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Speaker 1: The real app performance has been the US corporate high yield.
Speaker 1: Are the companies lean enough? Have they trimmed all the fats?
Speaker 1: The semiconductor business is a really cyclical business.
Speaker 2: Breaking market headlines and corporate news from across the globe.
Speaker 3: Do investors like the M and A that we've seen?
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Speaker 4: The window between the peak and cut changing super fast.
Speaker 2: Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio.
Speaker 3: I'll Paul Sweeney and I'm Mollie Smith filling in for
Speaker 3: Alex Steele.
Speaker 1: On Today's Bloomberg Intelligence Show. We dig inside the big
Speaker 1: business stories impacty Wall Street and the global markets.
Speaker 3: Each and every week we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries are analysts cover worldwide.
Speaker 1: Today, we'll look at how the seven three seven Max
Speaker 1: crisis impacted Boeings quarterly earnings.
Speaker 3: Plus we'll discuss how cost cuts impacted earnings at UPS.
Speaker 1: For first, we kick off a big week of corporate
Speaker 1: earnings with the electric vehicle maker Tesla. Tesla report a
Speaker 1: quarterly profit that fell forty eight percent. Sales also fell
Speaker 1: nine percent.
Speaker 3: And this comes as the company has spent more than
Speaker 3: a year slashing prices across the lineup in an effort
Speaker 3: to boost sales, and after Tesla reported results, CEO Elon
Speaker 3: musk vowed to launch a less expensive vehicle as soon
Speaker 3: as later this year.
Speaker 1: For more, we were joined by Steven Mann Bloomberg Intelligence,
Speaker 1: Global Autos and Industrials Research Channels. We first asked first
Speaker 1: reaction to musk comments.
Speaker 5: I think the affordable EV is the real thing ROBOTAXI.
Speaker 5: I think there's still needs time for development. But if
Speaker 5: you look at the affordable EV actually kills two birds
Speaker 5: in one stone. You know it actually increases a scale
Speaker 5: for Tesla. We're going to see revenue growth, we potentially
Speaker 5: see profit growth from that affordable EV. And that's what
Speaker 5: exactly what the market needs. It's more affordable vehicles to
Speaker 5: increase penetration UH of evs. The other thing that's really
Speaker 5: important with this UH affordable EV launches, it actually ink
Speaker 5: helps UH Tesla increases reach globally because you know you
Speaker 5: have a lot of emerging markets that you know, a
Speaker 5: lot of people, a lot of consumers there cannot afford
Speaker 5: an expensive fifty thousand dollars vehicle, forty thousand dollars vehicles,
Speaker 5: So a sub thirty thousand vehicle is p is is
Speaker 5: the right product for them to expand geographically.
Speaker 1: Steve, what do we know about the economics of such
Speaker 1: a a new or lower cost vehicle? Can they produce
Speaker 1: that at a profitable basis on a per unit basis?
Speaker 5: Yeah, there's there's a couple of ways they can approach this.
Speaker 5: I think they can develop a totally new platform. But
Speaker 5: you know, in the other segments that I've done with you,
Speaker 5: we've talked about vertical integration, and vertical integration has actually
Speaker 5: reduced the cost of you know, car production. So for them,
Speaker 5: you know, for TESTA, it's the only company that's profitable
Speaker 5: in producing evs. So the other option is actually think about,
Speaker 5: you know, what they can do with the three and
Speaker 5: the Y. You know, can they offer you know, lower trims,
Speaker 5: maybe even you know, a smaller battery that's going to
Speaker 5: allow them to cut costs and also make that available
Speaker 5: to the consumer at a lower price.
Speaker 3: So this obviously was the best part of the report,
Speaker 3: but you still had elsewhere in the earnings report. We
Speaker 3: had falling vehicle sales. We had worse than expected revenue
Speaker 3: and profit, and a pretty significant cash burn figure. So
Speaker 3: I mean, Steve, are you totally optimistic here? What kind
Speaker 3: of concerns do you still have here?
Speaker 5: I I've always said, you know, I think this year
Speaker 5: and even into next year, there's there's some bumps on
Speaker 5: the road. You know, cyber truck is still ramping up.
Speaker 5: It's a very difficult vehicle to build. They're still working
Speaker 5: on those issue shoes.
Speaker 2: You know.
Speaker 5: We don't think the EV market actually, especially in the US,
Speaker 5: will pick back up until twenty twenty five, late twenty
Speaker 5: twenty five into twenty twenty six, because the market really
Speaker 5: needs a lower cost, more affordable EV to entice kind
Speaker 5: of more new buyers into the market. I'm very positive.
Speaker 5: I think this company has done everything right in terms
Speaker 5: of looking at AI, looking at AV. I still believe
Speaker 5: the EV, you know, shift has actually sailed. We're going
Speaker 5: to have EV's and I think that subscription based software
Speaker 5: based vehicle that they're trying to build is the right
Speaker 5: move right strategy for the industry.
Speaker 1: Steve, what did the Elon say or to what extent
Speaker 1: did he address just kind of the developments in China,
Speaker 1: how things are developing there from a competitive standpoint, a
Speaker 1: sales standpoint and all that.
Speaker 5: Yeah, it's I actually see that we'll continue to be bumpy.
Speaker 5: They probably likely to lose market share, continue to lose
Speaker 5: some market share there. But I think you know, Tesla
Speaker 5: is leveraging China, not just for sales, but it's a
Speaker 5: low cost manufacturing base for the company. The Shanghai factory
Speaker 5: still pumps out a million vehicles, close to a million
Speaker 5: vehicles a year at a very low cost. They still
Speaker 5: are able to source battery from companies like c at L,
Speaker 5: the largest EV battery maker in the world, at a
Speaker 5: very attractive price given their volume. So, you know, China
Speaker 5: sales will probably slow. There's it's a hyper combetitive market.
Speaker 5: Shao Me which is a you know, a major cell
Speaker 5: phone maker in China, they're launching on vehicles that's also
Speaker 5: very affordable, so they're gonna see more competition in China.
Speaker 5: So but again, China is not just for sales, it's
Speaker 5: a manufacturing, low cost manufacturing.
Speaker 6: Base for them.
Speaker 3: Elon had took a dig at the car makers that
Speaker 3: are pairing back on the EV production plans and going
Speaker 3: more to the gas electric hybrids instead. He didn't call
Speaker 3: them out, but DM and Forward are among those ones.
Speaker 3: And but isn't that really where consumers are going more
Speaker 3: proportionally right now, more into the plug in hybrid space
Speaker 3: or maybe non plug in hybrid, but just hybrids in
Speaker 3: general versus full on evs.
Speaker 5: Yeah, I think the consumer I think, you know, we
Speaker 5: did a survey not so long ago. I think what
Speaker 5: we got from that survey was that I think the
Speaker 5: consumer needs to trial evs. They actually need to be
Speaker 5: educated on, you know, how to make EV work in
Speaker 5: their daily life. So, you know, PHVs, plug in hybrids,
Speaker 5: hybrids is actually good transition into full evs. They alleviate
Speaker 5: some of the concerns in terms of range, in terms
Speaker 5: of the lack of infrastructure that's for the EV market
Speaker 5: right now. So PHIV and EV are a good transitional product,
Speaker 5: but it's not a long term product because if you
Speaker 5: look at some of the emission standards, it's continued to
Speaker 5: continue to be tighter and tighter. Eventually hybrids and phgvs
Speaker 5: are probably won't even meet the more stringent emission standards down,
Speaker 5: you know, in the next decade.
Speaker 1: Our thanks to Steve Man, Bloomberg Intelligence, Global Autos and
Speaker 1: Industrials research analysts.
Speaker 3: All right now, we're going to move to the software space.
Speaker 3: This week we heard that software giants Salesforce's talks to
Speaker 3: acquire the data management company Informatica have fallen through. We
Speaker 3: were told that Informatica said it's not engaged in takeover talks.
Speaker 1: The deal would have ranked among the largest ever by Salesforce.
Speaker 6: For more.
Speaker 1: In this I was joined by Anna Rock, Rana Bloomberg
Speaker 1: Intelligence technology analysts and so Neil Rojokopal, Bloomberg Intelligence, Senior
Speaker 1: software Analysts. I first asked Ana Rock for his reaction
Speaker 1: to the news.
Speaker 7: Yeah, it was just a big head scratch for us too,
Speaker 7: almost because last March, Bennihoff comes and says, I've disbanded
Speaker 7: the mn committee, no more m and A. I'm going
Speaker 7: to focus on margins and organic growth. And in less
Speaker 7: than a year, you know, just around that one year mark,
Speaker 7: he's like, oh, we're going to go back and you know,
Speaker 7: buy something now. He didn't say that, the company didn't
Speaker 7: say that, but that was the rumor on the street
Speaker 7: that they're looking to buy Informatica. For us, that was
Speaker 7: a bit of a surprise because Informatica grows six to
Speaker 7: seven percent compared to Salesforce, which is growing north of
Speaker 7: ten percent. So why would anybody buy something that is
Speaker 7: slow growth? I get the data angle of it, but
Speaker 7: you know it was it was not something that we
Speaker 7: really liked.
Speaker 1: So Neil tell us about Informatica. I don't know a
Speaker 1: lot about it. I don't think a lot of investors
Speaker 1: know a lot about it. And that was one of
Speaker 1: the reasons that they're saying, what is Salesforce buying here
Speaker 1: or maybe thinking about buying? What tell us about this company?
Speaker 4: Sure, Informatica is all about data management, which is about
Speaker 4: cleaning all the data that comes from different sources and
Speaker 4: aligning it with the applications and getting all things sorted out.
Speaker 4: For data, so data comes in various shapes, forms and
Speaker 4: different sources, so all of that needs to be cleaned
Speaker 4: up to be used in a proper shape. So I
Speaker 4: think Informatica is that layer that acts as a cleanser
Speaker 4: of data and gets you to that right usage. So
Speaker 4: that's where it comes in as a player.
Speaker 1: So if they're not going to tie up with Salesforce.
Speaker 1: What's the call on this company? What's the call on
Speaker 1: the stock? Either you know, bullsh or bears.
Speaker 4: Look strategically. For Informatica, such an alliance would have been
Speaker 4: a great move that would have helped fuel its cloud journey,
Speaker 4: and that now accounts for roughly one third of its revenues.
Speaker 4: With the deal not happening, Informatica now has to focus
Speaker 4: on fueling its cloud growth organically. The company is boosting
Speaker 4: its partnership and rolling out new AI powered features, but
Speaker 4: this space is highly fragmented and competitive. The company has
Speaker 4: continued to lose market share, especially with the challengers that
Speaker 4: have risen substantially over the last few years. There are
Speaker 4: other big players like SAP and IBM that also compete,
Speaker 4: So I think going forward the market will definitely look
Speaker 4: a lot more challenging because now Salesforce are not having
Speaker 4: to go through with this tale will put more resources
Speaker 4: into MuleSoft, which I think will raise the competitive intensity
Speaker 4: and I think that is a big challenge for informatical
Speaker 4: going forward.
Speaker 1: An rag on your side from the Salesforce side, I mean,
Speaker 1: is it just steady as she goes? I mean, it's
Speaker 1: just such a great company. What's the call for the
Speaker 1: next twelve to eighteen months for Salesforce dot com?
Speaker 7: So, Paul, what we're thinking. You know, hopefully by the
Speaker 7: end of this year we get a little more clarity
Speaker 7: on technology spending, and perhaps from next year onwards we
Speaker 7: can see that lower doubleg growth in sales coupled with
Speaker 7: some margin expansion getting you to that mid to high
Speaker 7: teens earnings growth. That's what we want from Salesforce, organic growth,
Speaker 7: organic earnings, not so much driven by M and A,
Speaker 7: and I'm hoping that that's what the company delivers.
Speaker 1: On the software side, what are the most exciting areas
Speaker 1: for you that you're looking at here?
Speaker 4: Look for me. In the overall enterprise software space, I
Speaker 4: still like names in the observability sector. The name yeah,
Speaker 4: all right. So the observability is they act as a
Speaker 4: layer that monitors all of your systems applications. So be
Speaker 4: it any kind of an application that you're running your enterprise,
Speaker 4: everything needs to be monitored if there are like any bugs,
Speaker 4: if there are like system downtimes, et cetera. So observability
Speaker 4: vendors typically monitor all your applications and the infrastructure, so
Speaker 4: they play a very critical role in the overall enterprise
Speaker 4: software space, and I think players such as the Data Dog,
Speaker 4: diner Trace are very well positioned here.
Speaker 1: Public recently like recently as a couple of years.
Speaker 4: Yeah, yes, that's right.
Speaker 1: So what is I mean? I love the name. Looking
Speaker 1: at the stock here and bringing up the stock Data Dog.
Speaker 1: The symbol is ddog. This is kind of forty billion
Speaker 1: dollar market cap. It's kind of flat stock price on
Speaker 1: the year, but up to seventy five percent over the
Speaker 1: trailing twelve months. What's the call on Data Dog here?
Speaker 4: Look, it's a very I would say it has been
Speaker 4: a fast growing company. And of course last year we've
Speaker 4: seen a slow down in the overall enterprise software space,
Speaker 4: and Data Dog of course has been impacted with that
Speaker 4: slow it spending trends. But overall, if you look at
Speaker 4: the observability space as we see, I think that is
Speaker 4: a space that will continue to grow because the number
Speaker 4: of applications and the infrastructure that enterprises are deploying, especially
Speaker 4: with what is supposed to come with Jenny AI and others,
Speaker 4: we will continue to see a massive rise in the
Speaker 4: infrastructure and applications and that should all bode well for
Speaker 4: Data Dog and a players such as a Dina Trace
Speaker 4: and others in the observaty space.
Speaker 1: Our thanks to Sigeo, Roger Paul, Bloomberg Intelligence software analysts,
Speaker 1: and anaack runa Bloomberg Intelligence technology analyst.
Speaker 3: Coming up will break down why pessimism about the US
Speaker 3: economy may be impacting President Biden standing with voters.
Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 1: depth research and data on two thousand companies and one
Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 1: Bigo on the terminal. I'm Paul Sweeney and I'm Molly Smith.
Speaker 3: This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 3: I'm Paul Sweeney and I'm Molly Smith, hilling in for
Speaker 3: Alex Ziel. We move next to earnings from the logistics
Speaker 3: company UPS. This week, UPS reported first quarter profit that
Speaker 3: was higher than analyst expectations. This comes as the courier's
Speaker 3: headcount management and restructuring of its Delivery Roots begins to
Speaker 3: bear fruit for more.
Speaker 1: Guest host Emily Graffeo and I were joined by Lee Clascow,
Speaker 1: Bloomberg Intelligence Senior Transport, Logistics and Shipping Analysts. We first
Speaker 1: asked Lee for his take on UPS earnings.
Speaker 8: I think it's really about what they're doing on the
Speaker 8: cost side. I think that's really the driver of the
Speaker 8: outperformance in EPs, because revenue did come in slightly lower
Speaker 8: than expectations on lower volumes. You know, they're dealing with
Speaker 8: lower volumes from last share last year when they you know,
Speaker 8: were negotiating their labor contract and a lot of shippers
Speaker 8: kind of try to find other alternatives in case there
Speaker 8: was an issue with their network, you know, from a strike,
Speaker 8: but obviously that didn't happen. Now they're being pretty busy
Speaker 8: trying to win back that share, so, you know, I
Speaker 8: think what they're all in all, it was a good quarter.
Speaker 8: I think if UPS is you know, meeting or beating expectations,
Speaker 8: that's a good thing because they've had a rough year,
Speaker 8: driven a lot by that labor negotiation, which increased costs
Speaker 8: considerably and resulted in a lost amount of volume, which
Speaker 8: you know, for a company like UPS, the deleveraging effect
Speaker 8: on margins is quite substantial. But there are definitely some
Speaker 8: good news in the report that you know, we remain
Speaker 8: optimistic that they might be even looking to possibly increase,
Speaker 8: you know, their full year guidance for twenty twenty four,
Speaker 8: especially as the US postal service contract which they recently
Speaker 8: won from FedEx starts hitting their p and L.
Speaker 9: When you talk about average daily package volume down, your
Speaker 9: over year revenue down year over year, how much of
Speaker 9: the softer demand for UPS is related to macro economic
Speaker 9: factors and maybe coming out of the pandemic consumers shipping less.
Speaker 3: Is that a factor here?
Speaker 8: Yeah, I think it's a you know, probably a trieffective things.
Speaker 8: It's probably a softer great outlook all together, that coupled
Speaker 8: with tougher comparisons and the fact that they are, you know,
Speaker 8: are still trying to win back the share that they
Speaker 8: lost from their labor contract negotiation. So I think those
Speaker 8: three things are kind of weighing on their volumes, probably
Speaker 8: more than maybe their competitors like a FedEx or a DHL.
Speaker 1: Hayley. I know labor is a big deal with UPS
Speaker 1: and these companies here. I know UPS they had a
Speaker 1: new labor contract that really pushed up wages and benefits
Speaker 1: starting I guess this year. But then on the other side,
Speaker 1: they also cut twelve hundred or twelve thousand white collar jobs.
Speaker 1: That's like fourteen percent of the workforce here. So talk
Speaker 1: to us about the labor and component they're in the
Speaker 1: cost structure.
Speaker 8: Yeah, I mean that they're they're doing the right things.
Speaker 8: You know, the contract might have a you know, with
Speaker 8: the team serves, might have had a negative impact to margins,
Speaker 8: but you know we are going to anniversary those in
Speaker 8: the second half of the year, so those comparisons won't
Speaker 8: be as bad. And also, you know, does provide them
Speaker 8: with a steady labor force, because you know, if your
Speaker 8: labor is happy, you're gonna have less turnover, you have
Speaker 8: less turnover, you probably have better service and better safety,
Speaker 8: and that usually yields better profits. So I think, like
Speaker 8: when if you look longer term, beyond the initial shock
Speaker 8: of that new contract, which is very front loaded, you know,
Speaker 8: the increases aren't as bad. As we get to year two,
Speaker 8: it's not going to be as bad. And listen, you
Speaker 8: know UPS and FedEx and a lot of these companies,
Speaker 8: you know, they did get a little on the fat side,
Speaker 8: if you will, on their corporate ranks, and I think
Speaker 8: they're both doing the right things in terms of trimming
Speaker 8: it for the new normal of what their operating environment
Speaker 8: is today.
Speaker 9: How should investors be thinking about UPS?
Speaker 8: You know, I think what they need to do is
Speaker 8: they need to execute. They do not only need to
Speaker 8: execute on their twenty twenty four plans, but their twenty
Speaker 8: twenty six plans. And I do as I said earlier,
Speaker 8: I think there is some opportunity for some upside surprise.
Speaker 8: Given their US postal service contract. It didn't really make
Speaker 8: that much money for FedEx, But I think UPS's network
Speaker 8: is very different than FedEx's. It's more integrated, it's not
Speaker 8: a hub and spoke network, and that will provide them
Speaker 8: with some profitability and management pretty confident, at least it
Speaker 8: peers confident that this business is going to be not
Speaker 8: only creative to earnings, but a creative to margins. And
Speaker 8: that's kind of what you know, we as we look
Speaker 8: at the company, really want to see. We really want
Speaker 8: to see those domestic margins start to improve.
Speaker 1: Haylee, what are the companies saying about kind of normalized
Speaker 1: growth rates in terms of I guess unit volume. Where's
Speaker 1: this US economy in terms of just packages? Is it
Speaker 1: a GDP kind of number? Is that kind of the story.
Speaker 8: Yeah, it's a GDP kind of number. But you know
Speaker 8: UPS wants to grow beyond GDP and how they're going
Speaker 8: to do that is they've made some pretty significant not
Speaker 8: in size necessarily, but in terms of you know, capabilities acquisitions.
Speaker 8: You know, they bought a company Roadie, which you know
Speaker 8: it's not a drink on the road ball, but it's
Speaker 8: it is. What they do is they deliver heavy stuff
Speaker 8: to people's doors, so think furniture, think workout equipment, fitness equipment,
Speaker 8: and that is done through more or less an asset
Speaker 8: light model where you know, they're arranging the delivery. So
Speaker 8: that's that's a very good business. They're also invested or
Speaker 8: acquired a company that does returns without having it to
Speaker 8: box it, so it's a lot easier for consumers to
Speaker 8: you know, either go to a UPS stoor one of
Speaker 8: the other drop points that UPS provides to return something.
Speaker 8: And that's good for UPS because that stuff goes into
Speaker 8: their system and it becomes a B to B delivery
Speaker 8: where when we say B to B business business and
Speaker 8: meeting that there's more density, so it's you know, they're
Speaker 8: they're shipping you know, they're consolidating and shipping twenty boxes
Speaker 8: versus just one envelope, and that tends to be more profitable. U.
Speaker 8: And then their investments in the healthcare space, you know,
Speaker 8: their goal is to be the largest healthcare logistics provider.
Speaker 8: Healthcare has above average margins for transportation companies given the
Speaker 8: high level of service that's involved there. I think temperature control,
Speaker 8: think the fact that it has to get somewhere at
Speaker 8: a very specific time. So you know, those are higher
Speaker 8: margin business. So, you know, I think that those growth
Speaker 8: areas that I just mentioned will help them grow their
Speaker 8: overall volumes beyond you know, just GDP numbers.
Speaker 1: All thanks to Lead Glasgow, Bloomberg Intelligence Senior Transport, Logistics
Speaker 1: and Shipping Analyst.
Speaker 3: Now we're going to move to politics. President Joe Biden's
Speaker 3: recent polling bump and key battleground states has mostly evaporated.
Speaker 1: Biden is now trailing Donald Trump in six of seven
Speaker 1: swing states. That's according to the April Bloomberg News Morning
Speaker 1: Console poll. For more on this poll, we were joined
Speaker 1: by Gregory Corti, Bloomberg News White House and Political correspondent.
Speaker 1: We first asked Gregory for his takeaways from the latest poll.
Speaker 10: We've been doing this every month. This is the seventh
Speaker 10: iteration of this poll in seven key battleground states, and
Speaker 10: for the first five months it was a pretty stable
Speaker 10: race with former President Trump with a slight lead over
Speaker 10: President Biden. Then after the State of Union address, we
Speaker 10: got a little bit of good economic news, and we
Speaker 10: saw last month President Biden pretty much bring it even
Speaker 10: he was winning or even in the russ Belt states,
Speaker 10: the blue Wall states we call them of Michigan, Pennsylvania,
Speaker 10: and Wisconsin made it, gave him a fighting chance. But
Speaker 10: now we're seeing in this month, in the April poll
Speaker 10: sort of reversion back to the mean what we had
Speaker 10: been seeing all along, with former President Trump having across
Speaker 10: these seven battleground states as six point lead, and that's significant.
Speaker 10: Biden can't win this without getting at least those Blue
Speaker 10: Wall states and probably another one. And he's now down
Speaker 10: in Pennsylvania within the margin of error, but significantly down
Speaker 10: in Wisconsin. Michigan. Interestingly, is this bright spot And who
Speaker 10: would have known, because there are a lot of concerns
Speaker 10: there about a large population of Muslim voters. Union workers,
Speaker 10: but he seems to be holding his own there.
Speaker 1: Gregory, what are the key drivers are key influencers in
Speaker 1: his poll? What kind of moves the numbers around?
Speaker 10: It's really the economy And with that you see that
Speaker 10: with any incumbent president, their numbers move up and down
Speaker 10: with the economy. And what we're seeing in this poll
Speaker 10: is deep pessimism about where we're going to be by
Speaker 10: the end of the year. You see here the numbers
Speaker 10: of majorities think that the inflation rate is going to
Speaker 10: be higher by the end of the year, that the
Speaker 10: economy overall is going to be worse, and also that
Speaker 10: interest rates are going to be higher by the end
Speaker 10: of the year. Now, these are these are voters talking,
Speaker 10: and they're they're sort of giving us their perspective within
Speaker 10: this political framework where this this might differ a little
Speaker 10: bit from the University of Michigan survey when we're talking
Speaker 10: to consumers and people making different kinds of decisions. But
Speaker 10: the fact that President Biden is so tied to the
Speaker 10: state of this economy and that people are pessimistic about
Speaker 10: the economy is not a good sign for the president.
Speaker 3: This is so fascinating to me, is somebody who covers
Speaker 3: the economy just like, I mean, this is something wait,
Speaker 3: you know, Gregory, we're no stranger to this, but just
Speaker 3: like the mismatch and like where the economy is actually
Speaker 3: performing and how people actually perceive it to be performing.
Speaker 3: And it's so interesting to me that like this mismatch,
Speaker 3: I guess when you say to me that you know
Speaker 3: that majority of swing state voters see the economy worsening,
Speaker 3: I just wonder what metric are they referring to? And
Speaker 3: I know that they're not looking at the economy based
Speaker 3: on like, oh, well, we think manufacturings is but like
Speaker 3: what what what are they looking at? Is it really
Speaker 3: just inflation?
Speaker 10: Yeah, voters look at the economy differently than economists. And
Speaker 10: one of the interesting things even in this poll, there's
Speaker 10: an inconsistency and it's a little inscrutable, but when you
Speaker 10: ask people about the national economy, two thirds of them
Speaker 10: to say it's bad. When you ask people about their
Speaker 10: local economy, a majority say it's actually pretty good. And
Speaker 10: so people are differentiating between their own personal economic situation
Speaker 10: and what they see in the economy. Writ large. Why
Speaker 10: is that It may be because of their king off
Speaker 10: of negative political coverage. It might be because we have
Speaker 10: this political polarization where when they're saying the economy is bad,
Speaker 10: they're really trying to make a statement about the president
Speaker 10: who they don't like. It may just be that they
Speaker 10: view inflation as a national issue and inflation is high.
Speaker 10: On one pointed, they might see as a local issue
Speaker 10: because they have a job and their neighbor has a job,
Speaker 10: and so they might see as local issue and so
Speaker 10: therefore their local economy is doing well. There's a lot
Speaker 10: to parse out there, but certainly people are giving us
Speaker 10: mixed signals about the state of this economy.
Speaker 1: What do you think the Biden administration needs to do?
Speaker 1: Perhaps differently, going to Molly's point about saying, hey, the
Speaker 1: economy is in pretty darn good shape. Here's what we've done.
Speaker 1: How do you think they should be messaging this.
Speaker 10: They have been trying with that message for months now,
Speaker 10: and it's been a tough message to get across. At
Speaker 10: one point, they tried to take this pejorative label of
Speaker 10: the economy that Republicans try to brand it with of Bidenomics,
Speaker 10: and turn that into a positive. That did not work.
Speaker 10: They did not change the public perception of Bidenomics. They
Speaker 10: moved a little bit away from that messaging. Right now,
Speaker 10: they can talk all they want about the Infrastructure Bill,
Speaker 10: the Inflation Reduction Act, the Chips Act, all these things
Speaker 10: that we know we've been tracking is starting to make
Speaker 10: a difference, and we'll make a difference in manufacturing on
Speaker 10: sharing a lot of technology. But those aren't really resonating
Speaker 10: with people. People don't really connect with bills being passed.
Speaker 10: They want to see actual stuff getting done, and some
Speaker 10: of that is on a longer time ramps. So maybe
Speaker 10: it's just giving it time. We have six months now,
Speaker 10: But the problem for Biden is that now the second
Speaker 10: quarter of an election year is really when people start
Speaker 10: to make up their minds about the economy, really sort
Speaker 10: of solidify how they think the economy is, and they're
Speaker 10: going to carry that with them into November.
Speaker 1: Thanks to Gregory Corti, Bloomberg News White House and Political Correspondent.
Speaker 3: Coming up on the program, a conversation with Astra Zenega
Speaker 3: CEO Pascal Sorio on quarterly earnings.
Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 1: depth research and data on two thousand companies in one
Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 1: bi Go on the terminal. I'm Paul Sweeney and.
Speaker 3: I'm Molly Smith. This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 8: On.
Speaker 3: Paul Sweeney and I'm Mollie Smith filling in for Alex Steele.
Speaker 3: Now we're going to move to the aerospace industry and Boeing,
Speaker 3: the planemaker, said had burned through nearly four billion dollars
Speaker 3: in cash in the first quarter, and its cash use
Speaker 3: also wasn't as bad as the four point four billion
Speaker 3: dollar outflow that analysts had expected.
Speaker 1: But Boeing is still seeking to resolve concerns around the
Speaker 1: quality of its manufacturing following a near catastrophic accident on
Speaker 1: January fifth. For more on all of this, we were
Speaker 1: joined by George ferguson Bloomberg Intelligence, senior Aerospace, Defense and
Speaker 1: Airlines analyst.
Speaker 3: We first asked George for his key takeaways from Boeing's
Speaker 3: quarterly report.
Speaker 6: We did see cash burn for one que, you know,
Speaker 6: combined with capex free cash flow usage, well a three
Speaker 6: point nine billion CFO had sort of told us that
Speaker 6: we would see something between four and four and a
Speaker 6: half billion. That came in light of that. But you
Speaker 6: can't live here long, right. I guess the big takeaway
Speaker 6: here too, is that there's about seven billion dollars in
Speaker 6: cash and equivalents on the balance sheet. That's dwindling pretty quickly.
Speaker 6: They paid four point four billion I think it was
Speaker 6: in debt during the quarter, so something has to happen, right,
Speaker 6: They want to buy Spirit erow Systems. Out here, all
Speaker 6: kinds of conflicting reports, but essentially I think it's you know,
Speaker 6: there's a lot of challenges around negotiating getting airbust out
Speaker 6: of Spirit Aerosystems, so Boeing can buy it. They've talked
Speaker 6: about using cash to buy Spirit or I guess debt.
Speaker 2: Maybe.
Speaker 6: I think it's a company doesn't want to add a
Speaker 6: lot more debt to their balance sheet. Spirits market cap
Speaker 6: around four billion, you only have seven billion left in
Speaker 6: the balance sheet. Something's got to happen. You got to
Speaker 6: raise some capital here. You can't do this all cash
Speaker 6: or you got to use Boeing stock and just the
Speaker 6: numbers they're getting small, right, the cash numbers are getting small.
Speaker 6: You're running out a runway here. They need to come
Speaker 6: up with this plan with the FAA and how they're
Speaker 6: going to staybleize production, start building airplanes, start generating cash
Speaker 6: because you can't do this many quarters.
Speaker 3: So, George Lyne, do you think that there's a risk
Speaker 3: that we could be hearing about some kind of financing
Speaker 3: activity from Boeing coming up? I mean, like you just said,
Speaker 3: I mean, it's I think it'd be kind of hard
Speaker 3: to envision them doing a debt sale right now. That
Speaker 3: sounds like a little bit of maybe a red flag
Speaker 3: to me. But if they would do, I don't know,
Speaker 3: the equity is not worth a whole lot, Like what
Speaker 3: do you do from here?
Speaker 6: Yeah? So agreed. I think you know what I heard
Speaker 6: from you is that could be hard to do a
Speaker 6: debt deal here. I think so. I mean, I think
Speaker 6: they wouldn't let four point four billion get repaid without
Speaker 6: sort of plumbing the markets and thinking about whether they
Speaker 6: would do an issuance here. But you wouldn't want to
Speaker 6: raise equity here. I feel like it'd be hard to
Speaker 6: raise debt. You got a lot of money wrapped up
Speaker 6: at inventory on the balance sheet. Airplanes that have already
Speaker 6: been built haven't been delivered to customers that they've done.
Speaker 6: They've shipped some of those in the last quarter, which
Speaker 6: is free up some cash. But I think you really
Speaker 6: got to get the manufacturing, you know, process going again
Speaker 6: and genering cash that way. I think that would get
Speaker 6: folks more comfortable about giving more debt or equity.
Speaker 1: I don't know, I could get a debt feel done
Speaker 1: in this marketplace. You personally, Paul, I could go sell
Speaker 1: some bowing debt back the day if I had my
Speaker 1: seat back, maybe some investment debt, sure, no problem, all right, Hey, George,
Speaker 1: Boeing's customers, the big airlines, what are their needs these days?
Speaker 1: Do they need more aircraft? Like if Boeing was it
Speaker 1: fifty or sixty percent production, would there be demand there
Speaker 1: for that?
Speaker 6: They need more faster as soon as possible. I guess. Look,
Speaker 6: I think if you take United as as you know,
Speaker 6: one of the core customers, you know there's sort of
Speaker 6: a there's a demand to fleet refresh around the world.
Speaker 5: Right.
Speaker 6: The new Max is fifteen twenty percent more efficient, than
Speaker 6: the old seven thirty seven or the A three twenty.
Speaker 6: Airlines want that efficiency as soon as possible in their fleets.
Speaker 6: The market I think is is going to is looking
Speaker 6: fairly competitive. It may not, you know, this summer may
Speaker 6: be a little bit less competitive than we expected, given
Speaker 6: Boeing's problems and some of the geared turbofan problems at
Speaker 6: raytheon that knocks on airplanes out of service. But fuels rising,
Speaker 6: airlines want to be very competitive. They need the most
Speaker 6: fuel efficient aircraft, so they want them as soon as possible.
Speaker 6: And like in the United's case, almost everybody is increasing size. Right.
Speaker 6: Size of aircraft are rising because pilot's got twenty percent
Speaker 6: plus wage increases, you got to find a way to
Speaker 6: drive down costs. One of the things you always do
Speaker 6: is increase aircraft size, and therefore you're flying more passengers
Speaker 6: for the same cost of that pilot up front. That
Speaker 6: helps you improve efficiencies. They all want it, so they're
Speaker 6: all trying to find bigger aircraft to fly with more seats.
Speaker 6: And so yes, airlines want airplanes as soon as possible.
Speaker 6: If you're a Boeing customer, what also really ticks you
Speaker 6: off is you look across the street at the folks
Speaker 6: flying the Airbus airplane, and they probably have little to
Speaker 6: know in eruption this summer. In their schedules, you're worried
Speaker 6: about what deliveries you're going to get and your ability
Speaker 6: to fly your schedule, and that hurts if you're the
Speaker 6: bowing custom Right, the airbus customers are smiling.
Speaker 3: Our Thanks to George Ferguson Bloomberg Intelligence Senior Aerospace, Defense
Speaker 3: and Airlines analyst.
Speaker 1: We moved next to the pharmaceutical industry in Astrazenica, the
Speaker 1: company reported profit that beat analysts expectations. This was due
Speaker 1: to demand for its blockbuster cancer.
Speaker 3: Drugs, from where we were joined by astro Zenica CEO
Speaker 3: Pascal Sorio. We first asked for his take on the
Speaker 3: quarterly results.
Speaker 11: We had a tremendous start of the year. Actually I
Speaker 11: said it's our revenue. I should say glu by nineteen percent.
Speaker 11: But the exciting piece was that every portfolio of products
Speaker 11: Golovia is strongly oncology plus twenty six percent to five
Speaker 11: billions for the quota, cardiovascular twenty three percent, rare disease
Speaker 11: sixteen percent, goals, geo geographies gu nineteen percent. In the
Speaker 11: US and Europe. The most remarkable was forty percent goals
Speaker 11: in the emerging markets outside of China, and China itself
Speaker 11: is returning to growth. So really a very very strong
Speaker 11: start of the year. And beyond the financials, our portfolio,
Speaker 11: our pipeline is making a tremendous progress and we start
Speaker 11: a new face rituals and we announced very positive results
Speaker 11: in particular in oncology, which we present to the ASCO
Speaker 11: in Chicago very soon.
Speaker 3: Yeah, you've got an investor day coming up next month,
Speaker 3: and it seems like like you just said you're going
Speaker 3: to discuss the pipeline, including the timing of future treatment
Speaker 3: and their revenue potential. So can you give us a
Speaker 3: little seat peak now for some of us who can't wait.
Speaker 11: Yes, exactly. Actually, Marti, thank you for that question. What
Speaker 11: we're going to try and show to investors is that
Speaker 11: we can be a strong growth company not only for
Speaker 11: the next seven HS to twenty thirty, but even beyond that.
Speaker 11: And so the growth over the next period of time
Speaker 11: to twenty and thirty is going to be driven by
Speaker 11: what we have in our hands today and what is
Speaker 11: going to come out of our Face three pipeline very soon.
Speaker 11: So We're going to add pact attention to investors of
Speaker 11: investors to the major growth drivers. We're going to show
Speaker 11: them where consensus is actually underestimating some of our products
Speaker 11: and the opportunities we have in our pipeline. We have
Speaker 11: a very large pipeline of new projects and some of
Speaker 11: those are underestimated. Beyond that, we will also want we
Speaker 11: also want to show investors what our strategies and what
Speaker 11: our plans are for the long term. We've been investing
Speaker 11: in new platforms, new technologies which we believe will shave
Speaker 11: the future of medicine in cancer, immune diseases, and beyond,
Speaker 11: for instance, sales therapies, gins therapies, antibody drug conjugates, radio conjugates.
Speaker 11: So really this is our goal show people that when
Speaker 11: we are focused on today, but also tomorrow to twenty
Speaker 11: thirty and the long term.
Speaker 1: Pascal I always joke to people and I say, in
Speaker 1: my next life, I want to come back as a
Speaker 1: healthcare m and a banker, because it seems like every
Speaker 1: Monday we come in and pharmaceutical company A is buying
Speaker 1: pharmaceutical company B or biotechnology company C. How does MNA
Speaker 1: growth via acquisition fit in with your growth strategy vis
Speaker 1: a v organic growth that comes from your own in
Speaker 1: house R and D.
Speaker 11: We identified a number of years ago the technology platforms
Speaker 11: of the future, as I said a minute ago. So
Speaker 11: if you look at Seales Therapy, for instance, we have
Speaker 11: our own internal efforts and we've been complimenting this with
Speaker 11: acquisitions or licensing agreements. Particular, we bought a cell therapy
Speaker 11: company and that is bringing us technologies but also products,
Speaker 11: and we've been putting all of this together to actually
Speaker 11: build a portfolio of products in cell therapy, engine therapy,
Speaker 11: in ultiboty, drug conjugates, and beyond. So we target small
Speaker 11: to mid size Barton acquisitions. That really has been our strategy,
Speaker 11: so we can integrate them much better and then we
Speaker 11: can add value along the way.
Speaker 3: Before we launch Pascal. What can you tell us about
Speaker 3: drug prices right now? I mean, this is such a
Speaker 3: sensitive topic here in the US, especially in an election year,
Speaker 3: something that's really close to the heart of so many
Speaker 3: consumers and voters. I mean, how can can you tell
Speaker 3: us a little bit about the pricing strategy? And you know,
Speaker 3: are people able to afford a lot of these medications?
Speaker 11: You know, it's important for us of all to remember
Speaker 11: that in the United States. Of course, you know, price
Speaker 11: is an issue like everywhere in the world, but in
Speaker 11: the United States, patients have access to innovative medicines that
Speaker 11: can save their lives much faster than in Europe or
Speaker 11: in other parts of the world. Innovation is reywilded and
Speaker 11: access is much faster now. Price is definitely a consideration.
Speaker 11: Of course. The IRA, of course has some challenges and
Speaker 11: some issues we are trying to work to addrese but
Speaker 11: there is also a big benefit for patients, which is
Speaker 11: that starting in twenty twenty five, there will be a
Speaker 11: copy cup. Patients will not pay more than two thousand
Speaker 11: dollars a year. We are on Medicare path deep products
Speaker 11: and this year it's two three sizand five hundred and
Speaker 11: six hundred dollars as of max. So ultimately, if your
Speaker 11: MEDICA patient, you will not pay more than two thousand
Speaker 11: dollars a year for your medicines, regardless of how many
Speaker 11: medicines you have and how much the cost. So that
Speaker 11: will be really an enormous progress for patients. And of
Speaker 11: course some of these rebates that are discounts that are
Speaker 11: required to compensate for this, we will be paying. But
Speaker 11: suddenly we see that as a big improvement for patients
Speaker 11: and hopefully also an incremental revenue for us because patients
Speaker 11: will be able to afford their medicines and take them
Speaker 11: and stay on them longer. So you know, win win,
Speaker 11: really better for patients and hopefully better for the industry
Speaker 11: as well.
Speaker 1: The PASCAL I'm looking at the on the Bloomberg terminal,
Speaker 1: the PGeo function which shows me kind of your revenue
Speaker 1: by segment, and I see that oncology is your biggest
Speaker 1: revenue line there about thirty seven percent of total revenue.
Speaker 1: What are the opportunities there in your oncology is I
Speaker 1: know it's a competitive business, but what do you have
Speaker 1: in the pipeline? What do you have to bring to market?
Speaker 1: How do you think about that business?
Speaker 11: Yeah, ourcology portfolio of products go by twenty six percent
Speaker 11: in the first quarter to five billion dollars in the quarter.
Speaker 11: So we are on a very strong trajectory, driven by
Speaker 11: a number of products that we have in a portfolio
Speaker 11: for lung cancer, breast cancer, prostate cancer, or variant cancer.
Speaker 11: And there's more to come. And the future of oncology
Speaker 11: really is about combination therapy, combination of antibody drug conjugates,
Speaker 11: as I said before, those products that target the tumor
Speaker 11: cells and deliver a toxin at the site of the
Speaker 11: tumor cell and essentially kill the tumor cells without affecting
Speaker 11: the helcy cells around, and combining this with immuno oncology products,
Speaker 11: and then in long run, adding cell therapy to this.
Speaker 11: So there's an enormous amount of innovation that's going on
Speaker 11: in cancer. The bilogy of cancer is being improved very rapidly,
Speaker 11: and as a result, new medicines are coming up. There
Speaker 11: are still cancers, unfortunately, that are difficult to treat, but
Speaker 11: one of the other aspects of cancer that is very
Speaker 11: important is diagnosing patients early so you can intercept the
Speaker 11: disease early. If you look at breast cancer, mamographies have
Speaker 11: really helped diagnose breast cancer very early and survival right
Speaker 11: at five years is ninety nine percent when patients are
Speaker 11: diagnosed early. Lung cancer is the opposite, diagnos too late,
Speaker 11: So there are no technologies that will enable to patients
Speaker 11: and doctors to diagnose cancer very early and treat it only.
Speaker 11: So the combination of these plus new treatments gives us
Speaker 11: hope that there is a possibility that in the near
Speaker 11: future we could actually cure cancer or turn it to
Speaker 11: a chronic condition that people can live with our.
Speaker 3: Thanks to Astrozenica CEO Pascal Sorry.
Speaker 2: This is the Bloomberg Intelligence podcast, available on Apples, Spotify,
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