WEBVTT - BI Weekend: Nvidia, Retail Earnings Results 0:00:00.280 --> 0:00:11.680 Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.840 --> 0:00:12.920 with Paul Sweeney. 0:00:13.080 --> 0:00:16.279 The real app performance has been the US corporate high yield. 0:00:16.360 --> 0:00:20.040 These are two big time blue chip companies. One person's 0:00:20.079 --> 0:00:22.880 cast is another person's animal spirits. 0:00:22.560 --> 0:00:26.240 Breaking market headlines and corporate news from across the globe. 0:00:26.280 --> 0:00:28.360 Our viewer is if the economy is slowing down. 0:00:28.360 --> 0:00:30.400 There is the possibility of the death spiral. 0:00:30.560 --> 0:00:33.080 Full time competing in AI are going to power the future. 0:00:33.200 --> 0:00:36.479 People are just buying everything with Tex Bloomberg Intelligence with 0:00:36.640 --> 0:00:40.840 Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals. 0:00:41.840 --> 0:00:44.080 I'm Paul Sweeney and I'm Scarlett Food filling in on 0:00:44.120 --> 0:00:45.160 Bloomberg Intelligence. 0:00:45.200 --> 0:00:47.440 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:47.479 --> 0:00:49.880 business stories impacting Wall Street and the global markets. 0:00:49.960 --> 0:00:52.080 Each and every week we provide in depth research and 0:00:52.159 --> 0:00:54.279 data on some of the two thousand companies and one 0:00:54.320 --> 0:00:56.880 hundred and thirty industries are analysts covered worldwide. 0:00:56.960 --> 0:00:58.720 Today, we'll take a look at how the beverage make 0:00:58.760 --> 0:01:02.520 it Kirk doctor Pepper looking to strengthen its struggling coffee. 0:01:02.160 --> 0:01:05.480 Business, plus Echo Star agrees to sell spectrum licenses to 0:01:05.520 --> 0:01:07.600 at and T. We'll discuss what the deal means for 0:01:07.640 --> 0:01:09.480 the telecommunications companies, but. 0:01:09.560 --> 0:01:11.920 First we begin with earnings from the chip giant and video. 0:01:12.200 --> 0:01:14.959 This week, the world's most valuable publicly traded company reported 0:01:15.040 --> 0:01:16.839 second quarter earnings that beat an allo. 0:01:16.840 --> 0:01:19.880 Expectations, but investors were disappointed after in Vidia gave a 0:01:19.959 --> 0:01:23.080 lukewarm revenue forecast for the current quarter. And this is 0:01:23.120 --> 0:01:26.480 fueling concerns a massive run up and artificial intelligence spending 0:01:26.800 --> 0:01:27.280 is slowing. 0:01:27.800 --> 0:01:28.160 For more. 0:01:28.240 --> 0:01:30.680 Scarlet and I were joined by Ku John Sabani, Bloomberg 0:01:30.680 --> 0:01:34.319 Intelligence Senior semiconductor analysts, first to ask Kun John for 0:01:34.400 --> 0:01:36.080 his take on Invidious results. 0:01:36.720 --> 0:01:38.880 Yeah, like you said, it was once again a solid 0:01:38.959 --> 0:01:43.360 sprinting guide. It checked all the fundamental key boxes, but 0:01:43.800 --> 0:01:46.039 as has been the case with this name, you know, 0:01:46.080 --> 0:01:49.480 the expectations always run higher, and maybe not all the 0:01:49.600 --> 0:01:52.880 numbers were able to clear that high hurdle of expectations. 0:01:53.080 --> 0:01:56.600 Specifically the data center compute numbers in two Q. You 0:01:56.640 --> 0:01:58.520 would have liked to see that come in a little 0:01:58.560 --> 0:02:00.840 bit high, but there were still a lot of strong 0:02:01.440 --> 0:02:06.320 positive underlyings. One the networking was a significant beat, which 0:02:06.520 --> 0:02:09.639 shows the strength and the attachment that they're getting from 0:02:09.680 --> 0:02:13.560 their networking switches and chips in the Blackwell ramp. Second, 0:02:13.760 --> 0:02:17.240 like you mentioned, the three Q consensus had China included, 0:02:17.560 --> 0:02:20.480 and they still beat their three Q guide Without China. 0:02:20.520 --> 0:02:22.280 If you add in the China guide of two to 0:02:22.360 --> 0:02:25.440 five billion, they would have handsomely beaten the three Q numbers. 0:02:25.480 --> 0:02:29.640 So that noisy sort of consensus shadowed the goodness that 0:02:29.760 --> 0:02:31.800 is coming out of the guide of Nvidia. 0:02:32.040 --> 0:02:35.640 All right, so what's the company telling us now about China? 0:02:35.639 --> 0:02:37.760 Goes quite frankly, I just I'm reading the press. I 0:02:37.760 --> 0:02:39.040 don't know whether they're going to be able to sell 0:02:39.040 --> 0:02:41.720 stuff in the China or when, or whether they're gonna 0:02:41.760 --> 0:02:44.639 have to give a fifteen percent cut to the US government. 0:02:45.240 --> 0:02:46.240 How's that going to play out? 0:02:46.720 --> 0:02:49.880 Yeah, so China still remains, you know, after learning sort 0:02:49.880 --> 0:02:54.079 of that overhang in terms of uncertainty. The company did 0:02:54.280 --> 0:02:57.800 guide to a two to five billion revenues from the 0:02:57.840 --> 0:03:01.560 age twenty in China next quarter. Positive. That means they 0:03:01.760 --> 0:03:04.400 feel confident that they'll at least be able to ship 0:03:04.880 --> 0:03:08.040 some and get some of the revenues back. But yes, 0:03:08.240 --> 0:03:11.480 you know, the spark here for the China story will 0:03:11.480 --> 0:03:14.760 not appear until we have a clarity, and we believe 0:03:14.840 --> 0:03:17.880 until they have a blackwell version of a China chip, 0:03:17.960 --> 0:03:20.560 which they get approval from the government, that will end 0:03:20.639 --> 0:03:23.720 up really open up a massive amount of revenues coming 0:03:23.720 --> 0:03:26.040 from China. And there's a lot of hurdles you need 0:03:26.080 --> 0:03:28.639 to clear. Right there's the government, which has nothing to 0:03:28.680 --> 0:03:31.160 do with in media. The US China relationship needs to 0:03:31.200 --> 0:03:33.840 get sorted out because now even China can put in 0:03:33.880 --> 0:03:38.520 a roadblock from Nvidia selling or allowing their companies in 0:03:38.840 --> 0:03:41.920 China from buying in media chip. So there is work 0:03:41.960 --> 0:03:44.800 to be done. As you mentioned, the fifteen percent cut 0:03:44.920 --> 0:03:47.720 is not ironed out in terms of laws. There is 0:03:48.000 --> 0:03:50.880 we have heard new stories about potential lawsuits. So those 0:03:50.920 --> 0:03:55.360 two government and geopolitical angle needs to be cleared before 0:03:55.720 --> 0:03:58.440 we can start seeing billions of dollars of data center 0:03:58.560 --> 0:03:59.560 China revenue coming in. 0:04:00.040 --> 0:04:03.200 What's the competitive landscape here for these chip companies visa 0:04:03.280 --> 0:04:07.160 v in Nvidia and just kind of positioning for AI. 0:04:07.400 --> 0:04:10.480 I assume in Vidia's position A, who's kind of B 0:04:10.560 --> 0:04:10.760 and C. 0:04:11.320 --> 0:04:14.880 Yeah, So you know, the space is divided into two categories. 0:04:14.880 --> 0:04:17.440 One is the merchant GPUs, which is what in media 0:04:17.520 --> 0:04:22.160 sells and dominates that landscape. The sort of second competitor 0:04:22.240 --> 0:04:25.440 there or the b is AMD, which is a very 0:04:25.480 --> 0:04:29.080 far distant. You know, Nvidia today has about over ninety 0:04:29.120 --> 0:04:32.680 percent in terms of revenue share and the remaining is 0:04:32.839 --> 0:04:35.640 going to a very small to AMD. But there's another piece, 0:04:35.680 --> 0:04:37.920 which is we call what we call A six, which 0:04:38.000 --> 0:04:41.479 is what these big hyperscalers and cloud providers like Amazon 0:04:41.520 --> 0:04:44.279 and Google designed their own chips. So that's sort of 0:04:44.279 --> 0:04:47.320 the other competitive landscape where there's a risk of the 0:04:47.360 --> 0:04:51.680 A six taking sort of share away from merchant GPUs 0:04:51.720 --> 0:04:54.720 even though they don't compete directly for the same socket, 0:04:54.760 --> 0:04:56.280 they could take away the wallet share. 0:04:57.080 --> 0:05:00.680 And so does that mean companies like Nvidia have to 0:05:00.720 --> 0:05:03.080 pour money into R and D for that next chip 0:05:03.080 --> 0:05:05.520 to stay on front because I know in your business 0:05:06.480 --> 0:05:07.800 technology changes quickly. 0:05:09.360 --> 0:05:12.080 Yeah, definitely. I mean, look and Media has been even 0:05:12.160 --> 0:05:14.520 before the AI event happened, and Media has been the 0:05:14.560 --> 0:05:18.000 biggest R and D spender. They have continued and this 0:05:18.040 --> 0:05:20.320 is what really got them to the stage of being 0:05:20.400 --> 0:05:23.120 ahead of everyone else, and they have to continue spending 0:05:23.279 --> 0:05:26.040 out spending everyone else to sort of keep that lead. 0:05:26.560 --> 0:05:28.640 Their roadmap for the next two and a half years 0:05:28.680 --> 0:05:30.839 does suggest that they should be able to keep this 0:05:31.000 --> 0:05:34.480 lead handsomely, and for that it will definitely require high 0:05:34.600 --> 0:05:35.280 R and D spending. 0:05:35.800 --> 0:05:38.640 So this name to me who I'm used to stocks 0:05:38.640 --> 0:05:41.919 trading in much lower multiples in my world, But this 0:05:42.000 --> 0:05:44.600 seems like a stock that can actually earn its way, 0:05:44.680 --> 0:05:48.160 and we have seen it earn its way into its multiple. 0:05:48.240 --> 0:05:50.039 I mean, you can make an argument this is not 0:05:50.080 --> 0:05:51.000 an expensive stock. 0:05:51.960 --> 0:05:55.520 You're right. I mean, if you look at from a 0:05:55.680 --> 0:05:59.599 historical perspective, it's actually the multiple is much more lower 0:05:59.640 --> 0:06:01.440 than what we have seen in media trade in the 0:06:01.480 --> 0:06:04.880 past two years. So given that fact, and also when 0:06:04.920 --> 0:06:07.479 we look at the relative comparison, when you think about 0:06:07.560 --> 0:06:10.800 a company growing at fifty percent and making revenue in 0:06:10.839 --> 0:06:14.919 the hundreds of billions, that is unprecedented, especially growing with 0:06:15.080 --> 0:06:18.640 gross margins of seventy mits or low seventy percent. I mean, 0:06:18.640 --> 0:06:21.599 you're talking about a financial profile for software company, not 0:06:21.640 --> 0:06:24.680 a semic network company here. So definitely, when you take 0:06:24.680 --> 0:06:27.880 into those two things into account, it does seem that 0:06:28.040 --> 0:06:30.400 it might not be really highly valued. 0:06:30.520 --> 0:06:34.599 Our thanks to Kunjoan Shobani, Bloomberg Intelligence Senior semiconductor analyst, 0:06:35.080 --> 0:06:35.840 we move next to. 0:06:35.800 --> 0:06:38.840 The anti trust space as anti trust enforcement policies for 0:06:38.920 --> 0:06:42.760 President Donald Trump's administration takes shape, dealmakers and large businesses 0:06:42.800 --> 0:06:44.560 could see a glimmer of hope in some. 0:06:44.520 --> 0:06:47.320 Areas, and one area is Media. Last week, next to 0:06:47.360 --> 0:06:49.839 Our Media agreed to buy the TV station operator Tegna 0:06:49.920 --> 0:06:52.240 for three and a half billion dollars, and this deal 0:06:52.279 --> 0:06:55.640 will likely win FCC approval, according to Bloomberg Intelligence. 0:06:55.880 --> 0:06:59.000 For more guests, Alexis Christophers and I were joined by 0:06:59.120 --> 0:07:03.360 Jennifer ree Burg Intelligence senior litigation analyst. First asked jen 0:07:03.480 --> 0:07:06.080 if the next Star Tegni deal will be approved by 0:07:06.080 --> 0:07:06.720 the FCC. 0:07:07.080 --> 0:07:10.640 I think in the end yes, because the timing was right. 0:07:10.680 --> 0:07:12.680 You know, this isn't a deal. I think that these 0:07:12.720 --> 0:07:14.920 companies could have gotten through a few years ago during 0:07:14.960 --> 0:07:17.680 the Biden administration. But both of the rules that the 0:07:17.760 --> 0:07:19.640 FCC has that would get in the way are in 0:07:19.720 --> 0:07:22.920 the process of being changed as we speak, and Republican 0:07:22.960 --> 0:07:26.000 Commissioners have for a long time wanted to change these rules. 0:07:26.240 --> 0:07:29.040 So the first one is the thirty nine percent ownership cap. 0:07:29.120 --> 0:07:31.560 You know that one company can't own or operate TV 0:07:31.640 --> 0:07:34.680 stations that reach more than thirty nine percent of US households. 0:07:34.960 --> 0:07:37.840 These companies say they'll reach eighty percent. So it's just 0:07:37.920 --> 0:07:40.080 clear on its face that there's a problem there. But 0:07:40.120 --> 0:07:43.600 the FCC is in a rule making process. They'll probably 0:07:43.640 --> 0:07:46.280 have this rule, get rid of it, vacate it. We 0:07:46.320 --> 0:07:47.960 think by the end of the year. You know, my 0:07:48.000 --> 0:07:50.840 colleague Matt Chattenhelm is an expert on the FCC, and 0:07:50.880 --> 0:07:53.480 we've talked about this quite a bit. That's probably going 0:07:53.520 --> 0:07:55.880 to clear out of their way. There could be litigation, 0:07:55.960 --> 0:07:58.160 of course, but we do think the rule will move 0:07:58.200 --> 0:08:00.880 out of the way. The other issue is owning more 0:08:00.920 --> 0:08:05.440 than one of what's called the Big four broadcast stations ABC, CBS, NBC, Fox. 0:08:07.040 --> 0:08:09.640 That rule would also get in the way here probably 0:08:09.800 --> 0:08:13.680 in a number of local areas. Does it called designated 0:08:13.720 --> 0:08:17.880 market areas by Nielsen. That rule has also been vacated 0:08:17.960 --> 0:08:20.280 by the Eighth Circuit Court of Appeals. It will also 0:08:20.360 --> 0:08:22.920 probably be in litigation, but it seems like the road 0:08:23.160 --> 0:08:24.680 is clearing for the FCC. 0:08:24.880 --> 0:08:25.160 There. 0:08:25.280 --> 0:08:26.160 It's a whole new world. 0:08:26.320 --> 0:08:28.320 Yes, it's a whole new world. But we have Department 0:08:28.360 --> 0:08:31.440 of Justice also, so we can't forget that right and 0:08:31.480 --> 0:08:34.400 we always think about the FCC. The Department of Justice 0:08:34.440 --> 0:08:36.960 is going to be looking at this too, but I 0:08:37.000 --> 0:08:39.400 do think they can probably get it cleared through that 0:08:39.480 --> 0:08:40.400 agency as well. 0:08:40.640 --> 0:08:43.280 All we really care about is President Trump, that he 0:08:43.360 --> 0:08:46.040 have voiced any opinion one way or the other about 0:08:46.040 --> 0:08:47.840 this type of deal or these types of deals. 0:08:47.920 --> 0:08:50.200 You know, I haven't heard anything from him. You know, 0:08:50.200 --> 0:08:52.079 it would be reported in the news. I haven't heard 0:08:52.160 --> 0:08:54.960 him say anything about these deals. We are beginning to 0:08:54.960 --> 0:08:58.360 see a trend though, in the merger world, Paul, where 0:08:58.440 --> 0:09:00.720 if the companies do and say the right things for 0:09:00.760 --> 0:09:04.280 the Trump administration, they're getting assistants and getting their deal through. 0:09:04.679 --> 0:09:08.280 And they're all pretty well aware of that. So as 0:09:08.280 --> 0:09:10.120 long as they do and say the right things, hey, 0:09:10.160 --> 0:09:14.120 we won't block political ads, will be neutral in you know, 0:09:14.200 --> 0:09:17.360 our censorship of content things like that that resonate with Trump, 0:09:17.520 --> 0:09:18.360 that's going to help them. 0:09:19.240 --> 0:09:21.640 Sinclair did come in here with an eleventh hour deal, 0:09:21.679 --> 0:09:22.080 did they not? 0:09:23.240 --> 0:09:23.440 Yeah? 0:09:23.480 --> 0:09:25.760 I think so, but you know they rebuff what it 0:09:25.840 --> 0:09:28.360 seemed like on a per share basis, it was better 0:09:28.480 --> 0:09:32.000 than the next Star deal for Tegna, So why rebuffet. 0:09:31.800 --> 0:09:33.679 You know, I can't speak to that. You know, that's 0:09:33.760 --> 0:09:37.600 much more Tegna and Tegna's strategy maybe they think from 0:09:37.640 --> 0:09:40.640 an anti trust perspective, there's less overlap here. I mean, 0:09:40.679 --> 0:09:43.240 it is thirty five of fifty one of their DMAs, 0:09:43.280 --> 0:09:46.000 That's what TECHNA says. But in those thirty five, depending 0:09:46.000 --> 0:09:48.800 on what stations they own, that overlap may not be problematic. 0:09:48.840 --> 0:09:51.760 It may only be problematic into few. They may still 0:09:51.800 --> 0:09:54.079 have to divest some stations in order to get Department 0:09:54.080 --> 0:09:57.240 of Justice approval. I haven't done that comparison analysis, but 0:09:57.280 --> 0:09:59.920 it may be that they have to divest fewer stations. 0:10:00.160 --> 0:10:01.959 This deal perhaps done a different one. 0:10:02.080 --> 0:10:06.000 Yeah, how is the Department of Justice looking at mergers 0:10:06.040 --> 0:10:08.920 and equisisms generally defined? Has it maturely changed under the 0:10:08.960 --> 0:10:11.079 Trump administration versus the Biden administration? 0:10:11.240 --> 0:10:13.600 You know, it's so interesting. The rhetoric at the beginning 0:10:13.720 --> 0:10:15.560 was that it wouldn't change, that there would be this 0:10:15.640 --> 0:10:18.320 read through, and that there was more commonality with the 0:10:18.360 --> 0:10:21.720 Biden administrators than differences. But it has changed. You know, 0:10:21.760 --> 0:10:25.240 they have gone back to settling problematic deals with you know, 0:10:25.320 --> 0:10:30.680 structural even one behavioral remedy that was omnicom interpublic with divestitures. 0:10:30.679 --> 0:10:33.360 This is something that wasn't happening during the Biden administration. 0:10:33.640 --> 0:10:35.920 They just said, if it deals problematic, we're going to 0:10:35.920 --> 0:10:39.080 sue this. Doja in this FTC said no, we're going 0:10:39.120 --> 0:10:41.040 to work it out. If we have problems, we'll work 0:10:41.080 --> 0:10:43.320 out the problems with a fix. We'll have a settlement 0:10:43.360 --> 0:10:45.120 and will allow the broader deal to close. And that's 0:10:45.120 --> 0:10:45.800 a big difference. 0:10:46.800 --> 0:10:48.679 What does this deal tell you, though, just about the 0:10:48.800 --> 0:10:53.040 larger landscape of television, especially local TV, which we know 0:10:53.080 --> 0:10:57.480 has been losing revenue share. They're struggling just because there 0:10:57.520 --> 0:10:59.240 are too many places the eyeballs can go right and 0:11:00.000 --> 0:11:02.400 competing with streaming and with the big guys. So is 0:11:02.440 --> 0:11:05.880 this really a merger of necessity for these local TV stations? 0:11:05.960 --> 0:11:07.319 You know, I would think it is, and I think 0:11:07.320 --> 0:11:09.120 we're going to see more, you know, that kind of 0:11:09.160 --> 0:11:12.280 consolidation has slowly there's been quite a bit of consolidation, 0:11:12.360 --> 0:11:15.520 actually it has over the years. It kind of slowed 0:11:15.520 --> 0:11:17.920 down during the Biden administration, but you know, I think 0:11:17.920 --> 0:11:19.720 it's going to pick back up again because they are 0:11:19.760 --> 0:11:23.480 so challenged by cord cutters, by people who never you know, 0:11:23.559 --> 0:11:25.319 younger people who never watch TV at all. 0:11:25.520 --> 0:11:26.160 You know, what's that? 0:11:26.440 --> 0:11:28.680 What is cable exactly so. 0:11:28.920 --> 0:11:31.760 Broad looking broader here I mean, over the next year 0:11:31.840 --> 0:11:35.360 or two, do you expect to see more deal activity 0:11:35.520 --> 0:11:38.840 just because companies and boards and private and all the 0:11:38.880 --> 0:11:41.280 forces in out in the marketplace. I feel like this 0:11:41.320 --> 0:11:43.000 is the time to do it. This is an administration that 0:11:43.040 --> 0:11:44.040 will support deals. 0:11:44.480 --> 0:11:46.040 I think so, and I think it would have already 0:11:46.080 --> 0:11:48.360 picked up if we didn't have so much teriff uncertainty. 0:11:48.400 --> 0:11:50.960 I think that has slowed things down. But as those 0:11:50.960 --> 0:11:53.040 things sort of work themselves out, I think we're going 0:11:53.080 --> 0:11:55.520 to see a lot more deal activity because you can 0:11:55.559 --> 0:11:58.040 see a path to getting these deals done without having 0:11:58.080 --> 0:11:59.599 to go to court and without dragging it out for 0:11:59.600 --> 0:12:00.240 two years. 0:12:01.120 --> 0:12:03.160 So this is sort of a litmus test, then, isn't it. 0:12:03.160 --> 0:12:05.520 This next Star Techna deal. I think for the rest 0:12:05.520 --> 0:12:07.680 of the industry. Really yeah, I think we have a 0:12:07.679 --> 0:12:09.920 few litmus tests out there. You know, the Google Whiz 0:12:09.960 --> 0:12:12.120 deal that's pending is a litmus test for sure, to 0:12:12.160 --> 0:12:14.840 see what this administration will do with a big tech 0:12:14.880 --> 0:12:15.720 platform merger. 0:12:15.920 --> 0:12:18.120 I think this next Star Techna deal is a litmus 0:12:18.120 --> 0:12:20.520 test because they're breaking all these old rules that were 0:12:20.520 --> 0:12:23.400 the orthodoxy for years. We're going to see where that goes. 0:12:24.200 --> 0:12:27.000 And then you know, you have Dick's footlocker, and you've 0:12:27.000 --> 0:12:28.760 got Charter Cox. And there are a lot of big 0:12:28.760 --> 0:12:31.480 deals pending right now, and I think they all are 0:12:31.520 --> 0:12:34.040 deals that would have had trouble during the Biden administration, 0:12:34.120 --> 0:12:35.440 but I think can get cleared now. 0:12:35.640 --> 0:12:39.200 Our thanks to Jennifer Reeb, Bloomberg Intelligence senior litigation analyst. 0:12:39.480 --> 0:12:41.280 Coming up, we'll look at the results of a second 0:12:41.280 --> 0:12:44.040 obesity pill trial for the pharmaceutical giant Eli Lilly. 0:12:44.200 --> 0:12:47.000 If you're listening to Bloomberg Intelligence on Bloomberg Radio, providing 0:12:47.040 --> 0:12:49.120 in depth research and data on two thousand companies and 0:12:49.160 --> 0:12:50.800 one hundred and thirty industries, you. 0:12:50.720 --> 0:12:53.880 Can access Bloomberg Intelligence via bi go on the terminal. 0:12:54.040 --> 0:12:55.400 I'm Scarlett Foe. 0:12:55.040 --> 0:12:56.920 Oh Faull Sweeney, and this is Bloomberg. 0:13:00.480 --> 0:13:05.720 You're listening to Bloomberg Intelligence with Paul Sweeney on Bloomberg Radio. 0:13:06.640 --> 0:13:07.920 I'm Paul Sweeney. 0:13:07.480 --> 0:13:10.439 And I'm Scarlett Food filling in on Bloomberg Intelligence. 0:13:10.320 --> 0:13:12.400 Next to some M and A news in the consumer space. 0:13:12.640 --> 0:13:15.280 This week, the beverage company Currick Doctor Pepper announced it 0:13:15.280 --> 0:13:18.520 would buy the coffee and tea company JD. E. Pete. 0:13:18.679 --> 0:13:20.960 The goal is for Currick Doctor Pepper to strengthen its 0:13:20.960 --> 0:13:23.680 struggling coffee business. The company also says that plans to 0:13:23.720 --> 0:13:26.920 separate its coffee and soft drinks unit into two independent 0:13:27.200 --> 0:13:30.320 US listed companies next year once the deal is completed. 0:13:30.520 --> 0:13:32.959 For more on all of this, guests host Alexis Christophers 0:13:33.000 --> 0:13:35.280 and I were joined by Ken Shay, Bloomberg Intelligence senior 0:13:35.320 --> 0:13:38.480 consumer products analyst. First ask Ken to explain what this 0:13:38.559 --> 0:13:40.560 deal would do for Kurk Doctor Pepper. 0:13:41.040 --> 0:13:46.320 This two step deal basically addresses a lagging division they've 0:13:46.320 --> 0:13:50.040 had the Carrig coffee business, you know, it's it's cold 0:13:50.080 --> 0:13:56.559 beverage business, namely Dr Pepper, Mott's Canada Dry is doing 0:13:56.559 --> 0:14:00.800 it really well, whereas the cure coffee business really has 0:14:00.800 --> 0:14:03.120 been a laggered over the last couple of years. Now 0:14:03.160 --> 0:14:06.840 that you have higher green coffee costs, you have you know, 0:14:06.880 --> 0:14:10.640 fifty percent tariffs coming in from Brazil, namely coffee beans, 0:14:11.760 --> 0:14:15.960 slow demand for at home you know pod business, you know, 0:14:16.000 --> 0:14:20.280 the ubiquitous ca cups, and it really is painted a 0:14:20.280 --> 0:14:22.680 dismal picture for that division of the second half. So 0:14:23.840 --> 0:14:25.600 rather than try to sell it, and I don't know 0:14:25.600 --> 0:14:27.720 if they try to do that, but rather than try 0:14:27.760 --> 0:14:29.880 to do that at a low multiple. What they're trying 0:14:29.920 --> 0:14:33.000 to do cleverly is team it up with JD. E. Peets, 0:14:33.040 --> 0:14:35.400 which is the number two coffee producer in the world, 0:14:35.680 --> 0:14:39.480 behind only Nesley, but mostly big in Europe, and you know, 0:14:39.600 --> 0:14:44.960 attached the US essentially US business, the CA cup business 0:14:45.000 --> 0:14:48.760 together and you have a pretty good, pretty good entity. 0:14:49.080 --> 0:14:51.520 You know what struck me when I was reading about 0:14:51.520 --> 0:14:55.280 this deal, Guys, Doctor Pepper was the second most popular 0:14:55.360 --> 0:14:57.080 soda in the US last year. 0:14:57.200 --> 0:14:57.360 Is that? 0:14:57.440 --> 0:15:00.240 Right behind coke and a head of PEPSI did not 0:15:00.320 --> 0:15:02.520 know that. I can't remember the last time I drank 0:15:02.520 --> 0:15:03.280 a Doctor Pepper. 0:15:03.440 --> 0:15:06.320 Well, if you're in Texas, that's like the state drink, then. 0:15:06.480 --> 0:15:06.840 Is it now? 0:15:06.880 --> 0:15:07.560 Yes? All right? 0:15:08.040 --> 0:15:10.040 So but Ken, the question here is talk to me 0:15:10.080 --> 0:15:14.000 about the beverage side, the soda side here, because I 0:15:14.040 --> 0:15:16.320 know bottled water has sort of been eating their lunch 0:15:16.880 --> 0:15:20.160 the overall industry right for years now, outpacing the sales 0:15:20.200 --> 0:15:22.480 of soda. So how what's the health of that side 0:15:22.480 --> 0:15:23.000 of the business. 0:15:24.400 --> 0:15:27.560 Oh, it's doing very well, lexis the cold beverage side 0:15:27.640 --> 0:15:30.880 is doing really well, whether it's coke or Pepsi or cuity, 0:15:30.920 --> 0:15:34.840 Doctor Pepper, particularly those three companies because distribution is everything. 0:15:35.040 --> 0:15:38.640 These three companies have national footprints so they can reach 0:15:38.680 --> 0:15:41.000 all the outlets, you know, whether it's fountain drinks or 0:15:41.400 --> 0:15:45.160 traditional supermarkets, you know, vending, whatever, they can reach it. 0:15:45.280 --> 0:15:49.080 And they all had powerful brands. As you said, Doctor 0:15:49.080 --> 0:15:51.280 Pepper has really been coming on strong over the last 0:15:51.280 --> 0:15:53.760 couple of years. And they have other powerful brands. And 0:15:53.840 --> 0:15:58.840 unfortunately there are somewhat mini conglomerate business structure is being 0:15:58.920 --> 0:16:02.120 dragged down by a you know, Carrig the coffee business. 0:16:02.280 --> 0:16:05.240 So that business is doing really well. Carrik has shown 0:16:05.280 --> 0:16:09.280 that it's also flexible and willing to pivot to fast 0:16:09.280 --> 0:16:12.160 growing niche coal beverages. You know, it's a business that 0:16:12.200 --> 0:16:15.880 continually changes with consumer tastes. Over the last year or so, 0:16:15.920 --> 0:16:18.680 for instance, energy drinks have taken off, so what they do. 0:16:18.720 --> 0:16:21.120 They went out and bought Ghost Energy. You know, for 0:16:21.760 --> 0:16:26.360 even a younger demographic that typically drinks beverage, energy beverages. 0:16:27.520 --> 0:16:32.000 They are bigger into the sports, the sports drink category. 0:16:32.680 --> 0:16:34.720 They talked about on the last call a few weeks ago. 0:16:34.840 --> 0:16:37.920 To get stronger in the protein space. Everybody wants protein, 0:16:37.960 --> 0:16:40.640 you know, the GLP one folks need protein, replenishment. So 0:16:41.000 --> 0:16:45.160 they've shown a willingness to branch out and tap into 0:16:45.320 --> 0:16:50.240 anywhere where fast growing coal beverages are you know, doing well. 0:16:50.840 --> 0:16:52.920 So I look on like global commodity screen and I 0:16:52.960 --> 0:16:55.880 see the price of coffee. It's up like twenty five 0:16:56.000 --> 0:16:58.720 percent this year. I mean, what's going on with that? 0:16:59.160 --> 0:17:01.160 Talk to us about coffe and just the cost of 0:17:01.600 --> 0:17:02.920 the beans and all that kind of stuff. 0:17:03.880 --> 0:17:07.600 Well, you know, coffee beans are essentially sourced from Brazil, 0:17:07.760 --> 0:17:12.600 so to some degree, the roasters are hostage to good crops, 0:17:13.960 --> 0:17:15.960 and over the last year or so you really haven't 0:17:16.000 --> 0:17:19.520 had great crops. I think some of the sellers in 0:17:19.560 --> 0:17:23.160 Brazil are also holding back knowing that towers are coming 0:17:24.320 --> 0:17:25.919 and you're not going to get what you know they 0:17:25.920 --> 0:17:29.080 would like to get. And that's exacerbating the run up 0:17:29.400 --> 0:17:31.160 that you've seen over the past six months a year 0:17:31.560 --> 0:17:34.000 in coffee beans. If you went back over the last 0:17:34.080 --> 0:17:36.560 couple of years, through two or three years, you would 0:17:36.560 --> 0:17:39.280 see that the retail price of coffee, whether it's rate 0:17:39.359 --> 0:17:42.080 to drink or hot coffee at your you know, local 0:17:42.119 --> 0:17:47.040 coffee shop, have increased faster than most other beverages soft drinks. 0:17:47.040 --> 0:17:52.160 I'm talking about so you've even seeing some consumers bypower 0:17:52.320 --> 0:17:57.639 or switching from say like cold brew cold coffee to 0:17:58.840 --> 0:18:02.720 move to energy drinks. It's more cost effective. So the 0:18:02.760 --> 0:18:05.600 coffee producers have a condundrum. Do they continue to raise 0:18:05.640 --> 0:18:10.320 prices and get flatter lower volumes or do they eat 0:18:10.359 --> 0:18:13.560 that margin? And so what CURRG has decided to do 0:18:13.960 --> 0:18:16.560 is kind of divest it in a tax efficient way. 0:18:17.040 --> 0:18:20.919 Our thanks to Ken Shay, Bloomberg Intelligence, senior Consumer products analyst. 0:18:21.000 --> 0:18:23.760 Move next to the biotech space. This week, the pharmaceutical 0:18:23.760 --> 0:18:27.280 company Eli Lilly said its second obesity pill trial help 0:18:27.359 --> 0:18:30.240 patients was almost ten percent of their body weight, and 0:18:30.280 --> 0:18:32.960 the success of this weight loss trial moves Eli Lilly 0:18:33.000 --> 0:18:35.680 one step closer to the potential approval of its weight 0:18:35.760 --> 0:18:38.200 loss pill form wrong. On this guest hosts Lise Matteo 0:18:38.359 --> 0:18:41.600 and Alexis Christopherus were joined by Sam Fizzelli, Bloomberg Intelligence 0:18:41.600 --> 0:18:45.600 director of Research for Global Industries and senior pharmaceuticals analysts. 0:18:45.680 --> 0:18:48.600 They first asked Sam how the most recent obesity pill 0:18:48.640 --> 0:18:49.679 trial is different. 0:18:50.000 --> 0:18:55.399 This is a large trial in diabetic patients, but it 0:18:55.400 --> 0:18:59.359 obese diabetic patients, so they're looking at the impact in 0:18:59.440 --> 0:19:04.000 that popular that population tends to have less of a 0:19:04.040 --> 0:19:07.840 weight loss for a variety of reasons. But it's come 0:19:07.880 --> 0:19:10.800 out exactly where we thought it would come out, actually 0:19:10.800 --> 0:19:15.359 maybe a little bit better than people's lowered expectations after 0:19:15.440 --> 0:19:17.600 that first trial read out a couple of weeks ago, 0:19:17.640 --> 0:19:22.040 if you remember when the stock got hit severely lily stock, 0:19:22.520 --> 0:19:26.120 and so we're seeing about ten percent weight loss and 0:19:27.119 --> 0:19:31.000 still the same high levels of discontinuations. This is a 0:19:31.080 --> 0:19:33.560 long trial, so you even find a whole bunch of 0:19:33.600 --> 0:19:36.760 people on placeboud discontinue because they get bored. They want 0:19:36.760 --> 0:19:38.560 to go and get wed loss from another drug. So 0:19:38.920 --> 0:19:43.160