1 00:00:02,720 --> 00:00:12,360 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:12,480 --> 00:00:13,600 Speaker 1: with Paul Sweeney. 3 00:00:13,720 --> 00:00:16,959 Speaker 2: The real app performance has been the US corporate high yield. 4 00:00:17,040 --> 00:00:20,680 Speaker 2: These are two big time blue chip companies. One person's 5 00:00:20,720 --> 00:00:23,560 Speaker 2: cast is another person's animal spirits. 6 00:00:23,200 --> 00:00:26,920 Speaker 1: Breaking market headlines and corporate news from across the globe. 7 00:00:26,960 --> 00:00:29,000 Speaker 2: Our view is, if the economy is slowing. 8 00:00:28,600 --> 00:00:31,120 Speaker 3: Down, there is the possibility of the debt spirals. 9 00:00:31,240 --> 00:00:33,760 Speaker 4: Both protum competing and AI are going to power the future. 10 00:00:33,880 --> 00:00:37,239 Speaker 1: People are just buying everything with tex Bloomberg Intelligence with 11 00:00:37,320 --> 00:00:42,240 Speaker 1: Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals. 12 00:00:42,680 --> 00:00:45,040 Speaker 4: I'm Paul Sweeney and I'm Lisa Matteo filling in on 13 00:00:45,080 --> 00:00:46,160 Speaker 4: Bloomberg Intelligence. 14 00:00:46,240 --> 00:00:48,320 Speaker 2: On the Face Bloomberg Intelligence Show, we dig inside the 15 00:00:48,320 --> 00:00:50,960 Speaker 2: big business stories impacting Wall Street and the global markets. 16 00:00:51,120 --> 00:00:53,080 Speaker 2: Each and every week, we provide in depth research and 17 00:00:53,159 --> 00:00:55,200 Speaker 2: data on some of the two thousand companies in one 18 00:00:55,240 --> 00:00:58,840 Speaker 2: hundred and thirty industries our analysts cover worldwide. Today, we'll 19 00:00:58,840 --> 00:01:02,040 Speaker 2: look at why Volunteer Technologies reported its biggest ever quarterly 20 00:01:02,160 --> 00:01:04,320 Speaker 2: sales growth since the company went public. 21 00:01:04,440 --> 00:01:07,319 Speaker 4: Plus, we'll look at how the fast food Jay McDonald's 22 00:01:07,319 --> 00:01:09,000 Speaker 4: returned to sales growth last quarter. 23 00:01:09,200 --> 00:01:11,560 Speaker 2: But first we begin with earnings from the median entertainment 24 00:01:11,560 --> 00:01:12,759 Speaker 2: giant Walt Disney. 25 00:01:12,959 --> 00:01:15,280 Speaker 4: This week, Disney shares fell after the company gave a 26 00:01:15,319 --> 00:01:17,760 Speaker 4: mixed earnings report in the third quarter. The results, well, 27 00:01:17,800 --> 00:01:20,760 Speaker 4: they showed strength in Disney streaming and parks business, but 28 00:01:20,800 --> 00:01:23,560 Speaker 4: the company gave a lukewarm outlook for profit this year. 29 00:01:23,840 --> 00:01:25,959 Speaker 2: For more guest hosts, Isabelle Lee and I rejoined by 30 00:01:26,000 --> 00:01:29,800 Speaker 2: Keitha Rong Onathan Bloomberg Intelligence Analysts on US media. We 31 00:01:29,800 --> 00:01:33,959 Speaker 2: first asked Etha what exactly concerns investors about Disney. 32 00:01:33,880 --> 00:01:37,280 Speaker 5: You know, expectations might have been, you know, slightly high, 33 00:01:37,480 --> 00:01:39,680 Speaker 5: and the fact that they didn't necessarily give us any 34 00:01:39,720 --> 00:01:43,399 Speaker 5: specific guidance for fiscal twenty twenty six. They did point 35 00:01:43,480 --> 00:01:47,760 Speaker 5: to a raised guidance for EPs growth for fiscal twenty 36 00:01:47,800 --> 00:01:50,120 Speaker 5: twenty five eighteen percent now and sort of sixteen percent, 37 00:01:50,680 --> 00:01:52,960 Speaker 5: but they didn't necessarily give us anything specific for fiscal 38 00:01:52,960 --> 00:01:56,440 Speaker 5: twenty twenty six. That could be a slight source of disappointment. 39 00:01:56,760 --> 00:01:59,920 Speaker 5: They did say that they will stop disclosing Disney plusses 40 00:02:00,040 --> 00:02:03,080 Speaker 5: criber numbers, but again this is not something totally unexpected. 41 00:02:03,080 --> 00:02:05,680 Speaker 5: I mean, Netflix has stopped doing this. We're seeing this 42 00:02:05,760 --> 00:02:08,280 Speaker 5: kind of move away from just subscriber numbers to a 43 00:02:08,320 --> 00:02:09,760 Speaker 5: greater focus and profitability. 44 00:02:10,520 --> 00:02:12,560 Speaker 6: I want to zero in on parks because I'm still 45 00:02:12,600 --> 00:02:14,800 Speaker 6: scarred by how expensive it was when I visited a 46 00:02:14,800 --> 00:02:18,240 Speaker 6: couple of years ago as an adult. But how sustainable 47 00:02:18,280 --> 00:02:21,240 Speaker 6: is there strong parks performance given the divergent domestic and 48 00:02:21,320 --> 00:02:23,120 Speaker 6: international performance. 49 00:02:23,320 --> 00:02:27,000 Speaker 5: Very sustainable isabell. So, you know, we saw domestic parks, 50 00:02:27,000 --> 00:02:29,280 Speaker 5: and I say that because you know, domestic parks actually 51 00:02:29,320 --> 00:02:31,920 Speaker 5: coming into this year, coming into this quarter, there were 52 00:02:31,960 --> 00:02:33,880 Speaker 5: a lot of worries, one of course, about the general 53 00:02:33,960 --> 00:02:36,680 Speaker 5: macroeconomic environment, but the bigger source of worry was really 54 00:02:36,720 --> 00:02:40,720 Speaker 5: the opening of Epic Universe, which is you know, Universal's 55 00:02:40,760 --> 00:02:43,960 Speaker 5: big Florida theme parket traction. But the fact that it 56 00:02:44,040 --> 00:02:48,760 Speaker 5: had absolutely no impact at all, or very very modest impact, 57 00:02:48,800 --> 00:02:51,960 Speaker 5: if at all, is really amazing, and it just kind 58 00:02:51,960 --> 00:02:55,000 Speaker 5: of speaks to the resilience in Disney's business model. They 59 00:02:55,080 --> 00:02:59,080 Speaker 5: reported again very very strong per capita growth, you know, 60 00:02:59,160 --> 00:03:01,840 Speaker 5: in terms of food beverages, in terms of concessions. So 61 00:03:01,919 --> 00:03:03,839 Speaker 5: all of that doing really well, and the reason I'm 62 00:03:03,919 --> 00:03:06,360 Speaker 5: so positive about this business going forward. First of all 63 00:03:06,560 --> 00:03:09,160 Speaker 5: it contributes about fifty five to sixty percent of Disney profits. 64 00:03:09,160 --> 00:03:11,160 Speaker 5: Are really really important to their top line, to their 65 00:03:11,160 --> 00:03:14,760 Speaker 5: bottom line. Definitely. They have a lot of upcoming capacity, 66 00:03:14,840 --> 00:03:17,240 Speaker 5: So the biggest source of expansion over the next few 67 00:03:17,280 --> 00:03:19,560 Speaker 5: months is really going to be their cruise ships. They're 68 00:03:19,639 --> 00:03:23,959 Speaker 5: launching two new cruise ships, their biggest ever actually, which 69 00:03:24,000 --> 00:03:26,840 Speaker 5: is going to come on board in November and December. 70 00:03:27,480 --> 00:03:30,160 Speaker 5: One of them sets sail from Asia and that basically 71 00:03:30,200 --> 00:03:32,840 Speaker 5: takes the number of cruise ships to eight cruise ships, 72 00:03:32,960 --> 00:03:36,200 Speaker 5: effectively kind of doubling their capacity in a span of 73 00:03:36,240 --> 00:03:38,640 Speaker 5: just maybe two to three years. So that is going 74 00:03:38,680 --> 00:03:42,760 Speaker 5: to really buoy both top line and bottom line going 75 00:03:42,800 --> 00:03:45,480 Speaker 5: into twenty twenty six. And then beyond that, you really 76 00:03:45,520 --> 00:03:49,440 Speaker 5: have this huge sixty billion capital expansion plan that is 77 00:03:49,440 --> 00:03:51,400 Speaker 5: really going to play out over the next five to 78 00:03:51,440 --> 00:03:52,880 Speaker 5: ten years. So we're going to see a lot more 79 00:03:52,880 --> 00:03:55,360 Speaker 5: attractions all over the world. We're going to see that 80 00:03:55,400 --> 00:03:58,400 Speaker 5: new Abu Dhabi park come out. So there is really 81 00:03:58,480 --> 00:04:01,520 Speaker 5: a lot of you know, sustained momentum that we can 82 00:04:01,560 --> 00:04:02,960 Speaker 5: expect at the parks going forward. 83 00:04:03,400 --> 00:04:05,200 Speaker 2: Keith It talk to us about that deal they just 84 00:04:05,240 --> 00:04:07,920 Speaker 2: made with the NFL it seems like a really positive 85 00:04:08,000 --> 00:04:09,000 Speaker 2: development for the company. 86 00:04:09,160 --> 00:04:12,320 Speaker 5: Yeah, it's really good. I think from a Disney from 87 00:04:12,360 --> 00:04:15,440 Speaker 5: an ESPN standpoint, that they're so closely aligned now with 88 00:04:15,560 --> 00:04:19,320 Speaker 5: the NFL. I mean, the NFL is absolutely the premium property, 89 00:04:19,360 --> 00:04:21,240 Speaker 5: the gold standard, Paul, you know this well when it 90 00:04:21,279 --> 00:04:23,719 Speaker 5: comes to you know, sports properties in the US. And 91 00:04:23,760 --> 00:04:25,440 Speaker 5: the fact now that they're going to be able to 92 00:04:26,120 --> 00:04:29,880 Speaker 5: use all of this content for their upcoming ESPN streaming launch, 93 00:04:30,320 --> 00:04:32,960 Speaker 5: I mean that that itself just kind of gives it 94 00:04:33,160 --> 00:04:36,000 Speaker 5: a tremendous boost, I think even before you know it 95 00:04:36,080 --> 00:04:39,920 Speaker 5: comes on board. So it's great for the product. It's 96 00:04:39,960 --> 00:04:42,880 Speaker 5: also great from a strategic standpoint because the NFL is 97 00:04:42,920 --> 00:04:45,960 Speaker 5: obviously one of the most important sports properties, and this 98 00:04:46,040 --> 00:04:48,880 Speaker 5: really gives them access or it at least definitely gives 99 00:04:48,920 --> 00:04:51,360 Speaker 5: them a little bit of an advantageous position compared to 100 00:04:51,440 --> 00:04:53,559 Speaker 5: let's say, an Amazon or a Netflix or an Apple 101 00:04:53,600 --> 00:04:56,000 Speaker 5: if they want to ever outbid you know, the current 102 00:04:56,040 --> 00:05:00,480 Speaker 5: media partners. So definitely, I think strategically, very very sound 103 00:05:00,480 --> 00:05:01,800 Speaker 5: move on the part of Disney. 104 00:05:02,080 --> 00:05:03,960 Speaker 6: So it seems like we had a good quarter. Runway 105 00:05:04,000 --> 00:05:06,960 Speaker 6: for growth is really just long and wide. What downside 106 00:05:07,040 --> 00:05:10,839 Speaker 6: risks remain then, especially around the macro uncertainty and tiriff exposure. 107 00:05:10,960 --> 00:05:14,000 Speaker 5: Do you see, Yeah, maybe a little bit of execution risks. 108 00:05:14,000 --> 00:05:16,080 Speaker 5: So we still really don't know how this hole. I mean, 109 00:05:16,200 --> 00:05:20,280 Speaker 5: obviously everybody's very excited for the ESPN product launch, but 110 00:05:20,320 --> 00:05:22,960 Speaker 5: we still don't know how exactly that's going to play out. Again, 111 00:05:23,000 --> 00:05:24,640 Speaker 5: a huge source of upside is going to be the 112 00:05:24,680 --> 00:05:28,000 Speaker 5: streaming business. Everybody is expecting huge cost savings when it 113 00:05:28,040 --> 00:05:30,599 Speaker 5: comes to the integration of Hulu and Disney Plus. But 114 00:05:30,680 --> 00:05:32,520 Speaker 5: again execution is a little bit of a risk. And 115 00:05:32,520 --> 00:05:36,200 Speaker 5: then you pointed out, you know, macro factors. Remember, Disney 116 00:05:36,279 --> 00:05:39,440 Speaker 5: still obviously has huge exposure because of its parks business, 117 00:05:39,640 --> 00:05:42,000 Speaker 5: and anytime we see kind of a slowdown in the economy, 118 00:05:42,279 --> 00:05:44,520 Speaker 5: we do feel that in the parks as well. And 119 00:05:44,600 --> 00:05:47,680 Speaker 5: of course advertising also, so you know, they do have 120 00:05:47,720 --> 00:05:51,159 Speaker 5: a substantial exposure to advertising because of their TV networks business. 121 00:05:51,320 --> 00:05:53,160 Speaker 5: So there again we can see a little bit of 122 00:05:53,520 --> 00:05:55,880 Speaker 5: an impact. But overall, as it stands right now, the 123 00:05:55,880 --> 00:05:58,279 Speaker 5: business seems to be in really good shape all right here. 124 00:05:58,480 --> 00:06:00,919 Speaker 2: The problem childs though, are the podcast networks in the 125 00:06:00,960 --> 00:06:03,760 Speaker 2: cable networks. What you know, just because of cord cutting, 126 00:06:03,760 --> 00:06:07,080 Speaker 2: that they're just declining businesses. What's the company saying that 127 00:06:07,120 --> 00:06:08,640 Speaker 2: what we're going to do with those businesses. 128 00:06:08,839 --> 00:06:11,840 Speaker 5: They haven't said anything explicitly, Paul. So a few years ago, 129 00:06:11,960 --> 00:06:14,280 Speaker 5: you know, this idea was floated that maybe they kind 130 00:06:14,320 --> 00:06:17,360 Speaker 5: of spin off ABC their broadcast network, maybe they spin 131 00:06:17,440 --> 00:06:21,120 Speaker 5: off their linear cable channels, all of that. You know, 132 00:06:21,480 --> 00:06:23,960 Speaker 5: noise has kind of quietened down. You know, Bob Biger 133 00:06:23,960 --> 00:06:26,280 Speaker 5: basically said, no, no, no, we need these businesses. They're 134 00:06:26,320 --> 00:06:28,880 Speaker 5: all kind of integral to the whole Disney story. So 135 00:06:28,920 --> 00:06:33,120 Speaker 5: we haven't heard anything recently that being said. Just this 136 00:06:33,200 --> 00:06:36,200 Speaker 5: whole deal with the NFL, the NFL kind of taking 137 00:06:36,240 --> 00:06:39,760 Speaker 5: an equity stake, it almost seems like they are prepping 138 00:06:39,920 --> 00:06:42,960 Speaker 5: for ESPN to kind of ESPN and maybe ABC to 139 00:06:43,040 --> 00:06:46,320 Speaker 5: kind of coast solo. Remember, Bob Biger only has a 140 00:06:46,320 --> 00:06:49,159 Speaker 5: few more months left, so the end of twenty twenty 141 00:06:49,200 --> 00:06:53,680 Speaker 5: six he leaves Disney, or at least that's what he says. Yeah, 142 00:06:53,760 --> 00:06:57,320 Speaker 5: we think, and I really think he kind of wants 143 00:06:57,040 --> 00:07:00,480 Speaker 5: to get this deal done so to separate es because 144 00:07:00,480 --> 00:07:03,640 Speaker 5: it's not really core to the rest of the Disney properties. 145 00:07:04,360 --> 00:07:06,039 Speaker 5: But again, it's a little bit of a weight and watch, 146 00:07:06,080 --> 00:07:09,560 Speaker 5: but nothing explicitly stated from Disney management about what they 147 00:07:09,600 --> 00:07:11,480 Speaker 5: want to do with the linear piece of the business. 148 00:07:11,720 --> 00:07:14,320 Speaker 6: So ESPN is getting a fresh spin. Within August twenty 149 00:07:14,320 --> 00:07:17,120 Speaker 6: one launch, it will be thirty dollars a month for 150 00:07:17,200 --> 00:07:19,600 Speaker 6: the new streaming app. What do you make of that price? 151 00:07:19,760 --> 00:07:21,480 Speaker 6: You think people will pay up for it or is 152 00:07:21,480 --> 00:07:22,080 Speaker 6: that steep? 153 00:07:22,360 --> 00:07:24,440 Speaker 5: It's a high price point, There's no doubt about it. 154 00:07:24,480 --> 00:07:26,400 Speaker 5: I think most people were kind of expecting somewhere in 155 00:07:26,440 --> 00:07:29,280 Speaker 5: the twenty three to twenty five dollars range. That said, 156 00:07:29,360 --> 00:07:32,000 Speaker 5: what you know, we just ran a survey actually at 157 00:07:32,040 --> 00:07:34,880 Speaker 5: Bloomberg Intelligence, and what we found is that there's actually 158 00:07:34,880 --> 00:07:37,360 Speaker 5: a lot of interest in this product. So we think 159 00:07:37,360 --> 00:07:39,480 Speaker 5: that the updake will be fairly strong. And the updake 160 00:07:39,600 --> 00:07:41,920 Speaker 5: not so much as a standalone product, but when you 161 00:07:41,960 --> 00:07:45,200 Speaker 5: bundle it with Disney Plus and Hulu, so they are 162 00:07:45,280 --> 00:07:48,600 Speaker 5: running a pretty attractive promotion. So for the first year, 163 00:07:48,640 --> 00:07:52,840 Speaker 5: you can get Disney Plus, Hulu and ESPN at a 164 00:07:52,840 --> 00:07:55,160 Speaker 5: thirty to thirty dollars price point, which which seems like 165 00:07:55,240 --> 00:07:56,960 Speaker 5: really good value. So I think we're going to see 166 00:07:57,000 --> 00:07:59,920 Speaker 5: a lot of people come in initially through the bund 167 00:08:00,280 --> 00:08:01,040 Speaker 5: at least. 168 00:08:01,160 --> 00:08:04,080 Speaker 4: Our thanks to Githa Ranganath and Bloomberg Intelligence analyst on 169 00:08:04,280 --> 00:08:05,000 Speaker 4: US media. 170 00:08:05,160 --> 00:08:07,680 Speaker 2: We move next to recent news from the beverage company 171 00:08:07,800 --> 00:08:08,480 Speaker 2: Molson Cores. 172 00:08:08,680 --> 00:08:11,080 Speaker 4: This week, the company lowered its full year guidance for 173 00:08:11,120 --> 00:08:14,040 Speaker 4: the second quarter in a row. It cited continued pressure 174 00:08:14,080 --> 00:08:17,120 Speaker 4: from a week consumer, falling US market share, and rising 175 00:08:17,240 --> 00:08:18,960 Speaker 4: costs tied to aluminum tariffs. 176 00:08:19,200 --> 00:08:21,320 Speaker 2: For more, Lisa and I were joined by Ken Shay, 177 00:08:21,400 --> 00:08:24,960 Speaker 2: Bloomberg Intelligence senior consumer products analysts. We first asked Ken 178 00:08:25,080 --> 00:08:27,960 Speaker 2: just how much aluminum tariffs have been impacting Molson. 179 00:08:28,000 --> 00:08:31,520 Speaker 3: Course, it's material, you know, they describe it as an 180 00:08:31,560 --> 00:08:35,720 Speaker 3: indirect cost, but it really spiked up there in the quarter, 181 00:08:36,760 --> 00:08:38,959 Speaker 3: you know, encroaching on their margin. I think though the 182 00:08:39,120 --> 00:08:42,960 Speaker 3: bigger picture though here is the continued week sales, the 183 00:08:43,000 --> 00:08:45,680 Speaker 3: lackluster sales were seeing in the US beer market and 184 00:08:45,720 --> 00:08:48,199 Speaker 3: alcoholic beverages in general. You know, this is their peak 185 00:08:48,240 --> 00:08:50,920 Speaker 3: summer selling season. This is when you know these companies 186 00:08:50,920 --> 00:08:54,480 Speaker 3: should be thriving, and it looks like the summer selling 187 00:08:54,520 --> 00:08:57,079 Speaker 3: season in the US for alcoholic beverages is going to 188 00:08:57,120 --> 00:09:02,520 Speaker 3: be a dud. It's a cautious consumer, it's a particular 189 00:09:03,200 --> 00:09:06,840 Speaker 3: pressures on the Hispanic demographic. It's it was a lousy 190 00:09:07,000 --> 00:09:09,920 Speaker 3: June in terms of the weather and key markets, and 191 00:09:10,080 --> 00:09:14,920 Speaker 3: basically all the big brewers are setting up for a 192 00:09:14,960 --> 00:09:18,160 Speaker 3: tough second half as you know, these trends continue. You know, 193 00:09:18,679 --> 00:09:21,840 Speaker 3: I expect continued sluggish performance in the second half as well. 194 00:09:22,360 --> 00:09:25,280 Speaker 2: So is this beer thing? Is it the kind of 195 00:09:25,280 --> 00:09:27,000 Speaker 2: a global thing? I mean, I know, you guys at 196 00:09:27,080 --> 00:09:30,160 Speaker 2: Bloomberg Intelligence, you get the data that choose consumption of 197 00:09:30,200 --> 00:09:31,000 Speaker 2: everything out there. 198 00:09:31,480 --> 00:09:34,000 Speaker 3: In the case of most in course, Paul, yeah, they 199 00:09:34,240 --> 00:09:38,120 Speaker 3: have a big operation in Europe, Eastern Europe, many parts 200 00:09:38,160 --> 00:09:41,280 Speaker 3: of Western Europe, and that they had lower volumes as well. 201 00:09:41,880 --> 00:09:44,200 Speaker 3: It was saved by higher prices to a degree. But 202 00:09:44,559 --> 00:09:47,600 Speaker 3: you know, again the big picture is that consumers are 203 00:09:47,600 --> 00:09:49,280 Speaker 3: just not going out to the bars as much. On 204 00:09:49,320 --> 00:09:52,480 Speaker 3: premise sales, we're particularly weak. That could be weather related, 205 00:09:52,480 --> 00:09:57,280 Speaker 3: I mean, that's just another example, but also I think 206 00:09:57,320 --> 00:09:59,880 Speaker 3: it could be, you know, the culmination of a lot 207 00:09:59,880 --> 00:10:02,920 Speaker 3: of price increases over the last few years. Maybe we've 208 00:10:02,960 --> 00:10:05,160 Speaker 3: hit a point where there's some sticker shot going on here. 209 00:10:05,800 --> 00:10:07,760 Speaker 4: And what about people drinking he said, not going to 210 00:10:07,840 --> 00:10:11,240 Speaker 4: the bar, But what about just drinking less alcohol in general. 211 00:10:12,360 --> 00:10:14,520 Speaker 3: Well, that's a great point, least, I think longer term, 212 00:10:14,600 --> 00:10:17,360 Speaker 3: you have some secular headwinds as well, things you've talked 213 00:10:17,360 --> 00:10:19,960 Speaker 3: about in the past. You know, the spread of legal cannabis, 214 00:10:20,040 --> 00:10:22,920 Speaker 3: particularly here in the US. In the US, you also 215 00:10:23,040 --> 00:10:26,320 Speaker 3: have these intoxicating hemp drinks which are all the rage 216 00:10:26,400 --> 00:10:29,720 Speaker 3: now in many markets. You have the GLP one users 217 00:10:29,760 --> 00:10:33,720 Speaker 3: are cutting back. Gen Z doesn't seem to embrace alcohol 218 00:10:33,760 --> 00:10:35,840 Speaker 3: as much as their parents did. All those things are 219 00:10:35,840 --> 00:10:38,559 Speaker 3: weighing on it longer term, but that, combined with some 220 00:10:38,679 --> 00:10:41,200 Speaker 3: near term pressures, is really weighing on these companies. 221 00:10:41,640 --> 00:10:44,640 Speaker 2: It's a disappointing discussion here. I mean, not that we're 222 00:10:44,640 --> 00:10:47,280 Speaker 2: gonna have fun here. I'll tell you here's the problem 223 00:10:47,320 --> 00:10:50,280 Speaker 2: with all this white claw and sea breeze and I 224 00:10:50,320 --> 00:10:51,920 Speaker 2: don't know what you know, the iced tea and vodka, 225 00:10:52,000 --> 00:10:52,760 Speaker 2: what's that all about? 226 00:10:53,080 --> 00:10:53,640 Speaker 5: Is that a fad? 227 00:10:54,559 --> 00:10:56,559 Speaker 3: It seems to have some legs there, you know, the 228 00:10:56,600 --> 00:10:58,880 Speaker 3: pre mixed cocktails. Well, let me put it this way. 229 00:10:58,920 --> 00:11:00,760 Speaker 3: With some of the things that did l in the 230 00:11:00,840 --> 00:11:06,480 Speaker 3: quarter are things like bush light apple, you know, some flavor. 231 00:11:07,320 --> 00:11:09,520 Speaker 3: You know, some of the hard teas are doing well. 232 00:11:09,960 --> 00:11:12,480 Speaker 3: The premixes continue to do well, So I think the 233 00:11:12,600 --> 00:11:15,120 Speaker 3: way you could take away is maybe the consumer, while 234 00:11:15,440 --> 00:11:17,920 Speaker 3: you know economizing, is also looking for a flavor and 235 00:11:18,000 --> 00:11:21,360 Speaker 3: different variety. And also the non alcoholic and low alcoholic 236 00:11:21,920 --> 00:11:24,880 Speaker 3: segment continues to do well from a low base. So 237 00:11:25,000 --> 00:11:27,640 Speaker 3: I think in the second half I would expect a 238 00:11:27,760 --> 00:11:33,520 Speaker 3: higher level of promotion and innovation along those themes low 239 00:11:33,559 --> 00:11:37,120 Speaker 3: alcohol and no alcohol flavor innovation that's going to be 240 00:11:37,200 --> 00:11:39,760 Speaker 3: really popular. I think in the second half the super volume. 241 00:11:40,200 --> 00:11:42,079 Speaker 4: Hey, before you go, can you break down some of 242 00:11:42,120 --> 00:11:44,839 Speaker 4: those macro economic headwinds that the company's facing. 243 00:11:45,400 --> 00:11:48,760 Speaker 3: Sure, well, they The primary one is just you know, 244 00:11:49,120 --> 00:11:52,559 Speaker 3: consumer confidence. Consumers just feel you know, they're reading the 245 00:11:52,600 --> 00:11:55,920 Speaker 3: papers all these you know, tire fund certainties, and you 246 00:11:56,040 --> 00:11:59,679 Speaker 3: know the pressure on the Hispanics in particular, what's going 247 00:11:59,760 --> 00:12:02,120 Speaker 3: on there. Those are the big things, you know, And 248 00:12:02,120 --> 00:12:04,040 Speaker 3: I don't think it's anything major, but it's it's just 249 00:12:04,200 --> 00:12:06,760 Speaker 3: enough on the margin that these are purchases that can 250 00:12:06,800 --> 00:12:10,520 Speaker 3: be deferred and consumers by and large r. 251 00:12:11,000 --> 00:12:14,720 Speaker 4: A our thanks to Kenhey Bloomberg Intelligence senior consumer products analysts. 252 00:12:14,960 --> 00:12:16,839 Speaker 4: Coming up, we'll look at earnings from one of the 253 00:12:16,920 --> 00:12:20,080 Speaker 4: world's biggest producers of heavy machinery Caterpillar. 254 00:12:20,440 --> 00:12:23,400 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 255 00:12:23,480 --> 00:12:26,319 Speaker 2: depth research and data on two thousand companies one hundred 256 00:12:26,320 --> 00:12:27,079 Speaker 2: and thirty industries. 257 00:12:27,160 --> 00:12:30,360 Speaker 4: You can access Bloomberg Intelligence via bi Go and the terminal. 258 00:12:30,440 --> 00:12:33,640 Speaker 2: I'm Lise Matteo and I'm Paul Sweeney. This is Bloomberg. 259 00:12:38,120 --> 00:12:41,800 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 260 00:12:41,920 --> 00:12:44,960 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 261 00:12:45,000 --> 00:12:48,280 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 262 00:12:48,360 --> 00:12:51,439 Speaker 1: you get your podcasts, or watch us live on YouTube. 263 00:12:52,280 --> 00:12:54,480 Speaker 4: I'm Paul Sweeney and I'm Lice Matteo. Filling in on 264 00:12:54,559 --> 00:12:55,599 Speaker 4: Bloomberg Intelligence. 265 00:12:55,840 --> 00:12:59,080 Speaker 2: Move now to earning from the software company Palaneer Technologies. 266 00:12:59,200 --> 00:13:02,320 Speaker 4: This week, palente reported its biggest ever quarterly sales growth 267 00:13:02,360 --> 00:13:06,280 Speaker 4: since the company went public, and Palenteer cited astonishing impact 268 00:13:06,360 --> 00:13:09,160 Speaker 4: of artificial intelligence technology on its business. 269 00:13:09,480 --> 00:13:11,400 Speaker 2: For more, Lisa and I were joined by Mandeep saying 270 00:13:11,400 --> 00:13:15,120 Speaker 2: Bloomberg Intelligence, senior tech industry analyst. We first asked man 271 00:13:15,160 --> 00:13:18,280 Speaker 2: Deep if Palenteer should be considered a dominant software company 272 00:13:18,360 --> 00:13:18,920 Speaker 2: of the future. 273 00:13:19,320 --> 00:13:22,960 Speaker 7: I mean, clearly there is a lot baked into the valuation, 274 00:13:23,280 --> 00:13:27,439 Speaker 7: But I want to focus on, you know, the net 275 00:13:27,559 --> 00:13:31,360 Speaker 7: new ERR, which is a metric that software companies are 276 00:13:31,440 --> 00:13:36,959 Speaker 7: measured on. And when you compare Palenteers commercial segment revenue, 277 00:13:36,960 --> 00:13:41,920 Speaker 7: which everyone is excited about, their total deal value that's 278 00:13:42,000 --> 00:13:45,880 Speaker 7: remaining is around two point eight billion, the new ARR 279 00:13:46,160 --> 00:13:51,000 Speaker 7: increased by five hundred million. Contrast that with a Microsoft 280 00:13:51,360 --> 00:13:55,559 Speaker 7: or a Google Cloud. Microsoft added almost nine billion in 281 00:13:55,679 --> 00:13:59,520 Speaker 7: net new ARR this quarter, and they talked about, you know, 282 00:14:00,200 --> 00:14:05,040 Speaker 7: being used across one hundred million Microsoft Copilot users twenty 283 00:14:05,120 --> 00:14:09,559 Speaker 7: million GitHub Copilot users. So from that perspective, you know, 284 00:14:10,600 --> 00:14:14,400 Speaker 7: Balenteers increase in remaining deal value of five hundred million 285 00:14:14,559 --> 00:14:19,240 Speaker 7: looks pretty small. I mean, Palenteers overall revenue rund rate 286 00:14:19,360 --> 00:14:23,920 Speaker 7: is four billion. Microsoft clearly is you know, a company 287 00:14:24,000 --> 00:14:28,560 Speaker 7: that's almost one hundred times or eighty times more bigger 288 00:14:28,680 --> 00:14:32,520 Speaker 7: than Palenteer. But it just goes to show that even 289 00:14:32,600 --> 00:14:36,560 Speaker 7: on a net new AIRR basis, Microsoft is adding more 290 00:14:36,640 --> 00:14:40,000 Speaker 7: revenue per quarter than a Palenteer is. And still people 291 00:14:40,080 --> 00:14:45,000 Speaker 7: are very excited about Palenteers prospects. And to my mind, clearly, 292 00:14:45,280 --> 00:14:48,440 Speaker 7: you know, they have a product that is appealing to 293 00:14:48,720 --> 00:14:52,800 Speaker 7: a certain section of enterprise users. But at this valuation, 294 00:14:53,200 --> 00:14:56,320 Speaker 7: I mean, they can't sustain that for the next thirty 295 00:14:56,400 --> 00:15:00,160 Speaker 7: forty quarters, which is what they need to show to 296 00:15:00,240 --> 00:15:03,360 Speaker 7: grow into the evaluation. And I just don't see from 297 00:15:03,400 --> 00:15:07,120 Speaker 7: a product perspective they'll have the same kind of appeal 298 00:15:07,480 --> 00:15:10,600 Speaker 7: as a Microsoft Copilot or a Google Cloud or you know, 299 00:15:10,720 --> 00:15:12,480 Speaker 7: any of these large companies. 300 00:15:12,640 --> 00:15:14,600 Speaker 2: Some question today, how do you guys value this thing? 301 00:15:14,720 --> 00:15:16,480 Speaker 2: I mean, I got it at like two three hundred 302 00:15:16,520 --> 00:15:17,920 Speaker 2: times earning, So that's not the way to go. 303 00:15:18,560 --> 00:15:21,360 Speaker 7: So we've seen that with you know, new IPOs. When 304 00:15:21,400 --> 00:15:24,160 Speaker 7: they come to the market, they get a premium multiple. 305 00:15:24,480 --> 00:15:27,560 Speaker 7: They get traded at you know, thirty forty time sales. 306 00:15:27,600 --> 00:15:31,600 Speaker 7: Snowflake which is a competitor to Palenteer, when it went public, 307 00:15:32,120 --> 00:15:36,040 Speaker 7: it traded at sixty seventy time sales. Look at where 308 00:15:36,120 --> 00:15:39,280 Speaker 7: the stock is now. It's flat since the IPO. Even 309 00:15:39,320 --> 00:15:42,880 Speaker 7: though the company has grown top line at thirty thirty 310 00:15:42,920 --> 00:15:46,560 Speaker 7: five percent Kegger, the stock is flat. So that's what 311 00:15:46,720 --> 00:15:50,120 Speaker 7: I mean by growing into the valuation, because there is 312 00:15:50,360 --> 00:15:53,920 Speaker 7: so much embedded in that upfront multiple that even growing 313 00:15:54,000 --> 00:15:57,240 Speaker 7: at thirty percent is not enough. Palenteer really needs to 314 00:15:57,320 --> 00:16:00,640 Speaker 7: grow at fifty percent to be able to show any 315 00:16:00,920 --> 00:16:03,320 Speaker 7: sort of stock return from this point on, Can I 316 00:16:03,400 --> 00:16:05,480 Speaker 7: do that? No? I mean that's why I said I 317 00:16:05,600 --> 00:16:10,560 Speaker 7: compare the product. My initial comments were around comparing Palenteers 318 00:16:10,640 --> 00:16:15,240 Speaker 7: product versus other large enterprise software makers and even you know, 319 00:16:15,960 --> 00:16:20,080 Speaker 7: you go down the list Salesforce Service, now Adobe like, 320 00:16:20,280 --> 00:16:23,280 Speaker 7: these are much bigger companies and they have compounded at 321 00:16:23,320 --> 00:16:26,600 Speaker 7: twenty percent Keger over the years because they had a 322 00:16:26,680 --> 00:16:29,920 Speaker 7: seat base or a consumption based model. We don't even 323 00:16:30,120 --> 00:16:33,520 Speaker 7: know what kind of a business model Palenteer has. Yes, 324 00:16:33,600 --> 00:16:37,600 Speaker 7: it's winning government deals, Yes it's winning some enterprise deals, 325 00:16:37,840 --> 00:16:40,640 Speaker 7: but we don't know how they account for that revenue 326 00:16:40,680 --> 00:16:42,840 Speaker 7: every quarter. Is it a seat based model, is a 327 00:16:42,920 --> 00:16:46,080 Speaker 7: consumption base? We don't have that kind of visibility to 328 00:16:46,160 --> 00:16:47,040 Speaker 7: their business model. 329 00:16:48,240 --> 00:16:51,160 Speaker 2: In a Concter party, I can tell you the Google story, 330 00:16:51,320 --> 00:16:53,800 Speaker 2: I can tell you that Microsoft story. I have no 331 00:16:53,960 --> 00:16:56,440 Speaker 2: idea what the Palenteer story is. Can you explain it 332 00:16:56,480 --> 00:16:57,520 Speaker 2: to me like I'm a five year old? 333 00:16:57,920 --> 00:17:01,440 Speaker 7: Yeah, so their software out of the box will help 334 00:17:01,560 --> 00:17:05,080 Speaker 7: you make sense of your big data strategy. They really 335 00:17:05,320 --> 00:17:09,480 Speaker 7: curved out a name for themselves when big data became 336 00:17:09,640 --> 00:17:13,000 Speaker 7: the thing. When a company had a large amount of data, 337 00:17:13,119 --> 00:17:16,560 Speaker 7: whether it's log data or some other type of reporting data, 338 00:17:17,240 --> 00:17:19,800 Speaker 7: they would help you make sense of it because they 339 00:17:19,880 --> 00:17:23,399 Speaker 7: have something proprietary that no one else has in terms 340 00:17:23,480 --> 00:17:27,720 Speaker 7: of organizing that data and making it usable. So that's 341 00:17:27,760 --> 00:17:32,240 Speaker 7: their value proposition. But with the AI wave and llms, 342 00:17:32,320 --> 00:17:36,200 Speaker 7: they were able to integrate LLM calls within their offering 343 00:17:36,720 --> 00:17:40,320 Speaker 7: to develop a customer service or a supply chain use 344 00:17:40,400 --> 00:17:44,760 Speaker 7: case that you can apply AI on top of their ontology, 345 00:17:44,800 --> 00:17:47,320 Speaker 7: which is their core product. And a lot of other 346 00:17:47,400 --> 00:17:49,840 Speaker 7: companies are doing the same. To my mind, Microsoft is 347 00:17:49,920 --> 00:17:53,480 Speaker 7: doing the same for their customers. They're trying to embed 348 00:17:53,680 --> 00:17:56,879 Speaker 7: open AI with their core offerings with their CRM system 349 00:17:57,320 --> 00:18:00,800 Speaker 7: and help them deploy customer service use case. So the 350 00:18:01,000 --> 00:18:05,159 Speaker 7: differentiation of Balenteer versus Microsoft, to my mind is not 351 00:18:05,440 --> 00:18:08,360 Speaker 7: that big as the valuation reflects. And that's where I'm 352 00:18:08,440 --> 00:18:12,159 Speaker 7: betting they're not going to grow fifty percent for the 353 00:18:12,280 --> 00:18:15,640 Speaker 7: next twelve to twenty quarters, which is what the valuation 354 00:18:15,800 --> 00:18:16,280 Speaker 7: is implying. 355 00:18:16,359 --> 00:18:18,240 Speaker 4: Now, how would you compare what they do as far 356 00:18:18,320 --> 00:18:21,480 Speaker 4: as a government contractor versus the commercial side, like which 357 00:18:21,640 --> 00:18:22,919 Speaker 4: is doing better for them? 358 00:18:23,040 --> 00:18:26,280 Speaker 7: Yeah, so they have a much higher exposure to government side. 359 00:18:26,320 --> 00:18:28,639 Speaker 7: I mean, government side is still more than fifty percent 360 00:18:28,720 --> 00:18:32,560 Speaker 7: of their revenue, and all these large enterprise software companies 361 00:18:32,880 --> 00:18:36,520 Speaker 7: they have ten to fifteen percent government exposure. So Palenteer's 362 00:18:36,600 --> 00:18:41,800 Speaker 7: government exposure is way too large compared to other software makers. 363 00:18:42,040 --> 00:18:45,560 Speaker 7: And on top of that, their international sales seem to 364 00:18:45,640 --> 00:18:49,680 Speaker 7: be declining at least, you know, on the commercial side 365 00:18:49,760 --> 00:18:53,840 Speaker 7: because of the polarizing views of the management. So if 366 00:18:53,880 --> 00:18:57,439 Speaker 7: they were more balanced, probably they would win more international business. 367 00:18:57,520 --> 00:19:00,560 Speaker 7: But right now this is a US centric story, and 368 00:19:00,880 --> 00:19:03,600 Speaker 7: that's where I think it sort of puts a dent 369 00:19:03,680 --> 00:19:06,600 Speaker 7: to the growth rate down the line once they run 370 00:19:06,680 --> 00:19:09,040 Speaker 7: out of the deals that they currently have signed. 371 00:19:09,520 --> 00:19:12,320 Speaker 4: Our thanks to Man Deep, saying Bloomberg Intelligence senior tech 372 00:19:12,400 --> 00:19:13,320 Speaker 4: industry analyst. 373 00:19:13,560 --> 00:19:15,439 Speaker 2: We look next at earnings from one of the world's 374 00:19:15,480 --> 00:19:19,160 Speaker 2: biggest producers of heavy machinery, Caterpillar. This week, the company 375 00:19:19,200 --> 00:19:22,200 Speaker 2: posted qually earnings that missed analyst expectations. 376 00:19:22,320 --> 00:19:25,440 Speaker 4: Caterpillar also said it now expects full year adjusted operating 377 00:19:25,480 --> 00:19:28,120 Speaker 4: profit to fall in the bottom of its annual target range, 378 00:19:28,400 --> 00:19:30,760 Speaker 4: even with higher annual sales and the companies that it 379 00:19:30,800 --> 00:19:34,160 Speaker 4: expects to face net incremental tariffs on one point three 380 00:19:34,240 --> 00:19:36,440 Speaker 4: to one point five billion dollars this year. 381 00:19:36,720 --> 00:19:38,720 Speaker 2: For more, Lisa and I were joined by Chris Gielino, 382 00:19:38,720 --> 00:19:42,720 Speaker 2: Bloomberg Intelligence senior US machinery analyst. We first asked Chris 383 00:19:42,920 --> 00:19:45,560 Speaker 2: to discuss his takeaways from Caterpillar's earnings. 384 00:19:46,080 --> 00:19:47,800 Speaker 8: The print was a little weak. It came in a 385 00:19:47,800 --> 00:19:51,600 Speaker 8: little below expectations. The big takeaway here is that underlying 386 00:19:51,680 --> 00:19:55,879 Speaker 8: demand is still pretty darn resilient. You had backlog ubsequentially 387 00:19:56,000 --> 00:19:59,480 Speaker 8: again this quarter, which set another record. You had improving 388 00:19:59,600 --> 00:20:03,280 Speaker 8: order trad across all three of their main businesses. Dealer 389 00:20:03,359 --> 00:20:06,560 Speaker 8: inventories still remain quite low, and the company actually raise 390 00:20:06,600 --> 00:20:09,159 Speaker 8: their sales guidance for the year. So you know, that 391 00:20:09,280 --> 00:20:12,640 Speaker 8: seems to suggest us that underlying demand is still intact 392 00:20:12,720 --> 00:20:14,640 Speaker 8: despite all these these tariff headwinds. 393 00:20:15,280 --> 00:20:17,359 Speaker 4: And now, how do their results kind of match up 394 00:20:17,400 --> 00:20:20,679 Speaker 4: to some of their their peers. They believe there's Terex Lindsay, 395 00:20:21,000 --> 00:20:23,359 Speaker 4: who already opened their books. How does Caterpillar match up? 396 00:20:24,000 --> 00:20:27,280 Speaker 8: Yeah, I characterized the overall earning season for for US 397 00:20:27,400 --> 00:20:30,920 Speaker 8: machinery is kind of mixed if you think about really 398 00:20:31,040 --> 00:20:36,200 Speaker 8: construction peers, which which is kind of more Caterpillars sweet spot. 399 00:20:37,359 --> 00:20:39,680 Speaker 8: That's a market that's you know, kind of bouncing along 400 00:20:39,720 --> 00:20:40,159 Speaker 8: the bottom. 401 00:20:40,240 --> 00:20:40,359 Speaker 7: Here. 402 00:20:41,600 --> 00:20:45,440 Speaker 8: We do have you know, infrastructure projects and these large 403 00:20:45,480 --> 00:20:48,040 Speaker 8: meggat projects which are helping to offset some of the 404 00:20:48,080 --> 00:20:51,280 Speaker 8: weakness that you're seeing on the private, non residential side, 405 00:20:51,440 --> 00:20:54,200 Speaker 8: things that are more interest rate sensitive. But you know, 406 00:20:54,359 --> 00:20:57,280 Speaker 8: you're starting to see some positive indicators that would you know, 407 00:20:57,440 --> 00:20:58,920 Speaker 8: lead us to believe that you're going to start to 408 00:20:58,960 --> 00:21:02,520 Speaker 8: see a cycle clover emerge in twenty twenty six. There's 409 00:21:02,560 --> 00:21:04,520 Speaker 8: a number of you know, leading indicators out there that 410 00:21:04,560 --> 00:21:07,320 Speaker 8: would support that. And I think really Caterpillars results here 411 00:21:08,160 --> 00:21:10,680 Speaker 8: with orders being up in the construction business, with the 412 00:21:10,760 --> 00:21:13,400 Speaker 8: backlog being up, really kind of reinforced that view. 413 00:21:14,000 --> 00:21:18,159 Speaker 2: Where does Caterpillar make their big trucks and stuff like 414 00:21:18,240 --> 00:21:19,280 Speaker 2: that everywhere? 415 00:21:19,400 --> 00:21:22,879 Speaker 8: Right, They're they're a global company. They've got a large 416 00:21:22,960 --> 00:21:27,200 Speaker 8: footprint that spans you know, every continent in you know, 417 00:21:27,320 --> 00:21:29,680 Speaker 8: most countries. But if you think about it, at the 418 00:21:29,760 --> 00:21:32,280 Speaker 8: end of the day, it's North America, right, it's more 419 00:21:32,320 --> 00:21:35,440 Speaker 8: than half of their revenues. Europe is called it, you know, 420 00:21:35,640 --> 00:21:39,359 Speaker 8: twenty percent, ish Asia Pacific a little bit below that, 421 00:21:39,520 --> 00:21:41,679 Speaker 8: and then you know Latin America is kind of closer 422 00:21:41,720 --> 00:21:44,720 Speaker 8: to ten percent. They are a net exporter out of 423 00:21:44,760 --> 00:21:47,760 Speaker 8: the US, but as we saw, Tariff's probably going to 424 00:21:47,760 --> 00:21:49,359 Speaker 8: be a little bit more of a head wind they 425 00:21:49,560 --> 00:21:52,760 Speaker 8: than they had initially anticipated. They're looking for, you know, 426 00:21:52,840 --> 00:21:55,200 Speaker 8: somewhere between a one point three to one point five 427 00:21:55,280 --> 00:21:57,320 Speaker 8: billion dollar hit for this year. 428 00:21:57,880 --> 00:22:00,000 Speaker 4: So, Chris, you kind of touched upon this sales lie 429 00:22:00,160 --> 00:22:04,080 Speaker 4: in construction resource industries, but energy and transportation unit that 430 00:22:04,160 --> 00:22:07,560 Speaker 4: had some higher sales. What is that that driving force 431 00:22:07,720 --> 00:22:09,840 Speaker 4: behind the growth in engines and transportation? 432 00:22:11,119 --> 00:22:13,480 Speaker 8: So this continues to be one of really the big 433 00:22:13,600 --> 00:22:16,600 Speaker 8: highlights for Caterpillar, you know, despite some of the cyclical 434 00:22:17,080 --> 00:22:21,320 Speaker 8: softness that they're seeing, is the energy and transportation business, 435 00:22:21,840 --> 00:22:25,840 Speaker 8: particularly in power generation. So think you know, data centers 436 00:22:25,880 --> 00:22:29,240 Speaker 8: that are becoming an increasingly larger part of the portfolio. 437 00:22:30,040 --> 00:22:33,119 Speaker 8: Power gen continues to drive outsize growth within the energy 438 00:22:33,160 --> 00:22:37,560 Speaker 8: and transportation business. There's you know, a multi year backlog there, 439 00:22:37,600 --> 00:22:41,000 Speaker 8: so we have, you know, veryly tremendous visibility, and what 440 00:22:41,160 --> 00:22:44,720 Speaker 8: Caterpillar is doing now is really expanding capacity to help 441 00:22:44,840 --> 00:22:47,960 Speaker 8: you know, meet this growing demand for data centers and 442 00:22:48,080 --> 00:22:52,680 Speaker 8: power generation. So there's a long secular tailwind at play. 443 00:22:52,760 --> 00:22:54,359 Speaker 8: Here and really, you know, we think we have a 444 00:22:54,440 --> 00:22:57,000 Speaker 8: pretty good visibility here over the back half of the decade. 445 00:22:57,520 --> 00:23:00,240 Speaker 2: Is Caterpillar and companies like Caterpillar, are they benefit or 446 00:23:00,280 --> 00:23:03,720 Speaker 2: do you expect them to benefit from maybe on shoring 447 00:23:03,920 --> 00:23:07,359 Speaker 2: even more manufacturing in this country if to the extend 448 00:23:07,400 --> 00:23:09,760 Speaker 2: that President Trump you know, wants to do that and 449 00:23:09,840 --> 00:23:11,680 Speaker 2: he's been talking about that a lot. Is that something 450 00:23:11,680 --> 00:23:13,320 Speaker 2: where kat would will see it? 451 00:23:14,040 --> 00:23:17,760 Speaker 8: Yeah, I mean I would say we haven't really heard 452 00:23:17,800 --> 00:23:21,280 Speaker 8: of you know, I would say concrete or tangible evidence 453 00:23:21,359 --> 00:23:24,280 Speaker 8: of that happening yet, And it's really difficult to you know, 454 00:23:25,280 --> 00:23:27,640 Speaker 8: get a lens on that on a quarter to quarter 455 00:23:27,760 --> 00:23:29,360 Speaker 8: I think, you know, if we look back maybe over 456 00:23:30,160 --> 00:23:32,760 Speaker 8: a five year window, maybe we'll have a better picture 457 00:23:32,800 --> 00:23:34,800 Speaker 8: of that. But yet, no doubt Caterpillar is a big 458 00:23:34,840 --> 00:23:40,879 Speaker 8: beneficiary of any kind of construction activity here domestically. And 459 00:23:40,960 --> 00:23:42,880 Speaker 8: then not only on top of you know, not only 460 00:23:43,000 --> 00:23:47,040 Speaker 8: just moving the dirt and building the facilities, they're also, 461 00:23:47,160 --> 00:23:49,840 Speaker 8: like I mentioned, having have a bigger piece of the 462 00:23:50,560 --> 00:23:54,600 Speaker 8: data center and power generation needs within our within our 463 00:23:54,640 --> 00:23:58,520 Speaker 8: country as well. So it's really kind of twofold. Not 464 00:23:58,640 --> 00:24:01,960 Speaker 8: only you know, with the moving the dirt and the facilities, 465 00:24:02,000 --> 00:24:05,160 Speaker 8: but also you know, longer term, we think the secular 466 00:24:05,440 --> 00:24:08,960 Speaker 8: tailwinds around power generation. Are you pretty favorable? 467 00:24:09,320 --> 00:24:11,040 Speaker 4: Hey, Chris, before you go, we have like about a 468 00:24:11,119 --> 00:24:13,800 Speaker 4: minute or so left. People usually say this is like 469 00:24:13,880 --> 00:24:16,040 Speaker 4: the Bell weather for a look at the economy. Is 470 00:24:16,119 --> 00:24:19,520 Speaker 4: this company going to continue to be that spot and 471 00:24:19,600 --> 00:24:20,320 Speaker 4: to hold that title? 472 00:24:20,480 --> 00:24:23,480 Speaker 8: I don't see anything changing in the near term here. 473 00:24:23,680 --> 00:24:28,840 Speaker 8: They are the largest global manufacturer of heavy machinery. They 474 00:24:29,000 --> 00:24:33,359 Speaker 8: have the scale, the dealer network, and really there's not 475 00:24:33,480 --> 00:24:36,359 Speaker 8: too many competitors that are that close to them. So 476 00:24:37,600 --> 00:24:41,679 Speaker 8: they are the leading indicator for the heavy machinery markets 477 00:24:41,680 --> 00:24:45,080 Speaker 8: and construction activity, and I don't foresee that changing anytime soon. 478 00:24:45,560 --> 00:24:49,640 Speaker 4: Our thanks to Christopher Chiolio, Bloomberg Intelligence senior US machinery analyst. 479 00:24:50,000 --> 00:24:52,360 Speaker 4: Coming up, well, look at why the ev giant Tesla 480 00:24:52,680 --> 00:24:55,879 Speaker 4: approved a thirty billion dollar stock award for its CEO, 481 00:24:56,119 --> 00:24:57,800 Speaker 4: Elon Musk listening. 482 00:24:57,600 --> 00:25:00,600 Speaker 2: To Bloomberg Intelligence on Bloomberg Radio providing in the research 483 00:25:00,640 --> 00:25:02,800 Speaker 2: and data on two thousand companies in one hundred and 484 00:25:02,840 --> 00:25:03,479 Speaker 2: thirty industries. 485 00:25:03,600 --> 00:25:06,719 Speaker 4: You can access Bloomberg Intelligence via bi go on the terminal. 486 00:25:06,920 --> 00:25:08,119 Speaker 4: I'm Lice Matteo and. 487 00:25:08,160 --> 00:25:08,959 Speaker 2: I'm Paul Sweeney. 488 00:25:09,160 --> 00:25:10,440 Speaker 7: This is Bloomberg. 489 00:25:17,600 --> 00:25:21,280 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 490 00:25:21,400 --> 00:25:24,439 Speaker 1: weekdays at ten am Easterned on Apple, Cocklay and Android 491 00:25:24,480 --> 00:25:27,760 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 492 00:25:27,840 --> 00:25:30,920 Speaker 1: you get your podcasts, or watch us live on YouTube. 493 00:25:31,760 --> 00:25:34,000 Speaker 4: I'm Paul Sweeney and I'm Lace Matteo filling out on 494 00:25:34,040 --> 00:25:37,240 Speaker 4: Bloomberg Intelligence. We move now to second quarter earnings from 495 00:25:37,240 --> 00:25:38,880 Speaker 4: the fast food giant McDonald's. 496 00:25:39,040 --> 00:25:41,680 Speaker 2: This week, McDonald's reported their global sales at restaurants open 497 00:25:41,680 --> 00:25:44,760 Speaker 2: at least thirteen months rose three point eight percent last quarter. 498 00:25:45,040 --> 00:25:48,800 Speaker 4: This suggests that pop culture focused collaborations and budget meals 499 00:25:48,840 --> 00:25:51,320 Speaker 4: are helping to offset diners' economic anxiety. 500 00:25:51,720 --> 00:25:53,760 Speaker 2: More guest hosts Isabelle Lee and I were joined by 501 00:25:53,840 --> 00:25:57,120 Speaker 2: Michael Halen, Bloomberg Intelligence senior restaurant and food service analysts. 502 00:25:57,359 --> 00:25:59,720 Speaker 2: Your first ask, Mike, if returning to sales growth feels 503 00:25:59,800 --> 00:26:01,200 Speaker 2: like a waiting for McDonald's. 504 00:26:01,640 --> 00:26:06,080 Speaker 9: It's definitely a win for you know, overall industry, saam 505 00:26:06,119 --> 00:26:08,840 Speaker 9: source sales because it's such a monster. It also could 506 00:26:08,840 --> 00:26:12,120 Speaker 9: be bad news for some of their competitors. With fourteen 507 00:26:12,160 --> 00:26:15,359 Speaker 9: thousand stores in the United States. Listen, man, they know 508 00:26:15,480 --> 00:26:19,879 Speaker 9: how to run run good restaurants right right now in 509 00:26:19,920 --> 00:26:24,240 Speaker 9: the US, they're starting to lap some easier comparisons and 510 00:26:25,240 --> 00:26:27,880 Speaker 9: you know that's showing up and the you know, that's 511 00:26:27,920 --> 00:26:30,879 Speaker 9: helping their results. They're also you know, doing a good 512 00:26:30,960 --> 00:26:33,720 Speaker 9: job with you know, the menu, right, They're bringing back 513 00:26:33,800 --> 00:26:37,440 Speaker 9: snack wraps, they're bringing back the mccrispy strip. They just 514 00:26:37,560 --> 00:26:40,840 Speaker 9: debuted a daily double. They've been pressing on value all year. 515 00:26:40,920 --> 00:26:42,840 Speaker 9: That was a big thing since the first quarter. And 516 00:26:42,960 --> 00:26:46,359 Speaker 9: so you know, McDonald's has the scale that they can 517 00:26:46,680 --> 00:26:50,560 Speaker 9: you know, offer products a little bit cheaper than their 518 00:26:50,680 --> 00:26:53,320 Speaker 9: peers and still in the franchisees can still make a 519 00:26:53,359 --> 00:26:56,639 Speaker 9: little bit of money off of it, right, So you know, 520 00:26:56,720 --> 00:26:59,399 Speaker 9: they they seem to really be hitting their stride and 521 00:26:59,480 --> 00:27:01,800 Speaker 9: their lap easy comps in the second half of the year. 522 00:27:01,960 --> 00:27:04,920 Speaker 9: So you know, we're looking at a pretty good second 523 00:27:04,960 --> 00:27:05,919 Speaker 9: half for McDonald's. 524 00:27:06,280 --> 00:27:09,320 Speaker 6: And international markets led the company's growth. What regions of 525 00:27:09,359 --> 00:27:12,240 Speaker 6: the world did they really pushed aggressively towards. 526 00:27:13,119 --> 00:27:16,840 Speaker 9: Yeah, they mentioned some really good strength in Germany. They 527 00:27:17,359 --> 00:27:20,600 Speaker 9: talked about some improvement in some markets that had been struggling, 528 00:27:20,720 --> 00:27:24,920 Speaker 9: like France and Australia and so you know, what they're 529 00:27:25,080 --> 00:27:28,440 Speaker 9: doing overseas is similar to the US playbook, right, but 530 00:27:28,680 --> 00:27:32,400 Speaker 9: they're probably ahead of the game, ahead of the US 531 00:27:32,520 --> 00:27:37,000 Speaker 9: in terms of providing everyday value. Their value messaging has 532 00:27:37,119 --> 00:27:40,440 Speaker 9: been on point and it's really helped them grow internationally 533 00:27:40,480 --> 00:27:43,280 Speaker 9: and that's why we've seen international grow faster than the 534 00:27:43,359 --> 00:27:46,520 Speaker 9: US for the last year or so. They also cited 535 00:27:46,560 --> 00:27:49,760 Speaker 9: the fact that there's less competition overseas, so they're really, 536 00:27:50,359 --> 00:27:54,040 Speaker 9: you know, a pricing leader overseas. You know, they can 537 00:27:54,119 --> 00:27:55,600 Speaker 9: the same type of thing in the US where they 538 00:27:55,640 --> 00:27:59,119 Speaker 9: can offer price points that competitors just can't match. And 539 00:27:59,200 --> 00:28:02,120 Speaker 9: then they're also in improving the operations, improving the quality 540 00:28:02,160 --> 00:28:04,560 Speaker 9: of the product, which has been an ongoing theme here. 541 00:28:05,359 --> 00:28:08,760 Speaker 9: They're improving the quality of the beef, better burgers, the 542 00:28:08,840 --> 00:28:12,000 Speaker 9: way they cook the burgers their day being the big 543 00:28:12,280 --> 00:28:17,719 Speaker 9: Arch which is a big, bigger sized burger in their lineup. 544 00:28:17,760 --> 00:28:21,200 Speaker 9: They're also expanding chicken overseas. So this company's humming along 545 00:28:21,280 --> 00:28:21,560 Speaker 9: right now. 546 00:28:22,840 --> 00:28:25,440 Speaker 2: What does a company say, Like when I think about McDonald's, 547 00:28:25,440 --> 00:28:26,840 Speaker 2: I think a lot of folks probably feel like the 548 00:28:26,920 --> 00:28:30,600 Speaker 2: low end, low income consumers probably it's bread and butter 549 00:28:30,720 --> 00:28:33,720 Speaker 2: there and maybe that consumers more at risk in this 550 00:28:33,880 --> 00:28:37,640 Speaker 2: economic environment. What's the company saying about low income patrons. 551 00:28:38,200 --> 00:28:40,720 Speaker 9: Yeah, you know what I like about this call call 552 00:28:40,920 --> 00:28:43,440 Speaker 9: is that you know, they're talking about what they can control. 553 00:28:43,600 --> 00:28:45,880 Speaker 9: You know, they cited the fact that low income consumer 554 00:28:46,000 --> 00:28:49,400 Speaker 9: traffic is down double digits, right, versus a small gain 555 00:28:50,440 --> 00:28:54,040 Speaker 9: for middle income consumers and steady consistent gains with high 556 00:28:54,120 --> 00:28:57,760 Speaker 9: income consumers. So they are seeing, you know, weakness with 557 00:28:57,880 --> 00:29:00,880 Speaker 9: low income consumers like everyone else. That's why they push 558 00:29:00,960 --> 00:29:03,360 Speaker 9: so hard on value. That's why they have these you know, 559 00:29:03,480 --> 00:29:06,600 Speaker 9: five dollars meals and buy one, get one for a dollar, 560 00:29:06,680 --> 00:29:09,640 Speaker 9: and why they put marketing dollars behind that. That's part 561 00:29:09,680 --> 00:29:12,520 Speaker 9: of the you know, the beauty of the snack wraps. 562 00:29:12,520 --> 00:29:14,720 Speaker 9: They're coming back at a two ninety nine price point. 563 00:29:14,800 --> 00:29:17,520 Speaker 9: We think that's going to bring some low income consumers 564 00:29:17,600 --> 00:29:20,400 Speaker 9: back into the fold, right, So they understand that that 565 00:29:20,480 --> 00:29:23,880 Speaker 9: people are very priced sensitive right now, and you know, 566 00:29:24,000 --> 00:29:27,080 Speaker 9: they're addressing it with the price points. But they're also 567 00:29:27,200 --> 00:29:30,640 Speaker 9: trying to give people better quality and better service. At 568 00:29:30,680 --> 00:29:31,200 Speaker 9: the same time. 569 00:29:31,760 --> 00:29:34,880 Speaker 6: They also plan to taste new beverages and this includes 570 00:29:35,000 --> 00:29:37,560 Speaker 6: cold coffees and crafted sodas at more than five hundred 571 00:29:37,920 --> 00:29:41,800 Speaker 6: US locations. How much of a pull are beverages when 572 00:29:41,800 --> 00:29:44,640 Speaker 6: it comes to McDonald's offerings or is food really still king? 573 00:29:45,480 --> 00:29:48,120 Speaker 9: Food is still king? But listen, beverages are hot. Beverages 574 00:29:48,160 --> 00:29:54,000 Speaker 9: are hot everywhere right during highlges, energy and very high margin, right. 575 00:29:54,120 --> 00:29:57,320 Speaker 9: And so we think this is a very good opportunity 576 00:29:57,520 --> 00:30:01,120 Speaker 9: for McDonald's. I think this is kind of a problem 577 00:30:01,280 --> 00:30:06,560 Speaker 9: for Sonic, which has long done a really good job 578 00:30:06,680 --> 00:30:09,880 Speaker 9: with their drink offering. But yeah, we think this is 579 00:30:10,800 --> 00:30:15,800 Speaker 9: something that can help drive sales at McDonald's. Taco Bell 580 00:30:15,960 --> 00:30:19,200 Speaker 9: is something Taco Bell's expanding as well, But we think 581 00:30:19,240 --> 00:30:21,040 Speaker 9: this is going to be more of a twenty twenty 582 00:30:21,160 --> 00:30:22,600 Speaker 9: six story for McDonald's. 583 00:30:22,760 --> 00:30:26,400 Speaker 2: For McDonald's, my percentage of the revenue comes from owned 584 00:30:26,480 --> 00:30:28,560 Speaker 2: and operated stores versus franchise stores. 585 00:30:30,000 --> 00:30:34,000 Speaker 9: Oh, they're ninety eight percent franchised. So there, Yeah, they're 586 00:30:34,200 --> 00:30:37,880 Speaker 9: heavily franchised. And you know, it's a beautiful model, man. 587 00:30:37,960 --> 00:30:40,160 Speaker 9: There's not a lot of operating leverage in the model. 588 00:30:40,200 --> 00:30:43,960 Speaker 9: They generate a ton of cash that they return to shareholders. 589 00:30:44,400 --> 00:30:47,360 Speaker 2: It really is a buy What's so, what's the royalty 590 00:30:47,440 --> 00:30:50,479 Speaker 2: rate on there's a franchise e paid McDonald's based upon revenue, 591 00:30:50,680 --> 00:30:53,440 Speaker 2: based upon net income, based upon how many Big Max 592 00:30:53,480 --> 00:30:54,360 Speaker 2: say sale. How does that work? 593 00:30:55,160 --> 00:30:57,880 Speaker 9: Yeah, yeah, yeah. McDonald's is a little bit unique. They 594 00:30:57,960 --> 00:31:01,240 Speaker 9: have a five ish percent royalty eight plus they own 595 00:31:01,320 --> 00:31:02,680 Speaker 9: a lot of the real estate. So a lot of 596 00:31:02,720 --> 00:31:06,160 Speaker 9: franchises in the United States are paying a rent, which 597 00:31:06,240 --> 00:31:08,480 Speaker 9: is typically you know, a ten inch percent of sales, 598 00:31:08,600 --> 00:31:11,120 Speaker 9: we'll say, and then they'll pay another three and a 599 00:31:11,200 --> 00:31:13,720 Speaker 9: half to four percent into the ad fun. 600 00:31:13,800 --> 00:31:15,720 Speaker 2: I didn't know that until I saw the movie and 601 00:31:15,800 --> 00:31:19,640 Speaker 2: then that famous scene. Yeah, you're not in the hamburger business, 602 00:31:19,720 --> 00:31:21,760 Speaker 2: you're in the real estate business. And that was such 603 00:31:21,800 --> 00:31:24,000 Speaker 2: a great scene. I learned a lot there. All Right, 604 00:31:24,000 --> 00:31:25,800 Speaker 2: I can't let you go without Crackerbrowl and I need 605 00:31:25,880 --> 00:31:29,320 Speaker 2: my daily update Country Boy Breakfast. How's that company doing? Listen. 606 00:31:29,400 --> 00:31:33,880 Speaker 9: We're we're big fans of new CEO Julie Messino. That 607 00:31:34,000 --> 00:31:36,600 Speaker 9: stock's been a bit of a rollercoaster, not a surprise 608 00:31:36,680 --> 00:31:38,960 Speaker 9: since it's a small cap. It rows more than one 609 00:31:39,040 --> 00:31:42,560 Speaker 9: hundred percent off its April lows. Now it's in the 610 00:31:42,680 --> 00:31:44,680 Speaker 9: midst of a pretty aggressive downturn. 611 00:31:44,960 --> 00:31:46,160 Speaker 5: But you know, we like it. 612 00:31:46,280 --> 00:31:50,240 Speaker 9: We like Julie's plans to improve the operations, to spend 613 00:31:50,320 --> 00:31:54,160 Speaker 9: more and be more efficient with their marketing spend. We 614 00:31:54,280 --> 00:31:57,040 Speaker 9: think this is a chain that hadn't been taken care of, 615 00:31:57,200 --> 00:32:00,360 Speaker 9: It hadn't been run really well for the last decade, 616 00:32:00,400 --> 00:32:02,320 Speaker 9: and so we see a lot of low hanging fruit 617 00:32:02,400 --> 00:32:04,520 Speaker 9: for the current management team to turn things around and 618 00:32:04,600 --> 00:32:08,160 Speaker 9: really drive strong seam source sales through year end twenty 619 00:32:08,240 --> 00:32:10,480 Speaker 9: twenty five and well into twenty twenty six. 620 00:32:10,960 --> 00:32:13,560 Speaker 4: All right, thanks to Michael Hale and Bloomberg Intelligence senior 621 00:32:13,640 --> 00:32:17,080 Speaker 4: restaurant and food service analyst. We move next to news 622 00:32:17,120 --> 00:32:18,360 Speaker 4: at the ev giant Tesla. 623 00:32:18,680 --> 00:32:20,960 Speaker 2: This week, we heard that Tesla proved an interim stock 624 00:32:21,040 --> 00:32:23,720 Speaker 2: award worth about thirty billion dollars for chief executive officer 625 00:32:23,800 --> 00:32:26,760 Speaker 2: Elon Musk to keep his attention on the automaker. 626 00:32:27,000 --> 00:32:29,880 Speaker 4: The award includes ninety six million shares of the automaker 627 00:32:30,040 --> 00:32:32,320 Speaker 4: that will vest if Musk continues to serve in the 628 00:32:32,360 --> 00:32:33,960 Speaker 4: top post for another two years. 629 00:32:34,160 --> 00:32:36,080 Speaker 2: For more, guest host Norma, Linda and I were joined 630 00:32:36,080 --> 00:32:40,400 Speaker 2: by Steve Man Bloomberg Intelligence, Global Autos and Industrials Research Channels. First, 631 00:32:40,440 --> 00:32:42,680 Speaker 2: ask Steve what he makes of this stock award. 632 00:32:42,920 --> 00:32:47,520 Speaker 10: I think it's very positive news for Tesla because you know, 633 00:32:47,720 --> 00:32:51,480 Speaker 10: they are going through a pivot right now, not only 634 00:32:51,560 --> 00:32:55,400 Speaker 10: an automaker, but they're very focused on AI. But if 635 00:32:55,480 --> 00:32:58,560 Speaker 10: you look at Elon Musk, you know he's Tesla is 636 00:32:58,720 --> 00:33:02,280 Speaker 10: not his only business, right He's got x Ai, his 637 00:33:02,440 --> 00:33:07,320 Speaker 10: AI company, which owns the former Twitter, and he also 638 00:33:07,520 --> 00:33:13,200 Speaker 10: Hash you know, space x Neurlink. I think they're all 639 00:33:13,320 --> 00:33:16,920 Speaker 10: related in some ways to AI. And I think, you know, 640 00:33:17,120 --> 00:33:20,880 Speaker 10: without you know, must and Tesla, I think you know, 641 00:33:21,000 --> 00:33:23,400 Speaker 10: there's going to be a lot of risk to that 642 00:33:23,720 --> 00:33:25,680 Speaker 10: vision for Tesla without him there. 643 00:33:26,480 --> 00:33:28,240 Speaker 11: See, if you mentioned that there are a lot of 644 00:33:28,360 --> 00:33:31,040 Speaker 11: different things that are vying for Musk's attention. Of course, 645 00:33:31,080 --> 00:33:32,960 Speaker 11: we do know that he was really politically involved and 646 00:33:33,000 --> 00:33:34,840 Speaker 11: then we thought kind of pulled back, and then he 647 00:33:35,120 --> 00:33:38,320 Speaker 11: mentioned his intention for creating the America Party. So clearly 648 00:33:38,360 --> 00:33:41,040 Speaker 11: he still remains in these conversations here. But what are 649 00:33:41,120 --> 00:33:44,080 Speaker 11: investors looking for right now from him? And doesn't seem 650 00:33:44,120 --> 00:33:46,920 Speaker 11: as though his attention is devoted as much as it 651 00:33:46,960 --> 00:33:47,760 Speaker 11: should be to Tesla. 652 00:33:48,280 --> 00:33:51,280 Speaker 10: Yeah, I think fortunately for now, his attention is very 653 00:33:51,320 --> 00:33:54,480 Speaker 10: much devoted to Tesla. He set that at the second 654 00:33:54,560 --> 00:33:59,000 Speaker 10: quarter earnings call. I think, you know, his presence is 655 00:33:59,400 --> 00:34:03,440 Speaker 10: important because you know, you know, right now the company 656 00:34:03,560 --> 00:34:07,120 Speaker 10: is going through a changeover in terms of the direction 657 00:34:07,360 --> 00:34:10,880 Speaker 10: the strategy right uh. You know, cars has been very 658 00:34:10,920 --> 00:34:14,520 Speaker 10: important continues to be important to drive that AI theme. 659 00:34:15,280 --> 00:34:18,680 Speaker 10: But without must there, I think the company will have 660 00:34:18,880 --> 00:34:21,520 Speaker 10: to you know, won't able to find the next person 661 00:34:21,680 --> 00:34:24,480 Speaker 10: really to drive the company to the next step and 662 00:34:24,600 --> 00:34:30,720 Speaker 10: expanding robo taxi, expanding their optimness robot offering in the future. 663 00:34:31,040 --> 00:34:32,759 Speaker 2: Do we care about how many cars they make and 664 00:34:32,840 --> 00:34:35,040 Speaker 2: whether they make any money in the old car business? 665 00:34:35,040 --> 00:34:36,080 Speaker 5: Seed we do. 666 00:34:37,320 --> 00:34:39,600 Speaker 10: And you know a lot of people think that, you know, 667 00:34:40,000 --> 00:34:43,279 Speaker 10: it's a it's a full pivot towards AI, But I 668 00:34:43,400 --> 00:34:48,799 Speaker 10: think making cars and UH and developing that AI UH 669 00:34:49,080 --> 00:34:52,720 Speaker 10: software it goes hand in hand. It's almost like Apple 670 00:34:52,960 --> 00:34:54,399 Speaker 10: and its ecosystem. 671 00:34:55,120 --> 00:34:55,239 Speaker 5: UH. 672 00:34:55,440 --> 00:34:59,960 Speaker 10: I mean, there are opportunities for Tesla to actually license 673 00:35:00,400 --> 00:35:05,040 Speaker 10: the FSD, the full self driving software out, but I 674 00:35:05,120 --> 00:35:08,359 Speaker 10: think in the meantime it's not it's not something he's 675 00:35:08,400 --> 00:35:10,520 Speaker 10: looking to do. I think he wants to build out 676 00:35:10,600 --> 00:35:16,680 Speaker 10: Robotaxi internally and actually drive revenue and profits. He's does 677 00:35:16,800 --> 00:35:20,480 Speaker 10: see huge profits from from the Robotaxi and from the 678 00:35:20,640 --> 00:35:25,560 Speaker 10: FSD software. If you look at other software companies, margins 679 00:35:25,640 --> 00:35:29,440 Speaker 10: are high double digits on the software for any software. 680 00:35:29,960 --> 00:35:33,520 Speaker 10: But then you know with with his FSD software, the 681 00:35:33,960 --> 00:35:36,920 Speaker 10: car isn't an integrated component to it. It's it's it's 682 00:35:37,000 --> 00:35:40,120 Speaker 10: it's very important that he continues to make cars, not 683 00:35:40,239 --> 00:35:44,440 Speaker 10: only for the for cash, but for for really marketing 684 00:35:44,520 --> 00:35:45,520 Speaker 10: that software. 685 00:35:45,160 --> 00:35:45,600 Speaker 9: That he has. 686 00:35:46,320 --> 00:35:48,120 Speaker 11: You have a lot of pressuring Tesla over the last 687 00:35:48,160 --> 00:35:49,560 Speaker 11: few months. I mean we're looking at a stock. It's 688 00:35:49,560 --> 00:35:52,600 Speaker 11: the worst performing stock within all the mag seven stocks 689 00:35:52,640 --> 00:35:55,120 Speaker 11: that there are right now. Explain to me right now 690 00:35:55,200 --> 00:35:57,680 Speaker 11: what the latest overhangs are right now for the company. 691 00:35:58,120 --> 00:36:00,840 Speaker 10: Well, I think one big overhang that's to remove this 692 00:36:01,960 --> 00:36:04,120 Speaker 10: it is his pay package. There is a lot of 693 00:36:04,200 --> 00:36:08,280 Speaker 10: fear in terms of him potentially being kicked out of Tesla. 694 00:36:09,120 --> 00:36:12,239 Speaker 10: But I think the biggest overhang right now, or where 695 00:36:12,480 --> 00:36:16,520 Speaker 10: the investors are more focused on, is the expansion of Robotaxi. 696 00:36:17,120 --> 00:36:21,320 Speaker 10: Right He's he launched it back in June in Austin. 697 00:36:22,000 --> 00:36:25,560 Speaker 10: He's launching it in the San Francisco Bay area, and 698 00:36:25,840 --> 00:36:29,440 Speaker 10: he's also thinking about launching it in Nevada. And it's 699 00:36:29,480 --> 00:36:32,680 Speaker 10: from the looks of it, it's going quite well. I mean, 700 00:36:32,800 --> 00:36:36,400 Speaker 10: there are some hiccups here and there with this complex 701 00:36:36,560 --> 00:36:41,080 Speaker 10: engineering system that he's putting in place for cars. It's 702 00:36:41,239 --> 00:36:45,000 Speaker 10: it's normal, it's normal. So but you know, safety is 703 00:36:45,080 --> 00:36:48,480 Speaker 10: still his priority, and you know he's gonna going at 704 00:36:48,520 --> 00:36:51,919 Speaker 10: it at a measured pace, but it seems like he's 705 00:36:52,000 --> 00:36:57,000 Speaker 10: expanding it relatively fast. You know, his the the area 706 00:36:57,080 --> 00:37:01,040 Speaker 10: of coverage is is much bigger than initially was back 707 00:37:01,920 --> 00:37:05,640 Speaker 10: in Austin back in June, and we're seeing something similar 708 00:37:05,680 --> 00:37:09,799 Speaker 10: in San Francisco. So investors are really focused on when 709 00:37:10,320 --> 00:37:13,880 Speaker 10: Robotaxi will start contributing to the bottom line, and we 710 00:37:14,000 --> 00:37:16,640 Speaker 10: think that you're probably more likely in twenty twenty seven. 711 00:37:17,040 --> 00:37:19,840 Speaker 4: Our thanks to Steve Man, Bloomberg Intelligence, Global Autos and 712 00:37:19,960 --> 00:37:21,400 Speaker 4: Industrials Research analyst. 713 00:37:21,880 --> 00:37:26,520 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 714 00:37:26,760 --> 00:37:30,200 Speaker 1: and anywhere else you get your podcasts. Listen live each 715 00:37:30,239 --> 00:37:33,680 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com, 716 00:37:34,120 --> 00:37:37,600 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 717 00:37:38,080 --> 00:37:41,000 Speaker 1: You can also watch us live every weekday on YouTube 718 00:37:41,400 --> 00:37:43,600 Speaker 1: and always on the Bloomberg terminal