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Speaker 2: YouTube, Netflix, Comcast said to be interested in Warner Brothers.
Speaker 2: Who isn't interested in Warner Brothers Discovery Again, I spent
Speaker 2: most of my career putting that company together. Now they're
Speaker 2: taking it a part. Go figure. That's how the bankers
Speaker 2: and lawyers get paid. That's how it works, folks. Geith
Speaker 2: ron Gannathan Bloomberg Intelligence analyst. She covers all the media stuff.
Speaker 2: She's been covering media for gosh, north of fifteen years now,
Speaker 2: one of the best on the street. Githa, I'm gonna
Speaker 2: put it to you. You got to get this deal done.
Speaker 2: I mean, what happens to Warner Brothers Discovery here.
Speaker 3: Oh they're gonna get sold Paul one way or the other,
Speaker 3: and David Zaslav will make sure of that. So his
Speaker 3: whole move this morning. Yes, we got the red headline
Speaker 3: on Netflix and Comcast, but before that, basically what Warner
Speaker 3: Brothers management team did is they kind of launched this
Speaker 3: whole strategic review of the company, which was basically amounting
Speaker 3: to just putting on like a forced sale sign. So,
Speaker 3: you know, we know that they wanted to already split
Speaker 3: their company into two parts. You have the low growth business,
Speaker 3: which was TV Networks. You have the other high growth
Speaker 3: streaming and studios. But really the problem for Warner Brothers
Speaker 3: Discovery was that they were you know, I guess the
Speaker 3: way that people were thinking about it was not everybody
Speaker 3: was kind of incentivized to put in a bid for
Speaker 3: the whole company other than Paramount. And this is really
Speaker 3: the way that they kind of drum up interest from
Speaker 3: everybody to kind of get that sale process going.
Speaker 4: So where does Paramount stand? I mean, wasn't their offer
Speaker 4: too low? Were they going to come back? What are
Speaker 4: they doing now?
Speaker 3: Yeah, So, you know, we had a Bloomberg report suggesting
Speaker 3: that Paramount made a twenty dollars per share offer, which
Speaker 3: was rejected. There were multiple reports this morning suggested that
Speaker 3: Paramount actually made several bits for Warner Brothers Discovery, all
Speaker 3: higher than that reported twenty dollars price, so probably somewhere
Speaker 3: even upwards of twenty five dollars, but again those were rejected.
Speaker 5: So this is.
Speaker 3: Basically, you know, really kind of forcing Paramount's hand to
Speaker 3: raise their price pretty significantly. We know it's been reported
Speaker 3: that you know, David's aslov is seeking something like forty
Speaker 3: dollars per share for all of the company, and so
Speaker 3: this is really his way, you know, kind of putting
Speaker 3: you know, basically inviting everybody out there to bid on
Speaker 3: all of the assets. Really kind of forcing Paramount to
Speaker 3: take that price up or the price point up for
Speaker 3: Warner Brothers pretty pretty dramatically.
Speaker 2: All right, here's my prediction. You heard it here, folks,
Speaker 2: This will be the biggest M and A ticket certainly
Speaker 2: in the TMT space ever because they have so many
Speaker 2: companies that have to be bought sold here, so much financing,
Speaker 2: so much refinancing. Everybody's going to get paid here. The
Speaker 2: name that kind of came out of nowhere for some
Speaker 2: people GITHA is Comcast. But we know Bran, we know
Speaker 2: the team there. They are very comfortable during transformational deals here.
Speaker 2: What do you think Comcast strategy is?
Speaker 3: So this actually, Paul, if you just kind of think
Speaker 3: about it even more than Netflix, and you know this
Speaker 3: really well the Warner Brothers Discovery really makes perfect sense
Speaker 3: for comcasts. I mean, they have linear TV assets, they
Speaker 3: have a streaming business with Peacock, they have a fabulous
Speaker 3: studio with Universal. They could do a lot, a lot
Speaker 3: with the Warner Brothers Discovery assets. And I think everybody's
Speaker 3: kind of looking at this as a once in a generation,
Speaker 3: as a once in a lifetime opportunity. I mean, you
Speaker 3: let Warner Brothers Discovery go, there's really nothing else on
Speaker 3: the market that even compares, that even comes close to
Speaker 3: these assets. I mean you have top tier ip here,
Speaker 3: whether you're thinking about DC Comics or Harry Potter or
Speaker 3: Game of Thrones, So everybody knows they have to do something.
Speaker 3: I think it makes a lot of sense for comcasts.
Speaker 3: The only problem for them is really going to be
Speaker 3: getting regulatory approval. We know that, you know, Brand Roberts
Speaker 3: has not exactly been in the good graces of either
Speaker 3: the FCC or the Trump administration, so that's going to
Speaker 3: be a difficult hurdle to cross. And then of course financing.
Speaker 3: I mean, this is going to be, as you just said,
Speaker 3: it's going to be the biggest deal probably for a
Speaker 3: long time to come in the media space. So we're
Speaker 3: looking at you know, tens of billions of dollars, if
Speaker 3: not maybe even hundreds.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming.
Speaker 2: Up after this.
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Speaker 2: You know, all these companies reporting earnings, Lockheed Martin, just
Speaker 2: Rathon some really good numbers. GE Airspace rt X, which
Speaker 2: is j Ratheon, also reported some good numbers. Let's go
Speaker 2: to the analys who covers this stuff for Bloomberg Intelligence,
Speaker 2: George Ferguson. He's been covering these companies for decades and
Speaker 2: he has Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts,
Speaker 2: George ste Ge Air. Here's a company that you know,
Speaker 2: we've all grown up with GE putting itself together than
Speaker 2: breaking itself apart into smaller companies. I think the market
Speaker 2: likes this. Ge Airspace business doesn't.
Speaker 7: Yeah, so I think it's telling too that Larry Colep,
Speaker 7: the CEO of the combined companies, broke them apart and
Speaker 7: went with the aerospace business, right, that was the other
Speaker 7: the crown jewel. They're they're the largest maker of jet
Speaker 7: engines globally. I think they have probably the best technology
Speaker 7: for jet engines globally. And look, this was a really
Speaker 7: nice quarter. Margins were even stronger than we expected. I
Speaker 7: think they may be close to plateauing though. Here there's
Speaker 7: just a heavy, heavy demand for aircraft maintenance, even higher
Speaker 7: than sort of the amount of the increase in airline
Speaker 7: traffic would indicate just a lot of pent up demand.
Speaker 7: And then coming out of the pandemic and some of
Speaker 7: the newer technology engines just aren't as robust, so a
Speaker 7: lot of people flying the old ones longer. And we
Speaker 7: heard a lot of good news about supply chain. Supply
Speaker 7: chain sound like it was delivering. For Larry, it's been
Speaker 7: generally been a challenge. It was delivering, and he had
Speaker 7: parts to put on airplanes and those were high margin
Speaker 7: parts and each each showed it in the financial statements.
Speaker 4: Hey, George, you mentioned maintenance and repairs. So does that
Speaker 4: help the company kind of offset those those higher costs
Speaker 4: when you have the rise in the new engine deliveries.
Speaker 7: Yeah, So, like I said, I think we might be
Speaker 7: seeing a plateau here in the margins we're gonna get
Speaker 7: out of this company. So the air framers Bowing and
Speaker 7: Airbus have been slow in ramping up deliveries because they're
Speaker 7: working through their supply chain challenges. So we really see
Speaker 7: Boeing an Airbus increasing deliveries of new aircraft all the
Speaker 7: way to the back end of the decade. And that
Speaker 7: increase in deliveries is going to you know, we'll come
Speaker 7: with those new engines from ge and RTX for that matter,
Speaker 7: and those are diluted to margins, so you know, so
Speaker 7: they're kind of in this sweet spot where the original equipment,
Speaker 7: you know, shipments haven't taken off yet because Boeing and
Speaker 7: Airbus are working on that supply chain and they're doing
Speaker 7: a lot of spare parts deliveries and that's really juicing
Speaker 7: profitability very strongly. So next year I think becomes more
Speaker 7: challenging on the whole profitability front.
Speaker 2: All right, George, rt X, the old wraitheon. That's kind
Speaker 2: of how I know this company. Tell us like what's
Speaker 2: the business of RTX, what are their specialties and what
Speaker 2: did they report?
Speaker 7: So they they make jet engines as well, right, competitor
Speaker 7: to ge. They make the pratt Wickie gear turbo fan.
Speaker 7: They have the Collins business, which is is all kinds
Speaker 7: of parts for aircraft, you know, it could be breaks,
Speaker 7: it could be landing gear. And then they've got the
Speaker 7: Raytheon business, which is the old wraitheon that you know,
Speaker 7: the defense contractor from up Boston area, and they make
Speaker 7: they make radars, they missiles, they make air defense kind
Speaker 7: of equipment, and like all of the you know, all
Speaker 7: of those businesses in that portfolio are really clicking right now. Look,
Speaker 7: defense is going to grow slower. It takes time. The
Speaker 7: backlog builds quickly, but it takes a lot longer to
Speaker 7: build some of those products because they're not you know,
Speaker 7: running down a line that are making you know, as
Speaker 7: many like you know seven thirty sevens or a three
Speaker 7: twenties where you're doing five or six hunderd a year.
Speaker 7: These are a lot slower cadence. But we're seeing a
Speaker 7: lot of demand from customers around the world for missiles
Speaker 7: and for air defense, and so that backlog continues to
Speaker 7: build and they're building margin in that business. They're still
Speaker 7: in kind of eleven is twelve ish percent margin. That
Speaker 7: was quite good in that defense business, and then at
Speaker 7: the same time, like it has told you, for GE,
Speaker 7: the strength of demand for aircraft maintenance right now and
Speaker 7: the high margin parts that go into it thoroughly drove
Speaker 7: that Allen's business. Their collins business is a thirteen ish
Speaker 7: fourteen percent is operating margin business, really seeing strong growth.
Speaker 7: Their engine business is not as strong as gees. GE's
Speaker 7: returns in the twenty plus percent margins pat and Whitney's
Speaker 7: kind of an eight to nine percent operating margin. They've
Speaker 7: had problems with their latest narrow body engines, so they're
Speaker 7: managing some of those issues. They just don't the volume
Speaker 7: that GE has, but they continue to see margin growth
Speaker 7: in that business too as they deliver spare parts of
Speaker 7: some of the older legacy V twenty five hundred engines
Speaker 7: we know them as that power old A three twenties.
Speaker 7: Really did a nice job in that business, and they
Speaker 7: raise guidance even more than GE going into the back
Speaker 7: into the last quarter of the year. I think they
Speaker 7: had some of that in their back pocket, but it
Speaker 7: looked pretty nice.
Speaker 4: Hey, jeorded before you go about a minute left on
Speaker 4: they're one of the largest recipients of US federal contract
Speaker 4: funding we're talking about RTX. Can you name some of
Speaker 4: the projects they're working on with the Trump administration. What
Speaker 4: are they working on?
Speaker 7: Yeah, so, I mean they're gonna do things like patriot
Speaker 7: missile systems. They're gonna do a bunch of sorry, patriot
Speaker 7: air defense systems. They're gonna do a bunch of missile
Speaker 7: systems like gen T all right, you can think of
Speaker 7: if you know, in air defense, you use they make
Speaker 7: radars as well. You use a radar, you find a target,
Speaker 7: you you sort all the targets you got coming at
Speaker 7: you at it, and then you have to shoot a
Speaker 7: high value interceptor at that target. And the reason that
Speaker 7: interceptor is so high value is it's got to go
Speaker 7: and hit a missile approaching you know, your position, your country, whatever,
Speaker 7: which means you put a lot of value out in
Speaker 7: that missile so it can go find another one and
Speaker 7: destroy it. So that's part of what they're building. They'll
Speaker 7: also probably be involved in the in the you know,
Speaker 7: the Global Dome or whatever, you know, the our version
Speaker 7: of iron.
Speaker 2: Dome, Golden Dome. Yeah.
Speaker 7: Yeah, So there's just a lot of demand for the
Speaker 7: products that they're going to build.
Speaker 6: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
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Speaker 2: An automaker, General Motors put out some really good numbers
Speaker 2: here and the stocks are reacting up double digits. You're
Speaker 2: Steve manjoins is Bloomberg Intelligence Global Autos and Industrials Research analyst. Steve.
Speaker 2: What are your takeaways from the results from our friends
Speaker 2: at General Motors?
Speaker 5: Hey, Paul, I mean, the earnings report was just half
Speaker 5: of the story. The call was very, very positive, That's
Speaker 5: my takeaway. And the biggest takeaway from that call was
Speaker 5: really the mixshift towards more selling more bigger SUVs, the
Speaker 5: picka trucks. Those are usually the highest margin business for them.
Speaker 4: Now they did get some really from the Trump Administration's
Speaker 4: tariffs on auto parts, right, wasn't that part of the discussions?
Speaker 5: Yeah, terroriffs is one thing, but I think for twenty
Speaker 5: twenty six, the stars are really aligning for higher profit
Speaker 5: for General Motors. So you got lower terrorists but lower
Speaker 5: tariff costs for general motors and for the industry. Right,
Speaker 5: you have actually the elimination of admission penalties. So a
Speaker 5: lot of in the past automakers in the US had
Speaker 5: to pay a penalty for selling these gas guzzling SUVs
Speaker 5: and pickup trucks. Now they don't have to do that anymore.
Speaker 5: So that's going to contribute to the bottom line, right,
Speaker 5: and then they're gonna they're also not going to sell
Speaker 5: as many evs. EV's are basically loss making for many
Speaker 5: of the automakers, So you know, you get all these
Speaker 5: contributors into the for the twenty twenty six earnings.
Speaker 2: And Steve, maybe this is just me being a you know,
Speaker 2: a cynical Wall Street guy, but reading between the lines,
Speaker 2: I took away that message that they were backing up
Speaker 2: as much as they possibly could from evs, and if
Speaker 2: I'm an investor, that's a positive for me from a
Speaker 2: profitability standpoint. Might is that too much reading between the lines?
Speaker 2: Or do you think GM and maybe even Ford and
Speaker 2: Stalantes are backing away.
Speaker 5: Absolutely not, they are backing away. GM just took a
Speaker 5: one point six billion dollar charge, most of it was
Speaker 5: to rationalize ev production capacity in the US. I think
Speaker 5: everybody is seeing that EV sales in the US in
Speaker 5: the next quarter, maybe two quarters. Well, we'll be down
Speaker 5: quite a bit after the poll heead demand. We'll see
Speaker 5: how what the penetration is beyond that. But you know,
Speaker 5: they're cutting capacity. They're going to have to revisit their portfolio.
Speaker 5: Especially GM. They have launched more vehicles than you know,
Speaker 5: they're Detroit Rivals, so they're gonna have to look at that.
Speaker 6: So, you know, evs for GM.
Speaker 5: You know, they call it variable profit, but at the
Speaker 5: end of the day, the bottom line is still loss
Speaker 5: making for these vehicles. And you know when when when
Speaker 5: they sell less of them, uh, the mixshift improves. Uh,
Speaker 5: you know, you get and then now you're they're probably
Speaker 5: gonna even sell more uh, SUVs and and and pickup trucks.
Speaker 5: Those are typically the highest margin business vehicles for them.
Speaker 4: So what exactly did Mary Bot have to say about
Speaker 4: the EV adoption? Does she give any specific numbers or
Speaker 4: or dates?
Speaker 2: Extend any dates?
Speaker 5: Now she wouldn't. She didn't give any dates, but it
Speaker 5: is still a priority quote unquote priority. She called it
Speaker 5: the north Star for General motors. She thinks that long term, uh,
Speaker 5: and she didn't really define what long term is is
Speaker 5: that there's going to be a continued shift uh into evs.
Speaker 5: And I think you know when you when you listen
Speaker 5: to some of the consumers in the marketplace, you know
Speaker 5: a lot of them who switched over to evs do
Speaker 5: like them. I'm not sure if that the evs are
Speaker 5: are going to be there, you know, their only vehicle.
Speaker 5: I think it fits, especially in the US marketplace as
Speaker 5: a second vehicle, a commuter vehicle. So I think you
Speaker 5: know there will be there will be adoption of EV's.
Speaker 5: I think even before the seventy five hundred dollars credit
Speaker 5: was was was available, there was some you know, we
Speaker 5: did see a start of ev adoption.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming.
Speaker 2: Up after this.
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Speaker 2: A big, big day for earnings. We had industrial companies out.
Speaker 2: We also had General Motors out. Get some consumer companies
Speaker 2: coming out with earnings today as well, Philip Mars, Coca Cola,
Speaker 2: and we'd go to Ken Che He covers all these
Speaker 2: consumer facing companies for Bloomberg in intelligence. Hey can let's
Speaker 2: start with Coca Cola. I am a Coca Cola person,
Speaker 2: but again it's been widely reported that if you put
Speaker 2: au PEPs in front of me, I'm just as happy.
Speaker 2: But I'll talk to about Coca Cola.
Speaker 7: Ken.
Speaker 2: What what did you hear from them? Sure?
Speaker 8: All right, Paul so Cola Cola. Today they reported numbers
Speaker 8: that were slightly better than expected. The organic growth probably
Speaker 8: the biggest metric of all is about six percent operating
Speaker 8: margins wide and better than expected. EPs came in a
Speaker 8: little better. So that's why I'd probably why the shares
Speaker 8: are trading a little higher today. So it's good. They
Speaker 8: reiterated their expectations for the full year. They gave a
Speaker 8: hint for next year. They said, basically, they see lots
Speaker 8: of opportunities in some product innovation, so look out for
Speaker 8: things like more rollout of the zero colin sprites, zero sugar,
Speaker 8: I should say, more fair life protein drinks, more enhanced
Speaker 8: and low sugar sports drinks, and enhanced waters. So these
Speaker 8: are really the franchise full beverage products that they're known
Speaker 8: for and so they're going to continue to innovate next year.
Speaker 8: I should ask one quick thing. Another big news with
Speaker 8: Coke today is that they were successful in some of
Speaker 8: their refranchising. Basically, what that means is they're monetizing a
Speaker 8: lot of their bottling assets. They were instrumental in selling
Speaker 8: some seventy five percent of their Coca Cola Africa unit today.
Speaker 8: So anyway, what that does is streamlines and strengthens their
Speaker 8: global bottling network. And so I think that was another
Speaker 8: reason for investor encouragement today.
Speaker 4: Yeah, that was some big news that came out earlier
Speaker 4: before the earnings came out. Now, if we talk about earnings,
Speaker 4: you said, the consumers are still buying the drinks, but
Speaker 4: they're buying them at higher prices too.
Speaker 8: No, they are for the most part. And that's one
Speaker 8: of the things Coca Cola did mention today. He said,
Speaker 8: you know, I mean again, a company that's this global,
Speaker 8: you're going to have pockets of strength and weakness. And
Speaker 8: so they said, you know, in some areas are doing well,
Speaker 8: people are trading up and still favoring the premium products. Affordability, though,
Speaker 8: was a key issue in other big markets. So Mexico,
Speaker 8: for instance, is having a tough time macroeconomics. And by
Speaker 8: the way, Mexico is also going to pass a big
Speaker 8: sugar tax beginning next year, so they're a little wary
Speaker 8: on that, and so they're going to be rolling out
Speaker 8: a lot of affordability, universal bottles, returnable bottles, smaller package
Speaker 8: of sizes. So the company, you know, it's been doing
Speaker 8: us a long time though, so they've been through, you know,
Speaker 8: some of these ebbs and flows of the markets.
Speaker 2: It's well positioned, Philip marsh that this is the tobacco company.
Speaker 2: They had some numbers out today, stopped trading down a
Speaker 2: little bit here today.
Speaker 8: Yeah, Paul Pilla Morris also hit their numbers. It was
Speaker 8: a really strong quarter EPs on a comparable base of
Speaker 8: seventeen percent, strong top line margin improvement. It was hard
Speaker 8: to find any fault with the actual numbers that came in.
Speaker 8: But I think what may we've got a little some
Speaker 8: people a little nervous was that they lowered their guidance
Speaker 8: for operating organic operating earnings and a lot of that
Speaker 8: is just reinvestment in the business. One of the biggest
Speaker 8: products successes in recent years has been this zin oral
Speaker 8: nicotine product. It's a non tobacco pouch product. You put,
Speaker 8: you know, put in your mouth, you don't spit, get
Speaker 8: your nicked, your nicotine buzz that way. It's doing wonderful.
Speaker 8: The company said that now that has recently edits some
Speaker 8: manufacturing capacity and has some more supplies, it's going to
Speaker 8: look to expand the market. How do you expand the market.
Speaker 8: You convince smokers to move to a non combustible variety,
Speaker 8: particularly in the US. So it's spent a quite a
Speaker 8: bit of money to do that. And so for those
Speaker 8: you know, with a short term mind, I guess they
Speaker 8: were a little nervous about, you know, that lowered guidance
Speaker 8: for operating earnings. But I think they're doing the smart
Speaker 8: thing longer term thout, If you're a long term investor,
Speaker 8: it's hard to find fault in that strategy.
Speaker 4: How big is their smoke free business, it's now.
Speaker 8: About forty one percent of their total business, and the
Speaker 8: way of ahead of their competitors. Why I say smoke free,
Speaker 8: you're talking about a combination of things, the so called
Speaker 8: heat and not burn icoas family of products that contains
Speaker 8: actually some nicotine in there that heats it, that doesn't
Speaker 8: burn it. You have the revive e vapor product like
Speaker 8: an eat cigarette, and then you also have these in
Speaker 8: oral nicotine products. So it's combined. You have really three
Speaker 8: really strong franchises, and they're at the point now where
Speaker 8: they come on a combined basis, they're more profitable. I'm
Speaker 8: an operating margin standpoint. Then they're conventional cigarette business. So
Speaker 8: the faster this thing grows and it has a bigger
Speaker 8: proportion of their business, it's all good from a margin standpoint.
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