WEBVTT - Harris Campaign, US Earnings 0:00:00.600 --> 0:00:12.600 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence 0:00:12.640 --> 0:00:14.440 with Alex Steinhl and Paul'sweenye. 0:00:14.520 --> 0:00:17.720 The real app performance has been in US corporate high yield. 0:00:17.880 --> 0:00:20.239 Are the companies lean enough? Have they trimmed all the fats? 0:00:20.320 --> 0:00:24.119 The semiconductor business is a really cyclical business. 0:00:23.600 --> 0:00:27.160 Breaking market headlines and corporate news from across the globe. 0:00:27.240 --> 0:00:29.880 Do investors like the M and A that we've seen? 0:00:30.080 --> 0:00:33.159 These are two big time blue chip companies. 0:00:33.320 --> 0:00:36.920 The window between the peak and cut changing super fast. 0:00:37.080 --> 0:00:41.879 Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio. 0:00:43.400 --> 0:00:45.760 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:45.800 --> 0:00:48.240 business stories impacting Wall Street and the global markets. 0:00:48.360 --> 0:00:50.360 Each and every week, we provide in depth research and 0:00:50.440 --> 0:00:52.320 data on some of the two thousand companies and one 0:00:52.400 --> 0:00:55.080 hundred and thirty industries our analysts cover worldwide. 0:00:55.200 --> 0:00:58.560 Today, we'll discuss why UPS suffered its worst stock decline 0:00:58.560 --> 0:00:59.360 in twenty five years. 0:00:59.480 --> 0:01:02.560 Last, we break down Astrazeneco's quarterly earnings in a conversation 0:01:02.640 --> 0:01:04.080 with its chief financial officer. 0:01:04.480 --> 0:01:07.200 But first we dive into politics and the aftermath of 0:01:07.240 --> 0:01:09.800 President Joe Biden dropping out of the presidential race. 0:01:09.880 --> 0:01:12.440 Many people are now wondering whether Vice President Kamala Harris 0:01:12.480 --> 0:01:16.520 could defeat Republican nominee and former President Donald Trump in November. 0:01:16.240 --> 0:01:18.880 And this week Bloomberg Intelligence took a deep dive into 0:01:18.920 --> 0:01:22.280 how a potential Harris presidency could impact different sectors and 0:01:22.280 --> 0:01:23.240 policies in the US. 0:01:23.520 --> 0:01:26.040 For more, we are joined by Nathan Dean, Bloomberg Intelligence 0:01:26.040 --> 0:01:28.920 senior policy analyst, and we first asked Nathan what life 0:01:28.959 --> 0:01:31.920 would look like if Kamala Harris were to win in November. 0:01:32.160 --> 0:01:34.720 It's a lot of status quo for banks, evs, big 0:01:34.760 --> 0:01:37.200 tech and so forth like that. The one caveat is 0:01:37.240 --> 0:01:41.160 on taxes, and Kamala Harris's record in her tax aspect 0:01:41.240 --> 0:01:43.720 of it has been a little bit more, you know, 0:01:44.040 --> 0:01:46.679 i'd say progressive than what President Biden has said. But 0:01:46.920 --> 0:01:49.960 ultimately we've viewed President Biden as moving more towards Kamala 0:01:50.040 --> 0:01:53.720 Harris's policies when he became president, rather than Kamala Harris 0:01:53.800 --> 0:01:56.400 moving towards Biden's policies. So a lot of this if 0:01:56.440 --> 0:01:58.000 she becomes president will be status quo. 0:01:58.360 --> 0:02:00.200 Oh that's really interesting. So I was going to ask, 0:02:00.480 --> 0:02:04.080 where is Vice President Harris farther left than President Biden. 0:02:04.120 --> 0:02:05.520 Where is that biggest daylight? 0:02:06.280 --> 0:02:08.520 So the one thing that we actually hung down on 0:02:08.720 --> 0:02:10.960 was her record as Attorney General, and you know, just 0:02:11.040 --> 0:02:14.520 indicative of one of her actions as she joined about 0:02:14.560 --> 0:02:17.360 forty seven other states, including the District of Columbia, on 0:02:17.400 --> 0:02:20.720 a twenty five billion dollar settlement on home foreclosure practices, 0:02:20.960 --> 0:02:23.200 and a lot of her campaign speeches when she was 0:02:23.240 --> 0:02:26.040 running president in twenty twenty was talking about how she 0:02:26.080 --> 0:02:28.600 took on big banks. Now, you know, to us, that 0:02:28.680 --> 0:02:31.640 means there's a lot more consumer protection coming in the cards, 0:02:31.919 --> 0:02:35.000 whether it's the Consumer for Financial Protection Bureau, or whether 0:02:35.040 --> 0:02:37.440 it comes through acts of Congress, or maybe it's even 0:02:37.480 --> 0:02:41.640 executive orders like continuing President Biden's student debt relief pans. 0:02:41.760 --> 0:02:43.000 But I think there's going to be a lot of 0:02:43.000 --> 0:02:46.080 focus on this idea of load to middle income consumers, 0:02:46.360 --> 0:02:49.400 protections against big corporations, and a lot more in terms 0:02:49.400 --> 0:02:51.880 of disclosures and so forth like that. Now, is this 0:02:52.000 --> 0:02:55.200 a material impact on big tech or on the big banks. 0:02:55.600 --> 0:02:57.800 Probably not. A lot of it has to get passed 0:02:57.800 --> 0:03:00.760 through Congress, but ultimately it certainly headline risk that I 0:03:00.800 --> 0:03:03.400 would keep in mind for those sectors is in particular, 0:03:03.520 --> 0:03:05.520 is just to keep in mind, you know that if 0:03:05.560 --> 0:03:08.120 she were to focus on this and specifically it's just 0:03:08.160 --> 0:03:09.760 pick on anti trust. If she were to focus on 0:03:09.800 --> 0:03:12.720 anti trust, there's a lot of you know, intense scrutiny, 0:03:12.720 --> 0:03:14.720 more scrutiny than she could put there than a Biden 0:03:14.760 --> 0:03:15.640 administration could. 0:03:16.160 --> 0:03:17.640 All right, a lot of my M and A banker 0:03:17.680 --> 0:03:21.520 buddies are wondering what would a Harris administration mean for 0:03:22.080 --> 0:03:25.760 antitrust because Biden's been nobody into the M and A world. 0:03:25.840 --> 0:03:27.880 What's the is a feeling statisquo there as well? 0:03:28.520 --> 0:03:31.000 You know, this is one of those situations where I think, 0:03:31.040 --> 0:03:33.960 whoever wins as president's probably not going to be helpful 0:03:33.960 --> 0:03:36.760 to your M and A banker buddies, because on one hand, 0:03:36.800 --> 0:03:39.720 you have the continuation of the Biden presidency with Lena 0:03:39.800 --> 0:03:42.480 Khan at the FTC and taking a very skeptical look 0:03:42.520 --> 0:03:45.240 at mergers. I mean just in the financial space alone. 0:03:45.400 --> 0:03:47.600 You know, some of these merger reviews go over a year, 0:03:47.600 --> 0:03:49.600 if not longer, and you know we saw it certainly 0:03:49.600 --> 0:03:51.840 with the TD Financial merger they pulled out as a 0:03:51.880 --> 0:03:53.720 result of this. But then on the flip side, you 0:03:53.720 --> 0:03:56.880 have Senator Advance and President Trump. And remember this idea 0:03:56.920 --> 0:04:00.400 of economic popularism is rampted through that. You know that 0:04:00.520 --> 0:04:03.200 RNC agenda at the moment, So you know, Senator Vance 0:04:03.240 --> 0:04:05.320 even came down to a Bloomberg event here in Washington 0:04:05.400 --> 0:04:08.800 and called Lena Kahan, the FTC chairwoman Biden's best picked 0:04:08.800 --> 0:04:11.320 and insinuated that President Trump should even keep around. Now, 0:04:11.320 --> 0:04:13.920 I don't think that's going to happen, but for unfortunately, Paul, 0:04:13.960 --> 0:04:16.240 for your M and A banker buddies, I don't think 0:04:16.320 --> 0:04:18.919 any other way this gets around, whether it's Harris or Trump, 0:04:18.920 --> 0:04:21.599 it's going to be a very skeptical world for anti 0:04:21.600 --> 0:04:22.320 trust in M and A. 0:04:22.560 --> 0:04:24.760 So Paul's talking to his MENA buddies, I'm thinking about 0:04:24.760 --> 0:04:28.320 my energy buddies, because one area where it feels like 0:04:28.480 --> 0:04:32.440 President Harris could be farther left, of course, his energy. 0:04:32.480 --> 0:04:35.040 I was telling Paul earlier that she's been kind of 0:04:35.080 --> 0:04:38.960 anti fracking, she's been anti offshore. California is notoriously not 0:04:39.080 --> 0:04:42.039 loving any fossil fuels. How much of that do you 0:04:42.040 --> 0:04:43.719 think we have to really start considering. 0:04:44.560 --> 0:04:46.320 I think it's important to consider it. In fact, our 0:04:46.320 --> 0:04:48.599 colleague Rob Barnett put out a note talking about this 0:04:48.720 --> 0:04:51.479 in the importance it has on the renewable sector. So 0:04:51.760 --> 0:04:55.040 Vice President Harris, you know, certainly has pursued a clean 0:04:55.200 --> 0:04:57.599 energy agenda, and one of the things we see in 0:04:58.000 --> 0:05:00.719 you know, her presidency is a boosting of the Inflation 0:05:00.839 --> 0:05:02.760 Reduction Act. I don't want to say going back to 0:05:02.800 --> 0:05:05.000 the build back Better three point zero, you know, some 0:05:05.080 --> 0:05:06.960 of the ideas that will float around. She'll have her 0:05:07.000 --> 0:05:09.320 own ideas here, but this idea of the Inflation Reduction 0:05:09.440 --> 0:05:12.360 Act needs to be protected and enhanced. So if you're 0:05:12.360 --> 0:05:14.880 in the renewable sector, a solar sector, it certainly could 0:05:14.960 --> 0:05:19.120 be a boon idea. If Vice President Harris wins, you know, 0:05:19.160 --> 0:05:21.240 I would also just offer this that a lot of 0:05:21.279 --> 0:05:24.440 it also depends on who takes up Congress, because if 0:05:24.520 --> 0:05:27.200 Vice President Harris wins and the Republicans take one, if 0:05:27.200 --> 0:05:29.359 not two, chambers of the House, then a lot of 0:05:29.400 --> 0:05:32.000 those initiatives are going to be scaled down and actually 0:05:32.040 --> 0:05:34.000 dramatically lowered and so forth like that. 0:05:34.320 --> 0:05:37.080 All Right, we know Elon Musk is a big supporter 0:05:37.120 --> 0:05:40.680 of Trump, But what would a democratic Harris administration mean 0:05:40.760 --> 0:05:43.240 for the Elon Mussel of the world and the evs. 0:05:43.720 --> 0:05:45.680 So, you know, for the EV side, I think it's 0:05:45.720 --> 0:05:48.880 actually a continuation of the Inflation Reduction Act tax credit, 0:05:48.920 --> 0:05:51.120 if not an enhancement of that. You know, look, tax 0:05:51.160 --> 0:05:52.880 reform is going to have to happen next year no 0:05:52.920 --> 0:05:55.440 matter what, because the Trump era tax cuts for individuals 0:05:55.720 --> 0:05:58.279 expires at the tail end of twenty twenty five. And 0:05:58.480 --> 0:06:00.960 whether it's Vice President Harris or Trump, neither of them 0:06:01.000 --> 0:06:04.120 are going to want to increase taxes for low and 0:06:04.160 --> 0:06:07.200 middle and income you know, Americans. So for the EV's 0:06:07.240 --> 0:06:09.680 of the world, I would say, under a Harris presidency, 0:06:09.960 --> 0:06:12.960 you'll certainly have protection from that tax credit in the IRA, 0:06:13.480 --> 0:06:16.640 You potentially could have an enhancement of that. You certainly 0:06:16.680 --> 0:06:19.640 will have regulatory policies trying to boost EV usage and 0:06:19.680 --> 0:06:22.760 so forth like that. Comparing it against the President Trump presidency, 0:06:22.839 --> 0:06:24.720 where you know, he has said that he doesn't like 0:06:24.800 --> 0:06:27.440 electric vehicles. Obviously he has the Elon Musk whispering in 0:06:27.480 --> 0:06:29.839 his ear and providing forty five million dollars a month 0:06:29.839 --> 0:06:32.480 in PAC funding. But ultimately I think the Republicans you 0:06:32.680 --> 0:06:36.040 probably would see a scaling back of those tax credits. 0:06:35.720 --> 0:06:36.680 Uh maybe you. 0:06:36.640 --> 0:06:39.480 Know, just additional you know, restrictions on EV's and so 0:06:39.560 --> 0:06:42.080 forth like that. But you know, with the Trump presidency, 0:06:42.120 --> 0:06:44.640 we'll have to see if he wins and also if 0:06:44.640 --> 0:06:47.000 the Elon Musk is whispering in his ear income January 0:06:47.000 --> 0:06:48.280 and February taxes. 0:06:48.720 --> 0:06:51.719 If former President Trump were to get a second term, 0:06:51.960 --> 0:06:55.440 is there any consensus in Washington given the makeup of Congress. 0:06:55.480 --> 0:06:57.279 I guess we have to see how Congress shakes out. 0:06:57.279 --> 0:07:00.480 But what if anything, could Trump ad been tration get 0:07:00.480 --> 0:07:01.239 done on taxes? 0:07:01.839 --> 0:07:02.080 Yeah. 0:07:02.120 --> 0:07:03.800 So, you know, the way I think about the tax 0:07:03.839 --> 0:07:06.680 debate with my colleague Andrew Silverman is really print some timing. 0:07:06.760 --> 0:07:08.159 So the first thing you'll note is the election. 0:07:08.520 --> 0:07:10.920 If the Republicans take the House and the Senate and 0:07:10.960 --> 0:07:14.200 the presidency, then they have this opportunity for a reconciliation. 0:07:14.280 --> 0:07:15.920 This is how they got the Trump Ara tax cuts 0:07:15.920 --> 0:07:18.800 through in twenty seventeen. It allows them to actually move 0:07:18.840 --> 0:07:21.840 forth and enhance or you know, essentially conduct tax reform 0:07:22.000 --> 0:07:24.360 and they can bypass the Democrats. So if the Republicans 0:07:24.400 --> 0:07:26.680 win the House and the Senate and the presidency, then 0:07:26.800 --> 0:07:29.440 this President Trump's idea of lowering corporate tax rates is 0:07:29.480 --> 0:07:31.680 certainly in the carts now I have seen statements from 0:07:31.680 --> 0:07:34.160 House Republicans saying, eh, maybe we don't want to do 0:07:34.240 --> 0:07:36.120 that so much, but I do think that this would 0:07:36.120 --> 0:07:38.400 be President Trump driving this. Now, if you get more 0:07:38.440 --> 0:07:41.080 of a gridlock Congress, well, then the power of Congress 0:07:41.120 --> 0:07:42.720 is going to come out, and the House in ways 0:07:42.720 --> 0:07:45.000 and means Committee, whoever controls it, is certainly going to 0:07:45.000 --> 0:07:47.440 want to play here and tell the Presidency this is 0:07:47.480 --> 0:07:50.160 what we think. And so if you get a gridlock Congress, 0:07:50.320 --> 0:07:52.680 a lot of the tax reform or tax relief ideas 0:07:52.680 --> 0:07:54.640 that are out there are going to be scaled down 0:07:54.720 --> 0:07:57.520 or narrowed, but with one objective not to increase the 0:07:57.600 --> 0:08:01.640 individual tax relief or tax cuts for that individual. If 0:08:01.680 --> 0:08:04.320 you get President Harris, you may see tax increases for 0:08:04.360 --> 0:08:06.840 individuals who make greater than four hundred thousand dollars, but 0:08:06.960 --> 0:08:09.320 I think most individuals in the United States at the 0:08:09.400 --> 0:08:11.720 end of twenty twenty five probably won't have their taxes. 0:08:11.440 --> 0:08:13.840 Altered all that much. Our thanks to Nathan Dean Bloomberg 0:08:13.880 --> 0:08:15.840 Intelligence senior policy analyst. 0:08:15.760 --> 0:08:17.720 We moved out of corporate earnings and begin with the 0:08:17.760 --> 0:08:21.520 ev giant Tesla. Tesla reporting another quarter of disappointing profit 0:08:21.560 --> 0:08:25.400 and postponed a highly anticipated unveiling of autonomous taxis. 0:08:25.680 --> 0:08:27.720 For more and all this, we were joined by Steve Mann, 0:08:27.760 --> 0:08:30.960 Bloomberg Intelligence, Global Autos and Industrials Research Channels. 0:08:31.040 --> 0:08:33.920 We first asked for his key takeaways from Tesla's results. 0:08:34.160 --> 0:08:37.920 I still like their long term medium term outlook on 0:08:38.000 --> 0:08:42.200 AI in our view, were not including eight billion optimist robots. 0:08:42.240 --> 0:08:45.920 I think that's a little bit out there. But AI 0:08:46.120 --> 0:08:49.200 will continue to drive the stock. But I think people 0:08:49.240 --> 0:08:51.840 are focused on their auto business. It's a little bit worrying. 0:08:52.600 --> 0:08:57.080 I think investors were expecting their automotive gross margin to 0:08:57.200 --> 0:09:00.800 flatten out in the second quarter versus the first, but 0:09:00.880 --> 0:09:04.640 it did decline about one hundred and fifty basis points 0:09:05.120 --> 0:09:09.040 to thirteen point nine percent, which is in line with 0:09:09.200 --> 0:09:13.280 you know, the legacy automaker's automotive growth marginal fourteen percent. 0:09:13.520 --> 0:09:18.120 So there is some concerns with the investors. Is you know, 0:09:18.200 --> 0:09:21.120 are there any more upside on margin? Are they you know, 0:09:21.160 --> 0:09:22.800 are they really that good with cost? 0:09:23.120 --> 0:09:25.160 But I guess the question is how do we value 0:09:25.200 --> 0:09:27.000 the stock? So I hear you that the auto part 0:09:27.000 --> 0:09:29.440 of their business is very much maybe in line with 0:09:29.440 --> 0:09:31.840 what other auto companies are talking about but they trade 0:09:31.840 --> 0:09:34.960 an estimated pe of like ninety times, Like is it 0:09:35.040 --> 0:09:37.920 worth it for that if it's also being valued as 0:09:37.960 --> 0:09:38.960 an AI company. 0:09:39.400 --> 0:09:41.360 I think there's a couple of things that the investors 0:09:41.360 --> 0:09:45.080 are focused on beyond this second quarter. You know, they 0:09:45.120 --> 0:09:48.960 did pull ahead the start of production for a more 0:09:49.000 --> 0:09:52.679 affordable EV from like the second half of next year 0:09:52.800 --> 0:09:55.240 to the first half, which is critical. I think the 0:09:55.280 --> 0:09:59.640 EV market today globally is actually consumers in the EV 0:09:59.720 --> 0:10:03.480 market actually looking for a more affordable EV, something that's 0:10:03.559 --> 0:10:06.520 you know, less than fifty thousand US dollars. You know, 0:10:06.600 --> 0:10:10.920 most of the EV's offered today are above fifty thousand dollars. So, 0:10:11.280 --> 0:10:14.640 you know, I think the investors are hoping that, you know, 0:10:14.800 --> 0:10:18.400 into twenty twenty five and into twenty twenty six, we're 0:10:18.400 --> 0:10:21.200 going to get a rebound in EV sales because there's 0:10:21.280 --> 0:10:25.000 going to be more affordable EV's, budget friendly EV's for 0:10:25.080 --> 0:10:25.840 the mass market. 0:10:26.160 --> 0:10:29.839 Steve Tesla right now is an auto company and it's 0:10:29.880 --> 0:10:33.360 an other company. Elon wants you to focus on the 0:10:33.559 --> 0:10:36.840 other Can you define what's in that other bucket and 0:10:37.000 --> 0:10:42.319 when investors believe it will be material to their revenution profits? 0:10:43.120 --> 0:10:45.960 Yeah, you know, He talks about AI quite a bit, 0:10:46.640 --> 0:10:50.240 you know, robo taxi, optimist robot. But if you think 0:10:50.280 --> 0:10:54.520 of AI, I think there's you know, potentially even more 0:10:55.200 --> 0:10:59.240 ways to generate revenues from AI. One of the things 0:10:59.280 --> 0:11:02.480 that I think the market is also focused on other 0:11:02.559 --> 0:11:06.480 than robotaxi, taking a passenger from point A to point 0:11:06.480 --> 0:11:10.800 B is for example. You know, these cars have huge 0:11:10.880 --> 0:11:15.440 battery storage capacity, right, and these things, if they can 0:11:15.559 --> 0:11:18.760 move about on its own, you can really help out 0:11:18.800 --> 0:11:23.000 the utilities in terms of, you know, redistributing power across 0:11:23.000 --> 0:11:23.439 the grid. 0:11:24.000 --> 0:11:26.360 Well to that point, I mean, their energy business was 0:11:26.400 --> 0:11:29.319 actually quite impressive. It had its highest installation of batteries 0:11:29.320 --> 0:11:33.440 and revenue ever, and energy accounted for just twelve percent 0:11:33.520 --> 0:11:38.160 and sixteen percent of Tesla's revenue and gross profit respectively. 0:11:38.240 --> 0:11:40.960 I mean, yeah, it's going to fluctuate, but that's pretty strong. 0:11:42.240 --> 0:11:45.319 Yeah, it's a good, good sign. I think those tend 0:11:45.400 --> 0:11:47.840 to be a little bit lumpy because the orders are big, 0:11:48.480 --> 0:11:51.719 and so whenever they deliver the order and when they 0:11:51.720 --> 0:11:53.920 ever they book it, that tends to be lumpy. I 0:11:54.000 --> 0:11:57.040 think we'll have to see if it's going to be consistent. 0:11:57.080 --> 0:12:00.679 But I think the investors are very focused on business. 0:12:00.920 --> 0:12:02.600 Are they going to be on time in rolling out 0:12:02.640 --> 0:12:06.520 the new EV, the affordable EV? And then longer term, 0:12:06.679 --> 0:12:09.439 it's really you know AI. Is he going to deliver 0:12:09.559 --> 0:12:12.360 What is he going to say in October the AI 0:12:12.480 --> 0:12:15.440 event that he's hosting. There were a lot of questions 0:12:15.640 --> 0:12:18.600 about that during the call, but they were pretty tight lip. 0:12:18.600 --> 0:12:21.120 Our thanks to Steve Man. Bloomberg Intelligence, Global, Autos and 0:12:21.160 --> 0:12:22.400 Industrials research channels. 0:12:22.440 --> 0:12:24.120 Coming up, We're going to break down how demand for 0:12:24.160 --> 0:12:28.000 cloud computing services and advertising impacted Alphabet's quarterly earnings. 0:12:28.120 --> 0:12:31.120 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:31.120 --> 0:12:33.440 depth research and data on two thousand companies and one 0:12:33.520 --> 0:12:36.480 hundred and thirty industries. You can access Bloomberg Intelligence via 0:12:36.559 --> 0:12:37.760 b I go on the terminal. 0:12:37.920 --> 0:12:40.880 I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg. 0:12:48.200 --> 0:12:52.040 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:52.120 --> 0:12:55.240 weekdays at ten am Eastern on Affo Card playing Enbroud 0:12:55.240 --> 0:12:58.320 Auto with the Bloomberg Business App. Listen on demand wherever 0:12:58.400 --> 0:13:02.600 you get your podcasts. Want us live on YouTube. 0:13:03.080 --> 0:13:05.880 We move next to earning. It's from Logistic company UPS. 0:13:06.120 --> 0:13:08.520 This week, YOUPS suffered it's worst stock decline it's twenty 0:13:08.520 --> 0:13:11.080 five years after reporting profit than missed Anamal's estimates for 0:13:11.120 --> 0:13:11.480 the quarter. 0:13:11.679 --> 0:13:14.080 The company also trimmed its forecast for the year, and 0:13:14.120 --> 0:13:16.920 this comes as UPS has failed to deliver fast enough 0:13:17.080 --> 0:13:20.040 on a turnaround plan to cut costs and increase volumes. 0:13:20.240 --> 0:13:22.040 For more on this, we were joined by Lee Classical 0:13:22.080 --> 0:13:25.080 Bloomberg Intelligence Senior Transport, Logistics and Shipping Antals. 0:13:25.120 --> 0:13:27.440 We first asked Lee why it was another tough quarter 0:13:27.480 --> 0:13:28.120 for UPS. 0:13:28.400 --> 0:13:30.120 I think it's a lot of things. You know, they 0:13:30.120 --> 0:13:32.800 are seeing vuyume growth, which is good, but that mix 0:13:32.920 --> 0:13:36.080 of growth is not good. What they're seeing is their 0:13:36.080 --> 0:13:38.560 shippers trading down. So if you were going to maybe 0:13:38.559 --> 0:13:41.280 send something via air, maybe you decide you go on 0:13:41.320 --> 0:13:43.840 the ground, which is you know, cheaper and lower margin. 0:13:44.160 --> 0:13:46.000 And then if you're using ground, maybe you're going to 0:13:46.120 --> 0:13:48.440 use one of their products like sure Posts, which is 0:13:48.440 --> 0:13:52.320 like an economy product which is cheaper and again lower 0:13:52.360 --> 0:13:56.600 margin business. So you're also seeing the mix of B 0:13:56.679 --> 0:14:00.280 two C outpacing growth of B to B. B two 0:14:00.320 --> 0:14:03.440 C growth was around four percent and B to B 0:14:03.559 --> 0:14:06.880 growth was down four percent and B to B. So 0:14:07.080 --> 0:14:11.600 think like a lawyer sending documents to another lawyer's office. 0:14:11.760 --> 0:14:14.840 That business tends to have better margins because of the 0:14:14.880 --> 0:14:18.800 inherent density that follows that business, and density is really 0:14:18.800 --> 0:14:22.880 good for acid intensive networks like ups is. And then 0:14:22.920 --> 0:14:26.320 you also, you know, have another negative mixed impact you 0:14:26.440 --> 0:14:29.040 had too. You know, they called out on their call 0:14:29.160 --> 0:14:32.440 to large e commerce companies. I'm assuming that you know, 0:14:32.480 --> 0:14:36.359 these are companies out of China that are you know, 0:14:36.640 --> 0:14:42.120 are kind of using more economy services, so you're seeing 0:14:42.280 --> 0:14:45.520 a surge in that demand from from there as well. 0:14:46.040 --> 0:14:48.560 Is this the trough? Is this sort of the worst 0:14:48.560 --> 0:14:49.200 it's going to get? 0:14:49.320 --> 0:14:52.200 It's a great question. I mean, you know, I think so, 0:14:52.720 --> 0:14:55.040 you know, I think it feels like it's this is 0:14:55.080 --> 0:14:57.600 the worst. I mean, you know, the company has done 0:14:57.640 --> 0:15:02.120 pretty well in terms of eating expectations or beating expectations. 0:15:02.160 --> 0:15:04.240 This is the first miss since I believe the first 0:15:04.320 --> 0:15:07.240 quarter of twenty twenty, so you know, Carol to May 0:15:07.240 --> 0:15:09.920 and her team have been on quite a role. They 0:15:09.960 --> 0:15:12.880 also have some easier comparisons going into the second half. 0:15:13.120 --> 0:15:15.600 You know, some of your listeners might have remembered they 0:15:15.600 --> 0:15:19.040 had a new contract that was really you know, heavily 0:15:19.080 --> 0:15:22.680 weighted in the first year that gets anniversaried in August first, 0:15:22.680 --> 0:15:26.400 So therefore, you know, those higher labor costs, the comparables 0:15:26.440 --> 0:15:30.800 will ease significantly, you know, after August first, so that 0:15:30.840 --> 0:15:34.320 should provide a better cost for them in a third 0:15:34.400 --> 0:15:38.280 quarter and going forward. Also, you know peak seasons here, right, 0:15:38.400 --> 0:15:40.520 You know, a lot of the companies that we cover 0:15:41.080 --> 0:15:43.280 are talking about we you know, most of them are 0:15:43.280 --> 0:15:45.880 expecting a real peak season and we're not talking about, 0:15:46.000 --> 0:15:47.800 you know, the peak seasons that maybe we've seen the 0:15:47.880 --> 0:15:50.760 nineteen nineties or early two thousand, but you're definitely going 0:15:50.800 --> 0:15:54.240 to see seasonal increase in demand. And that peak season 0:15:54.360 --> 0:15:57.800 is one of the shortest on record. You know, it's 0:15:57.800 --> 0:16:02.400 around seventeen days between Thanksgiving and Christmas, and that will 0:16:02.440 --> 0:16:08.320 allow ups to implement surve charges because they're going to 0:16:08.360 --> 0:16:12.160 have to you know, get those resources in a short 0:16:12.160 --> 0:16:15.600 amount of time or a short amount of time to 0:16:15.680 --> 0:16:17.960 make sure that you know, they're able to deliver at 0:16:18.000 --> 0:16:22.280 high service levels. So you should see probably some good 0:16:22.320 --> 0:16:25.960 revenue growth in the fourth quarter from those sur charges. 0:16:26.280 --> 0:16:28.560 So you know, that coupled with a lot of their 0:16:28.880 --> 0:16:32.880 cost cutting measurements, they've they've they've reduced a lot of heads. 0:16:33.720 --> 0:16:35.120 You know, I think a lot of things are going 0:16:35.200 --> 0:16:38.480 to turn for this company once you're going to see 0:16:38.520 --> 0:16:41.280 you know that B two B volume return and the 0:16:41.320 --> 0:16:43.920 company is doing a lot of things I think to 0:16:43.960 --> 0:16:47.400 position itself longer term, you know, whether that's you know, 0:16:47.880 --> 0:16:52.080 focusing on the healthcare logistics. Healthcare logistics obviously there's a 0:16:52.120 --> 0:16:54.640 lot of value add there and those margins are pretty 0:16:54.680 --> 0:16:57.680 high relative to you know, someone throwing a package on 0:16:57.720 --> 0:17:01.320 your porch, and so you know, they're really looking to 0:17:01.320 --> 0:17:03.240 grow that business and they want to be a leader 0:17:03.240 --> 0:17:06.080 in that business. Uh And and to be frank, it's 0:17:06.119 --> 0:17:09.080 it's it's a fantastic uh business to be in if 0:17:09.119 --> 0:17:12.440 you're a logistics provider. And then you know they're also 0:17:12.840 --> 0:17:16.240 trying to do new things with or more things, I 0:17:16.280 --> 0:17:19.400 should say, with with what we call SMBs, which are 0:17:19.640 --> 0:17:22.399 small and medium sized businesses. You know that tends to 0:17:22.440 --> 0:17:25.600 have better margins than you know, dealing with these super 0:17:25.720 --> 0:17:30.119 large companies like Amazon, which you know the business is good, 0:17:30.160 --> 0:17:31.600 but the margins could be better. 0:17:31.880 --> 0:17:34.159 I have actually no loyalty between these two services, I 0:17:34.200 --> 0:17:35.879 mean the FedEx store and the UPS store kind of 0:17:35.920 --> 0:17:38.040 right next to each other in my little strip malls. 0:17:38.040 --> 0:17:39.920 So whichever's got the shorter line, that's kind of where 0:17:39.920 --> 0:17:42.560 I go. But from an investment perspective, you know, you 0:17:42.640 --> 0:17:44.760 got thirty seconds here. What's the difference between these two 0:17:44.760 --> 0:17:46.720 companies From an investor perspective. 0:17:47.359 --> 0:17:50.359 Well, it's interesting. So like on FedEx, I think they're 0:17:50.359 --> 0:17:54.159 dealing with more structural issues because that was a company 0:17:54.200 --> 0:17:57.440 that I would say was extremely bloated, you know, over 0:17:57.480 --> 0:18:00.520 the last decade, and they're kind of right sizing there network. 0:18:00.760 --> 0:18:04.399 They're both making changes to their networks to kind of 0:18:04.720 --> 0:18:07.520 meet the new demands, you know, that change of increase 0:18:07.600 --> 0:18:11.960 in the home delivery versus you know, delivering to lawyers 0:18:12.040 --> 0:18:14.119 or doctors' offices or corporations. 0:18:14.480 --> 0:18:14.679 You know. 0:18:14.960 --> 0:18:18.000 I think the biggest difference is, you know, there might 0:18:18.040 --> 0:18:22.560 be more margin expansion opportunity at FedEx, just because they're 0:18:22.560 --> 0:18:25.240 starting from a lower base than new ps. 0:18:25.960 --> 0:18:26.199 You know. 0:18:26.480 --> 0:18:28.960 But you know, these are two what I would consider 0:18:29.040 --> 0:18:33.840 blue chip companies that are you know, should benefit with 0:18:34.000 --> 0:18:37.240 the economy and they should probably be able to grow 0:18:37.359 --> 0:18:42.040 top line well passed Global GDP just given some of 0:18:42.080 --> 0:18:44.400 the self help things that they have in front of them. 0:18:44.520 --> 0:18:47.800 Are thanks to Lee Clasicow, Bloomberg Intelligence, Senior Transport, Logistics 0:18:47.840 --> 0:18:48.520 and Shipping Annals. 0:18:48.840 --> 0:18:51.320 We moved now to big tech and Google parent Alphabet, 0:18:51.359 --> 0:18:54.680 the company reporting second quarter revenue that beat analyst expectations. 0:18:54.840 --> 0:18:58.000 Alphabet's results for boosted by demand for cloud, computing services 0:18:58.000 --> 0:18:59.600 and advertising on a search engine. 0:19:00.000 --> 0:19:03.320 Despite this, investors weren't pleased the capital spending rows more 0:19:03.359 --> 0:19:07.000 than expected to support Google's AI programs and computing power needs. 0:19:07.200 --> 0:19:09.240 For more, we were joined by man Deep Singh, Bloomberg 0:19:09.240 --> 0:19:11.040 Intelligence Senior Tech industry analysts. 0:19:11.080 --> 0:19:13.399 We first asked man Deep for his take on Alphabet's 0:19:13.400 --> 0:19:14.639 results this quarter. 0:19:14.840 --> 0:19:18.439 Companies are not getting a pass on boosting capex. That 0:19:18.600 --> 0:19:23.080 wasn't the case last quarter. But clearly, I think investors 0:19:23.320 --> 0:19:27.320 vary about how much CAPEX these companies are going to 0:19:27.359 --> 0:19:30.560 throw on AI. And look, in the case of Alphabet, 0:19:30.640 --> 0:19:33.840 there is revenue in the cloud segment, so they quantified 0:19:33.920 --> 0:19:37.800 the AI impact on cloud, which was high single digit 0:19:37.840 --> 0:19:41.199 contribution to cloud segment, and cloud segment actually saw on 0:19:41.320 --> 0:19:45.800 acceleration in top line growth. But YouTube miss, I think 0:19:45.840 --> 0:19:50.280 I attribute that more to software spending outside of financial 0:19:50.320 --> 0:19:54.600 services and retail sectors like automotive. They're not spending on 0:19:54.640 --> 0:19:57.280