbreak, and you know, this company is
Speaker 8: set up for much much stronger top and bottom line
Speaker 8: growth over the next twelve months because of you know,
Speaker 8: they got rid of that yoke on its neck, which
Speaker 8: so they just.
Speaker 2: Have to get through this period.
Speaker 6: In other words, you know, with all the bad news
Speaker 6: and figuring out a solution to this. I want to
Speaker 6: go back to something you said earlier, Michael, about how
Speaker 6: McDonald's is trying to get more people into its stores
Speaker 6: in the afternoon hours, you know.
Speaker 2: Like with drinks.
Speaker 6: I think about Starbucks and how it's trying to get
Speaker 6: more people into its stores through food items. So everyone's
Speaker 6: just trying to get away to get consumers to come
Speaker 6: in around what two to four pm? That's the lull
Speaker 6: and that's like the time of day they've targeted. And
Speaker 6: if you sell food, then you want to provide drinks.
Speaker 6: If you sell drinks, things want to provide food. What
Speaker 6: did people do? What did companies do with that timeslot
Speaker 6: before this, before this focused attention, they just kind of
Speaker 6: gave up on it.
Speaker 8: And no, I mean, you know, it makes a lot
Speaker 8: of sense because your stores are staffed, right, you have
Speaker 8: people in the stores, but you don't have a lot
Speaker 8: of customers coming in. So any of those sales that
Speaker 8: you can bring in in those types of times, since
Speaker 8: they call them the shoulder periods, are very high margin. Right,
Speaker 8: it's basically all incremental.
Speaker 4: Samantha writes in says they need to offer happy hours.
Speaker 4: That's a concept that works. Oh yeah, the bar business.
Speaker 4: Why not in like a Bounce or Starbucks.
Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 6: We also have earnings out from Caterpillar, which normally you
Speaker 6: know it's a maker of earth moving machines, bulldozers the like,
Speaker 6: But now it's become an AI play, not just in
Speaker 6: a construction and mining equipment company, it's.
Speaker 2: So much more.
Speaker 6: Chris Ricilino is our senior US machinery analyst here at
Speaker 6: Bloomberg Intelligence, and he joins us now with more on
Speaker 6: these results, which some people have called blowout results, especially
Speaker 6: the upside to Wall Street estimates for a second quarter profit. Chris,
Speaker 6: give us a quick read here on Caterpillar's latest results.
Speaker 9: Yeah, it's hard to refute those comments. It was really
Speaker 9: a monster quarter you had against pretty lofty expectations heading
Speaker 9: into the print. You had a really convincing bet and
Speaker 9: raise better than expected sales and margins across all three businesses.
Speaker 9: So it's not just the the AI power gen business.
Speaker 9: And actually, I would say one of the more encouraging
Speaker 9: takeaways from this print was a performance in their construction business,
Speaker 9: so which really suggests that this recovery is broadening out
Speaker 9: where you have a lot of the cyclical tailwind starting
Speaker 9: to kick in and kind of enhance what we're seeing
Speaker 9: on the secular side with the data center build out
Speaker 9: orders again very strong in the quarter, push backlog to
Speaker 9: another record level. We're north of seventy two billion dollars
Speaker 9: on the backlog. They're already starting to take some orders
Speaker 9: out to twenty thirty so above average production visibility. There's
Speaker 9: really a lot to liken. This report. Question now becomes
Speaker 9: is this as good as it gets? So we shall
Speaker 9: see from here.
Speaker 3: So Chris, as I understand your coverage of machinery and
Speaker 3: the Deers of the world, the cats of the world,
Speaker 3: I mean, I think that is classic cyclical stuff. But
Speaker 3: these stocks are trading thirty five times earnings. I mean,
Speaker 3: you're like a growth stock industry. Now, what's going on
Speaker 3: with your industry is it's still cyclical.
Speaker 9: It's hard to wrap your head around some of the
Speaker 9: valuations in the space, even the small So we had
Speaker 9: a Caterpillar. If you look over to last year, it's
Speaker 9: really traded in line with a lot of the AI
Speaker 9: and hyperscaler names in terms of just the moves and
Speaker 9: the trajectory. It's been one of the top performers in
Speaker 9: the industrials world because of that data center exposure in
Speaker 9: their power generation business. At the end of the day,
Speaker 9: I still believe this is still a cyclical company. They
Speaker 9: had just been you know, uh, fortunately positioned to capitalize
Speaker 9: on some of this build out with their large engines
Speaker 9: and reciprocating the natural gas engines, which you know, initially
Speaker 9: we're used more for backup power on the data centers,
Speaker 9: but are becoming increasingly used in prime power applications. But
Speaker 9: this is more than just a data center play. You're
Speaker 9: just beginning to see. I think the fruits of that
Speaker 9: in terms of the construction and mining recovery, which we
Speaker 9: think have some legs into twenty seven and twenty eight.
Speaker 6: You know, if Caterpillar has more demand than it knows
Speaker 6: what to do with, and that power and Energy unit
Speaker 6: has grown to be the largest for Caterpillar by sales
Speaker 6: for the stuff that it can't take on. Who benefits
Speaker 6: what other companies are kind of, you know, getting some
Speaker 6: of the business that Caterpillar can't take on.
Speaker 9: Right, So it's a race to add capacity. At this point,
Speaker 9: Caterpillar is increasing their large engine capacity by three x
Speaker 9: through the end of the decade, turbines by two and
Speaker 9: a half times through the end of the decade. Come Ins,
Speaker 9: another one of their competitors. They're also significantly increasing their capacity. Really,
Speaker 9: it's just a matter of who has product availability is
Speaker 9: to who's getting some of these contracts. Right now, the
Speaker 9: industry really can't add capacity fast enough. That is one
Speaker 9: of the overarching concerns now where we're adding too much capacity.
Speaker 9: But right now, I mean, from all indications from this report,
Speaker 9: it doesn't seem like there's any signs of that slowing down.
Speaker 9: And in fact, some of their lead times have actually
Speaker 9: extended this quarter. Like I mentioned, some of their customers
Speaker 9: already taken orders out to twenty thirty, which you know,
Speaker 9: highly unusual for them at this point.
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 2: All right, let's not go to the healthcare sector.
Speaker 6: I'm not sure that those stocks are trading those kinds
Speaker 6: of multiples. Let's bring Sam Fazzelli, who knows a thing
Speaker 6: or two about the healthcare sector. He is our director
Speaker 6: of research covering healthcare, defense industrials, and autos and he
Speaker 6: joins us right now from London. So Sam, Pfizer and
Speaker 6: Merk both coming out with the results. What is the
Speaker 6: narrative here for these two big pharma companies.
Speaker 10: Yeah, Scarlett, So the story here really is that you've
Speaker 10: got two companies both heading and facing some significant patent expiries,
Speaker 10: which means some of their big drugs are going to
Speaker 10: go generic. And therefore they're going to say but things
Speaker 10: like aliquists that fires the cells are going to fall
Speaker 10: off a cliff literally, and they do call it a
Speaker 10: pat cliff too. So within six months and eight ninety
Speaker 10: percent of the volume can be eroded depending on the
Speaker 10: way the generics come in. If there's any ones I
Speaker 10: have six months exclusivity, then they don't drop the price
Speaker 10: that much. But in the end, pretty much the business
Speaker 10: goes away, which is great because that's what farmer companies
Speaker 10: should do. They get their phenomenal dollars behind the R
Speaker 10: and D, make a new drug, make a lot of
Speaker 10: profit for ten years, eleven years, eight years, whatever the
Speaker 10: length of time is. Then everybody gets gets access to
Speaker 10: it at a much lower price, and work is the
Speaker 10: same because they've got tutor coming up. So Both of
Speaker 10: these companies are looking ahead to this issue. Both are
Speaker 10: therefore stories about pipeline. What have I got to replace
Speaker 10: this lost sales? Mark's holy potentially bigger at least just
Speaker 10: basing that on the volume of sales today or value
Speaker 10: of sales today. But yet, if you need to kind
Speaker 10: of just done the chart. He I was looking at
Speaker 10: it and playing with it. Now you look at Murg,
Speaker 10: it's up sixty percent in twelve months. Sixty percent. That's
Speaker 10: pretty much not far from where the SMP five hundred is.
Speaker 10: Pfizer is up seven percent, So massive underperformance. Why because
Speaker 10: one has been able to convince that they've got the pipeline,
Speaker 10: the other one hasn't.
Speaker 4: So sam are we is the number of drugs and
Speaker 4: the amount of sales associated with those drugs potentially you know,
Speaker 4: at risk or scheduled to come off? Pattern?
Speaker 2: Is it more today.
Speaker 4: Than it's been in the pass? It just seems like
Speaker 4: we hear about it more and more from these big companies.
Speaker 10: Well, yes and no, because you know we've had these
Speaker 10: big patterners. The biggest pattern cliff was around the twenty
Speaker 10: ten time frame where Pfizers themselves went on board sharing PLOW.
Speaker 10: If I'm not mistaken. It's a long time, you know,
Speaker 10: one is allowed a little bit of memory. Last in
Speaker 10: my I think it was a sharing planer and bought
Speaker 10: another company. Anyway, they bought. They did these mega mergers.
Speaker 10: No remember the one we were talking about yesterday with
Speaker 10: what Astro is doing, which is why I'm incredulous because
Speaker 10: they don't have a patent expiry issue to deal with anyway,
Speaker 10: there are Remember, the drugs are bigger now, the sales
Speaker 10: are bigger now. So when you have a Cutruder that
Speaker 10: I don't think anyone you go back and use our
Speaker 10: modl function and have a look and see what people
Speaker 10: thought Cutruder would be selling, which is a cancer drug
Speaker 10: by Mark back in twenty sixteen, seventeen, maybe ten billion.
Speaker 10: The thing is heading for forty billion dollars of sales
Speaker 10: because it turned into a pipeline their product, and that
Speaker 10: is a big number to play. Imagine our GLP wants
Speaker 10: for Lily one day when when Munjaro goes off pattern
Speaker 10: or whatever. Uh, how do you do deal with a
Speaker 10: thirty forty billion dollar sales implosion? That is tougher, which
Speaker 10: is why they talking about it more and investors are
Speaker 10: if you want more focused.
Speaker 6: On it right, makes a lot of sense. Before we
Speaker 6: let you go, just a quick question on biointech. This
Speaker 6: is of course a German drug maker, and it's still
Speaker 6: talking about a COVID nineteen vaccine demand shrinking for that
Speaker 6: is there? What does demand for a COVID nineteen vaccine
Speaker 6: look like right now? I mean, certainly in the US
Speaker 6: it kind of has dropped off the conversation completely.
Speaker 10: Yeah, I mean, so people still taking it. I mean,
Speaker 10: what's happening with COVID, which is very interesting is that
Speaker 10: we've had four years since the pandemic. We've had two waves.
Speaker 10: This year, the summer waves disappeared. It seems to be
Speaker 10: heading if this sticks to a winter wave, which is
Speaker 10: what other coronaviruses and most cold viruses seem to have.
Speaker 10: So this would mean that if there was any demand
Speaker 10: for the summer period, that's fallen, by the way, So
Speaker 10: and they just downgraded their guidance by about ten percent
Speaker 10: for the full year, but Moderna has been sticking with
Speaker 10: this guidance. Someple competition were in on there, ethic.
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