August 8, 2025 • 37 mins
Watch Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Hosts: Paul Sweeney and Lisa Mateo
On this podcast:
- Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, discusses Walt Disney earnings.
- Ken Shea, Bloomberg Intelligence Senior Consumer Products Analyst, discusses Molson Coors Earnings
- Mandeep Singh, Bloomberg Intelligence Senior Tech Industry Analyst, discusses Palantir earnings.
- Christopher Ciolino, Bloomberg Intelligence Senior US Machinery Analyst, discusses Caterpillar earnings.
- Michael Halen, Bloomberg Intelligence Senior Restaurant and Foodservice Analyst, discusses McDonalds earnings.
-Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Analyst, discusses Tesla approving a $30 billion stock award for CEO Elon Musk.
Bloomberg Intelligence, the research arm of Bloomberg L.P., has more than 400 professionals who provide in-depth analysis on more than 2,000 companies and 135 industries while considering strategic, equity and credit perspectives. BI also provides interactive data from over 500 independent contributors. It is available exclusively for Bloomberg Terminal subscribers.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence
with Paul Sweeney.
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Breaking market headlines and corporate news from across the globe.
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Our view is, if the economy is slowing.
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Down, there is the possibility of the debt spirals.
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Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals.
Speaker 4 (00:42):
I'm Paul Sweeney and I'm Lisa Matteo filling in on
Bloomberg Intelligence.
Speaker 2 (00:46):
On the Face Bloomberg Intelligence Show, we dig inside the
big business stories impacting Wall Street and the global markets.
Each and every week, we provide in depth research and
data on some of the two thousand companies in one
hundred and thirty industries our analysts cover worldwide. Today, we'll
look at why Volunteer Technologies reported its biggest ever quarterly
sales growth since the company went public.
Speaker 4 (01:04):
Plus, we'll look at how the fast food Jay McDonald's
returned to sales growth last quarter.
Speaker 2 (01:09):
But first we begin with earnings from the median entertainment
giant Walt Disney.
Speaker 4 (01:12):
This week, Disney shares fell after the company gave a
mixed earnings report in the third quarter. The results, well,
they showed strength in Disney streaming and parks business, but
the company gave a lukewarm outlook for profit this year.
Speaker 2 (01:23):
For more guest hosts, Isabelle Lee and I rejoined by
Keitha Rong Onathan Bloomberg Intelligence Analysts on US media. We
first asked Etha what exactly concerns investors about Disney.
Speaker 5 (01:33):
You know, expectations might have been, you know, slightly high,
and the fact that they didn't necessarily give us any
specific guidance for fiscal twenty twenty six. They did point
to a raised guidance for EPs growth for fiscal twenty
twenty five eighteen percent now and sort of sixteen percent,
but they didn't necessarily give us anything specific for fiscal
twenty twenty six. That could be a slight source of disappointment.
(01:56):
They did say that they will stop disclosing Disney plusses
criber numbers, but again this is not something totally unexpected.
I mean, Netflix has stopped doing this. We're seeing this
kind of move away from just subscriber numbers to a
greater focus and profitability.
Speaker 6 (02:10):
I want to zero in on parks because I'm still
scarred by how expensive it was when I visited a
couple of years ago as an adult. But how sustainable
is there strong parks performance given the divergent domestic and
international performance.
Speaker 5 (02:23):
Very sustainable isabell. So, you know, we saw domestic parks,
and I say that because you know, domestic parks actually
coming into this year, coming into this quarter, there were
a lot of worries, one of course, about the general
macroeconomic environment, but the bigger source of worry was really
the opening of Epic Universe, which is you know, Universal's
big Florida theme parket traction. But the fact that it
(02:44):
had absolutely no impact at all, or very very modest impact,
if at all, is really amazing, and it just kind
of speaks to the resilience in Disney's business model. They
reported again very very strong per capita growth, you know,
in terms of food beverages, in terms of concessions. So
all of that doing really well, and the reason I'm
so positive about this business going forward. First of all
(03:06):
it contributes about fifty five to sixty percent of Disney profits.
Are really really important to their top line, to their
bottom line. Definitely. They have a lot of upcoming capacity,
So the biggest source of expansion over the next few
months is really going to be their cruise ships. They're
launching two new cruise ships, their biggest ever actually, which
is going to come on board in November and December.
(03:27):
One of them sets sail from Asia and that basically
takes the number of cruise ships to eight cruise ships,
effectively kind of doubling their capacity in a span of
just maybe two to three years. So that is going
to really buoy both top line and bottom line going
into twenty twenty six. And then beyond that, you really
have this huge sixty billion capital expansion plan that is
(03:49):
really going to play out over the next five to
ten years. So we're going to see a lot more
attractions all over the world. We're going to see that
new Abu Dhabi park come out. So there is really
a lot of you know, sustained momentum that we can
expect at the parks going forward.
Speaker 2 (04:03):
Keith It talk to us about that deal they just
made with the NFL it seems like a really positive
development for the company.
Speaker 5 (04:09):
Yeah, it's really good. I think from a Disney from
an ESPN standpoint, that they're so closely aligned now with
the NFL. I mean, the NFL is absolutely the premium property,
the gold standard, Paul, you know this well when it
comes to you know, sports properties in the US. And
the fact now that they're going to be able to
use all of this content for their upcoming ESPN streaming launch,
(04:30):
I mean that that itself just kind of gives it
a tremendous boost, I think even before you know it
comes on board. So it's great for the product. It's
also great from a strategic standpoint because the NFL is
obviously one of the most important sports properties, and this
really gives them access or it at least definitely gives
them a little bit of an advantageous position compared to
(04:51):
let's say, an Amazon or a Netflix or an Apple
if they want to ever outbid you know, the current
media partners. So definitely, I think strategically, very very sound
move on the part of Disney.
Speaker 6 (05:02):
So it seems like we had a good quarter. Runway
for growth is really just long and wide. What downside
risks remain then, especially around the macro uncertainty and tiriff exposure.
Speaker 5 (05:10):
Do you see, Yeah, maybe a little bit of execution risks.
So we still really don't know how this hole. I mean,
obviously everybody's very excited for the ESPN product launch, but
we still don't know how exactly that's going to play out. Again,
a huge source of upside is going to be the
streaming business. Everybody is expecting huge cost savings when it
comes to the integration of Hulu and Disney Plus. But
again execution is a little bit of a risk. And
(05:32):
then you pointed out, you know, macro factors. Remember, Disney
still obviously has huge exposure because of its parks business,
and anytime we see kind of a slowdown in the economy,
we do feel that in the parks as well. And
of course advertising also, so you know, they do have
a substantial exposure to advertising because of their TV networks business.
So there again we can see a little bit of
(05:53):
an impact. But overall, as it stands right now, the
business seems to be in really good shape all right here.
Speaker 2 (05:58):
The problem childs though, are the podcast networks in the
cable networks. What you know, just because of cord cutting,
that they're just declining businesses. What's the company saying that
what we're going to do with those businesses.
Speaker 5 (06:08):
They haven't said anything explicitly, Paul. So a few years ago,
you know, this idea was floated that maybe they kind
of spin off ABC their broadcast network, maybe they spin
off their linear cable channels, all of that. You know,
noise has kind of quietened down. You know, Bob Biger
basically said, no, no, no, we need these businesses. They're
all kind of integral to the whole Disney story. So
(06:28):
we haven't heard anything recently that being said. Just this
whole deal with the NFL, the NFL kind of taking
an equity stake, it almost seems like they are prepping
for ESPN to kind of ESPN and maybe ABC to
kind of coast solo. Remember, Bob Biger only has a
few more months left, so the end of twenty twenty
(06:49):
six he leaves Disney, or at least that's what he says. Yeah,
we think, and I really think he kind of wants
to get this deal done so to separate es because
it's not really core to the rest of the Disney properties.
But again, it's a little bit of a weight and watch,
but nothing explicitly stated from Disney management about what they
(07:09):
want to do with the linear piece of the business.
Speaker 6 (07:11):
So ESPN is getting a fresh spin. Within August twenty
one launch, it will be thirty dollars a month for
the new streaming app. What do you make of that price?
You think people will pay up for it or is
that steep?
Speaker 5 (07:22):
It's a high price point, There's no doubt about it.
I think most people were kind of expecting somewhere in
the twenty three to twenty five dollars range. That said,
what you know, we just ran a survey actually at
Bloomberg Intelligence, and what we found is that there's actually
a lot of interest in this product. So we think
that the updake will be fairly strong. And the updake
not so much as a standalone product, but when you
bundle it with Disney Plus and Hulu, so they are
(07:45):
running a pretty attractive promotion. So for the first year,
you can get Disney Plus, Hulu and ESPN at a
thirty to thirty dollars price point, which which seems like
really good value. So I think we're going to see
a lot of people come in initially through the bund
at least.
Speaker 4 (08:01):
Our thanks to Githa Ranganath and Bloomberg Intelligence analyst on
US media.
Speaker 2 (08:05):
We move next to recent news from the beverage company
Molson Cores.
Speaker 4 (08:08):
This week, the company lowered its full year guidance for
the second quarter in a row. It cited continued pressure
from a week consumer, falling US market share, and rising
costs tied to aluminum tariffs.
Speaker 2 (08:19):
For more, Lisa and I were joined by Ken Shay,
Bloomberg Intelligence senior consumer products analysts. We first asked Ken
just how much aluminum tariffs have been impacting Molson.
Speaker 3 (08:28):
Course, it's material, you know, they describe it as an
indirect cost, but it really spiked up there in the quarter,
you know, encroaching on their margin. I think though the
bigger picture though here is the continued week sales, the
lackluster sales were seeing in the US beer market and
alcoholic beverages in general. You know, this is their peak
(08:48):
summer selling season. This is when you know these companies
should be thriving, and it looks like the summer selling
season in the US for alcoholic beverages is going to
be a dud. It's a cautious consumer, it's a particular
pressures on the Hispanic demographic. It's it was a lousy
June in terms of the weather and key markets, and
(09:10):
basically all the big brewers are setting up for a
tough second half as you know, these trends continue. You know,
I expect continued sluggish performance in the second half as well.
Speaker 2 (09:22):
So is this beer thing? Is it the kind of
a global thing? I mean, I know, you guys at
Bloomberg Intelligence, you get the data that choose consumption of
everything out there.
Speaker 3 (09:31):
In the case of most in course, Paul, yeah, they
have a big operation in Europe, Eastern Europe, many parts
of Western Europe, and that they had lower volumes as well.
It was saved by higher prices to a degree. But
you know, again the big picture is that consumers are
just not going out to the bars as much. On
premise sales, we're particularly weak. That could be weather related,
(09:52):
I mean, that's just another example, but also I think
it could be, you know, the culmination of a lot
of price increases over the last few years. Maybe we've
hit a point where there's some sticker shot going on here.
Speaker 4 (10:05):
And what about people drinking he said, not going to
the bar, But what about just drinking less alcohol in general.
Speaker 3 (10:12):
Well, that's a great point, least, I think longer term,
you have some secular headwinds as well, things you've talked
about in the past. You know, the spread of legal cannabis,
particularly here in the US. In the US, you also
have these intoxicating hemp drinks which are all the rage
now in many markets. You have the GLP one users
are cutting back. Gen Z doesn't seem to embrace alcohol
(10:33):
as much as their parents did. All those things are
weighing on it longer term, but that, combined with some
near term pressures, is really weighing on these companies.
Speaker 2 (10:41):
It's a disappointing discussion here. I mean, not that we're
gonna have fun here. I'll tell you here's the problem
with all this white claw and sea breeze and I
don't know what you know, the iced tea and vodka,
what's that all about?
Speaker 5 (10:53):
Is that a fad?
Speaker 3 (10:54):
It seems to have some legs there, you know, the
pre mixed cocktails. Well, let me put it this way.
With some of the things that did l in the
quarter are things like bush light apple, you know, some flavor.
You know, some of the hard teas are doing well.
The premixes continue to do well, So I think the
way you could take away is maybe the consumer, while
(11:15):
you know economizing, is also looking for a flavor and
different variety. And also the non alcoholic and low alcoholic
segment continues to do well from a low base. So
I think in the second half I would expect a
higher level of promotion and innovation along those themes low
alcohol and no alcohol flavor innovation that's going to be
(11:37):
really popular. I think in the second half the super volume.
Speaker 4 (11:40):
Hey, before you go, can you break down some of
those macro economic headwinds that the company's facing.
Speaker 3 (11:45):
Sure, well, they The primary one is just you know,
consumer confidence. Consumers just feel you know, they're reading the
papers all these you know, tire fund certainties, and you
know the pressure on the Hispanics in particular, what's going
on there. Those are the big things, you know, And
I don't think it's anything major, but it's it's just
enough on the margin that these are purchases that can
(12:06):
be deferred and consumers by and large r.
Speaker 4 (12:11):
A our thanks to Kenhey Bloomberg Intelligence senior consumer products analysts.
Coming up, we'll look at earnings from one of the
world's biggest producers of heavy machinery Caterpillar.
Speaker 2 (12:20):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies one hundred
and thirty industries.
Speaker 4 (12:27):
You can access Bloomberg Intelligence via bi Go and the terminal.
Speaker 2 (12:30):
I'm Lise Matteo and I'm Paul Sweeney. This is Bloomberg.
Speaker 1 (12:38):
You're listening to the Bloomberg Intelligence podcast. Catch us live
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Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (12:52):
I'm Paul Sweeney and I'm Lice Matteo. Filling in on
Bloomberg Intelligence.
Speaker 2 (12:55):
Move now to earning from the software company Palaneer Technologies.
Speaker 4 (12:59):
This week, palente reported its biggest ever quarterly sales growth
since the company went public, and Palenteer cited astonishing impact
of artificial intelligence technology on its business.
Speaker 2 (13:09):
For more, Lisa and I were joined by Mandeep saying
Bloomberg Intelligence, senior tech industry analyst. We first asked man
Deep if Palenteer should be considered a dominant software company
of the future.
Speaker 7 (13:19):
I mean, clearly there is a lot baked into the valuation,
But I want to focus on, you know, the net
new ERR, which is a metric that software companies are
measured on. And when you compare Palenteers commercial segment revenue,
which everyone is excited about, their total deal value that's
(13:42):
remaining is around two point eight billion, the new ARR
increased by five hundred million. Contrast that with a Microsoft
or a Google Cloud. Microsoft added almost nine billion in
net new ARR this quarter, and they talked about, you know,
being used across one hundred million Microsoft Copilot users twenty
(14:05):
million GitHub Copilot users. So from that perspective, you know,
Balenteers increase in remaining deal value of five hundred million
looks pretty small. I mean, Palenteers overall revenue rund rate
is four billion. Microsoft clearly is you know, a company
that's almost one hundred times or eighty times more bigger
(14:28):
than Palenteer. But it just goes to show that even
on a net new AIRR basis, Microsoft is adding more
revenue per quarter than a Palenteer is. And still people
are very excited about Palenteers prospects. And to my mind, clearly,
you know, they have a product that is appealing to
(14:48):
a certain section of enterprise users. But at this valuation,
I mean, they can't sustain that for the next thirty
forty quarters, which is what they need to show to
grow into the evaluation. And I just don't see from
a product perspective they'll have the same kind of appeal
as a Microsoft Copilot or a Google Cloud or you know,
(15:10):
any of these large companies.
Speaker 2 (15:12):
Some question today, how do you guys value this thing?
I mean, I got it at like two three hundred
times earning, So that's not the way to go.
Speaker 7 (15:18):
So we've seen that with you know, new IPOs. When
they come to the market, they get a premium multiple.
They get traded at you know, thirty forty time sales.
Snowflake which is a competitor to Palenteer, when it went public,
it traded at sixty seventy time sales. Look at where
the stock is now. It's flat since the IPO. Even
(15:39):
though the company has grown top line at thirty thirty
five percent Kegger, the stock is flat. So that's what
I mean by growing into the valuation, because there is
so much embedded in that upfront multiple that even growing
at thirty percent is not enough. Palenteer really needs to
grow at fifty percent to be able to show any
(16:00):
sort of stock return from this point on, Can I
do that? No? I mean that's why I said I
compare the product. My initial comments were around comparing Palenteers
product versus other large enterprise software makers and even you know,
you go down the list Salesforce Service, now Adobe like,
these are much bigger companies and they have compounded at
(16:23):
twenty percent Keger over the years because they had a
seat base or a consumption based model. We don't even
know what kind of a business model Palenteer has. Yes,
it's winning government deals, Yes it's winning some enterprise deals,
but we don't know how they account for that revenue
every quarter. Is it a seat based model, is a
consumption base? We don't have that kind of visibility to
(16:46):
their business model.
Speaker 2 (16:48):
In a Concter party, I can tell you the Google story,
I can tell you that Microsoft story. I have no
idea what the Palenteer story is. Can you explain it
to me like I'm a five year old?
Speaker 7 (16:57):
Yeah, so their software out of the box will help
you make sense of your big data strategy. They really
curved out a name for themselves when big data became
the thing. When a company had a large amount of data,
whether it's log data or some other type of reporting data,
they would help you make sense of it because they
(17:19):
have something proprietary that no one else has in terms
of organizing that data and making it usable. So that's
their value proposition. But with the AI wave and llms,
they were able to integrate LLM calls within their offering
to develop a customer service or a supply chain use
(17:40):
case that you can apply AI on top of their ontology,
which is their core product. And a lot of other
companies are doing the same. To my mind, Microsoft is
doing the same for their customers. They're trying to embed
open AI with their core offerings with their CRM system
and help them deploy customer service use case. So the
(18:01):
differentiation of Balenteer versus Microsoft, to my mind is not
that big as the valuation reflects. And that's where I'm
betting they're not going to grow fifty percent for the
next twelve to twenty quarters, which is what the valuation
is implying.
Speaker 4 (18:16):
Now, how would you compare what they do as far
as a government contractor versus the commercial side, like which
is doing better for them?
Speaker 7 (18:23):
Yeah, so they have a much higher exposure to government side.
I mean, government side is still more than fifty percent
of their revenue, and all these large enterprise software companies
they have ten to fifteen percent government exposure. So Palenteer's
government exposure is way too large compared to other software makers.
And on top of that, their international sales seem to
(18:45):
be declining at least, you know, on the commercial side
because of the polarizing views of the management. So if
they were more balanced, probably they would win more international business.
But right now this is a US centric story, and
that's where I think it sort of puts a dent
to the growth rate down the line once they run
(19:06):
out of the deals that they currently have signed.
Speaker 4 (19:09):
Our thanks to Man Deep, saying Bloomberg Intelligence senior tech
industry analyst.
Speaker 2 (19:13):
We look next at earnings from one of the world's
biggest producers of heavy machinery, Caterpillar. This week, the company
posted qually earnings that missed analyst expectations.
Speaker 4 (19:22):
Caterpillar also said it now expects full year adjusted operating
profit to fall in the bottom of its annual target range,
even with higher annual sales and the companies that it
expects to face net incremental tariffs on one point three
to one point five billion dollars this year.
Speaker 2 (19:36):
For more, Lisa and I were joined by Chris Gielino,
Bloomberg Intelligence senior US machinery analyst. We first asked Chris
to discuss his takeaways from Caterpillar's earnings.
Speaker 8 (19:46):
The print was a little weak. It came in a
little below expectations. The big takeaway here is that underlying
demand is still pretty darn resilient. You had backlog ubsequentially
again this quarter, which set another record. You had improving
order trad across all three of their main businesses. Dealer
inventories still remain quite low, and the company actually raise
(20:06):
their sales guidance for the year. So you know, that
seems to suggest us that underlying demand is still intact
despite all these these tariff headwinds.
Speaker 4 (20:15):
And now, how do their results kind of match up
to some of their their peers. They believe there's Terex Lindsay,
who already opened their books. How does Caterpillar match up?
Speaker 8 (20:24):
Yeah, I characterized the overall earning season for for US
machinery is kind of mixed if you think about really
construction peers, which which is kind of more Caterpillars sweet spot.
That's a market that's you know, kind of bouncing along
the bottom.
Speaker 7 (20:40):
Here.
Speaker 8 (20:41):
We do have you know, infrastructure projects and these large
meggat projects which are helping to offset some of the
weakness that you're seeing on the private, non residential side,
things that are more interest rate sensitive. But you know,
you're starting to see some positive indicators that would you know,
lead us to believe that you're going to start to
see a cycle clover emerge in twenty twenty six. There's
(21:02):
a number of you know, leading indicators out there that
would support that. And I think really Caterpillars results here
with orders being up in the construction business, with the
backlog being up, really kind of reinforced that view.
Speaker 2 (21:14):
Where does Caterpillar make their big trucks and stuff like
that everywhere?
Speaker 8 (21:19):
Right, They're they're a global company. They've got a large
footprint that spans you know, every continent in you know,
most countries. But if you think about it, at the
end of the day, it's North America, right, it's more
than half of their revenues. Europe is called it, you know,
twenty percent, ish Asia Pacific a little bit below that,
(21:39):
and then you know Latin America is kind of closer
to ten percent. They are a net exporter out of
the US, but as we saw, Tariff's probably going to
be a little bit more of a head wind they
than they had initially anticipated. They're looking for, you know,
somewhere between a one point three to one point five
billion dollar hit for this year.
Speaker 4 (21:57):
So, Chris, you kind of touched upon this sales lie
in construction resource industries, but energy and transportation unit that
had some higher sales. What is that that driving force
behind the growth in engines and transportation?
Speaker 8 (22:11):
So this continues to be one of really the big
highlights for Caterpillar, you know, despite some of the cyclical
softness that they're seeing, is the energy and transportation business,
particularly in power generation. So think you know, data centers
that are becoming an increasingly larger part of the portfolio.
Power gen continues to drive outsize growth within the energy
(22:33):
and transportation business. There's you know, a multi year backlog there,
so we have, you know, veryly tremendous visibility, and what
Caterpillar is doing now is really expanding capacity to help
you know, meet this growing demand for data centers and
power generation. So there's a long secular tailwind at play.
Here and really, you know, we think we have a
(22:54):
pretty good visibility here over the back half of the decade.
Speaker 2 (22:57):
Is Caterpillar and companies like Caterpillar, are they benefit or
do you expect them to benefit from maybe on shoring
even more manufacturing in this country if to the extend
that President Trump you know, wants to do that and
he's been talking about that a lot. Is that something
where kat would will see it?
Speaker 8 (23:14):
Yeah, I mean I would say we haven't really heard
of you know, I would say concrete or tangible evidence
of that happening yet, And it's really difficult to you know,
get a lens on that on a quarter to quarter
I think, you know, if we look back maybe over
a five year window, maybe we'll have a better picture
of that. But yet, no doubt Caterpillar is a big
(23:34):
beneficiary of any kind of construction activity here domestically. And
then not only on top of you know, not only
just moving the dirt and building the facilities, they're also,
like I mentioned, having have a bigger piece of the
data center and power generation needs within our within our
country as well. So it's really kind of twofold. Not
(23:58):
only you know, with the moving the dirt and the facilities,
but also you know, longer term, we think the secular
tailwinds around power generation. Are you pretty favorable?
Speaker 4 (24:09):
Hey, Chris, before you go, we have like about a
minute or so left. People usually say this is like
the Bell weather for a look at the economy. Is
this company going to continue to be that spot and
to hold that title?
Speaker 8 (24:20):
I don't see anything changing in the near term here.
They are the largest global manufacturer of heavy machinery. They
have the scale, the dealer network, and really there's not
too many competitors that are that close to them. So
they are the leading indicator for the heavy machinery markets
(24:41):
and construction activity, and I don't foresee that changing anytime soon.
Speaker 4 (24:45):
Our thanks to Christopher Chiolio, Bloomberg Intelligence senior US machinery analyst.
Coming up, well, look at why the ev giant Tesla
approved a thirty billion dollar stock award for its CEO,
Elon Musk listening.
Speaker 2 (24:57):
To Bloomberg Intelligence on Bloomberg Radio providing in the research
and data on two thousand companies in one hundred and
thirty industries.
Speaker 4 (25:03):
You can access Bloomberg Intelligence via bi go on the terminal.
I'm Lice Matteo and.
Speaker 2 (25:08):
I'm Paul Sweeney.
Speaker 7 (25:09):
This is Bloomberg.
Speaker 1 (25:17):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Easterned on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (25:31):
I'm Paul Sweeney and I'm Lace Matteo filling out on
Bloomberg Intelligence. We move now to second quarter earnings from
the fast food giant McDonald's.
Speaker 2 (25:39):
This week, McDonald's reported their global sales at restaurants open
at least thirteen months rose three point eight percent last quarter.
Speaker 4 (25:45):
This suggests that pop culture focused collaborations and budget meals
are helping to offset diners' economic anxiety.
Speaker 2 (25:51):
More guest hosts Isabelle Lee and I were joined by
Michael Halen, Bloomberg Intelligence senior restaurant and food service analysts.
Your first ask, Mike, if returning to sales growth feels
like a waiting for McDonald's.
Speaker 9 (26:01):
It's definitely a win for you know, overall industry, saam
source sales because it's such a monster. It also could
be bad news for some of their competitors. With fourteen
thousand stores in the United States. Listen, man, they know
how to run run good restaurants right right now in
the US, they're starting to lap some easier comparisons and
(26:25):
you know that's showing up and the you know, that's
helping their results. They're also you know, doing a good
job with you know, the menu, right, They're bringing back
snack wraps, they're bringing back the mccrispy strip. They just
debuted a daily double. They've been pressing on value all year.
That was a big thing since the first quarter. And
so you know, McDonald's has the scale that they can
(26:46):
you know, offer products a little bit cheaper than their
peers and still in the franchisees can still make a
little bit of money off of it, right, So you know,
they they seem to really be hitting their stride and
their lap easy comps in the second half of the year.
So you know, we're looking at a pretty good second
half for McDonald's.
Speaker 6 (27:06):
And international markets led the company's growth. What regions of
the world did they really pushed aggressively towards.
Speaker 9 (27:13):
Yeah, they mentioned some really good strength in Germany. They
talked about some improvement in some markets that had been struggling,
like France and Australia and so you know, what they're
doing overseas is similar to the US playbook, right, but
they're probably ahead of the game, ahead of the US
in terms of providing everyday value. Their value messaging has
(27:37):
been on point and it's really helped them grow internationally
and that's why we've seen international grow faster than the
US for the last year or so. They also cited
the fact that there's less competition overseas, so they're really,
you know, a pricing leader overseas. You know, they can
the same type of thing in the US where they
can offer price points that competitors just can't match. And
(27:59):
then they're also in improving the operations, improving the quality
of the product, which has been an ongoing theme here.
They're improving the quality of the beef, better burgers, the
way they cook the burgers their day being the big
Arch which is a big, bigger sized burger in their lineup.
They're also expanding chicken overseas. So this company's humming along
(28:21):
right now.
Speaker 2 (28:22):
What does a company say, Like when I think about McDonald's,
I think a lot of folks probably feel like the
low end, low income consumers probably it's bread and butter
there and maybe that consumers more at risk in this
economic environment. What's the company saying about low income patrons.
Speaker 9 (28:38):
Yeah, you know what I like about this call call
is that you know, they're talking about what they can control.
You know, they cited the fact that low income consumer
traffic is down double digits, right, versus a small gain
for middle income consumers and steady consistent gains with high
income consumers. So they are seeing, you know, weakness with
low income consumers like everyone else. That's why they push
(29:00):
so hard on value. That's why they have these you know,
five dollars meals and buy one, get one for a dollar,
and why they put marketing dollars behind that. That's part
of the you know, the beauty of the snack wraps.
They're coming back at a two ninety nine price point.
We think that's going to bring some low income consumers
back into the fold, right, So they understand that that
people are very priced sensitive right now, and you know,
(29:24):
they're addressing it with the price points. But they're also
trying to give people better quality and better service. At
the same time.
Speaker 6 (29:31):
They also plan to taste new beverages and this includes
cold coffees and crafted sodas at more than five hundred
US locations. How much of a pull are beverages when
it comes to McDonald's offerings or is food really still king?
Speaker 9 (29:45):
Food is still king? But listen, beverages are hot. Beverages
are hot everywhere right during highlges, energy and very high margin, right.
And so we think this is a very good opportunity
for McDonald's. I think this is kind of a problem
for Sonic, which has long done a really good job
(30:06):
with their drink offering. But yeah, we think this is
something that can help drive sales at McDonald's. Taco Bell
is something Taco Bell's expanding as well, But we think
this is going to be more of a twenty twenty
six story for McDonald's.
Speaker 2 (30:22):
For McDonald's, my percentage of the revenue comes from owned
and operated stores versus franchise stores.
Speaker 9 (30:30):
Oh, they're ninety eight percent franchised. So there, Yeah, they're
heavily franchised. And you know, it's a beautiful model, man.
There's not a lot of operating leverage in the model.
They generate a ton of cash that they return to shareholders.
Speaker 2 (30:44):
It really is a buy What's so, what's the royalty
rate on there's a franchise e paid McDonald's based upon revenue,
based upon net income, based upon how many Big Max
say sale. How does that work?
Speaker 9 (30:55):
Yeah, yeah, yeah. McDonald's is a little bit unique. They
have a five ish percent royalty eight plus they own
a lot of the real estate. So a lot of
franchises in the United States are paying a rent, which
is typically you know, a ten inch percent of sales,
we'll say, and then they'll pay another three and a
half to four percent into the ad fun.
Speaker 2 (31:13):
I didn't know that until I saw the movie and
then that famous scene. Yeah, you're not in the hamburger business,
you're in the real estate business. And that was such
a great scene. I learned a lot there. All Right,
I can't let you go without Crackerbrowl and I need
my daily update Country Boy Breakfast. How's that company doing? Listen.
Speaker 9 (31:29):
We're we're big fans of new CEO Julie Messino. That
stock's been a bit of a rollercoaster, not a surprise
since it's a small cap. It rows more than one
hundred percent off its April lows. Now it's in the
midst of a pretty aggressive downturn.
Speaker 5 (31:44):
But you know, we like it.
Speaker 9 (31:46):
We like Julie's plans to improve the operations, to spend
more and be more efficient with their marketing spend. We
think this is a chain that hadn't been taken care of,
It hadn't been run really well for the last decade,
and so we see a lot of low hanging fruit
for the current management team to turn things around and
really drive strong seam source sales through year end twenty
(32:08):
twenty five and well into twenty twenty six.
Speaker 4 (32:10):
All right, thanks to Michael Hale and Bloomberg Intelligence senior
restaurant and food service analyst. We move next to news
at the ev giant Tesla.
Speaker 2 (32:18):
This week, we heard that Tesla proved an interim stock
award worth about thirty billion dollars for chief executive officer
Elon Musk to keep his attention on the automaker.
Speaker 4 (32:27):
The award includes ninety six million shares of the automaker
that will vest if Musk continues to serve in the
top post for another two years.
Speaker 2 (32:34):
For more, guest host Norma, Linda and I were joined
by Steve Man Bloomberg Intelligence, Global Autos and Industrials Research Channels. First,
ask Steve what he makes of this stock award.
Speaker 10 (32:42):
I think it's very positive news for Tesla because you know,
they are going through a pivot right now, not only
an automaker, but they're very focused on AI. But if
you look at Elon Musk, you know he's Tesla is
not his only business, right He's got x Ai, his
AI company, which owns the former Twitter, and he also
(33:07):
Hash you know, space x Neurlink. I think they're all
related in some ways to AI. And I think, you know,
without you know, must and Tesla, I think you know,
there's going to be a lot of risk to that
vision for Tesla without him there.
Speaker 11 (33:26):
See, if you mentioned that there are a lot of
different things that are vying for Musk's attention. Of course,
we do know that he was really politically involved and
then we thought kind of pulled back, and then he
mentioned his intention for creating the America Party. So clearly
he still remains in these conversations here. But what are
investors looking for right now from him? And doesn't seem
as though his attention is devoted as much as it
(33:46):
should be to Tesla.
Speaker 10 (33:48):
Yeah, I think fortunately for now, his attention is very
much devoted to Tesla. He set that at the second
quarter earnings call. I think, you know, his presence is
important because you know, you know, right now the company
is going through a changeover in terms of the direction
the strategy right uh. You know, cars has been very
(34:10):
important continues to be important to drive that AI theme.
But without must there, I think the company will have
to you know, won't able to find the next person
really to drive the company to the next step and
expanding robo taxi, expanding their optimness robot offering in the future.
Speaker 2 (34:31):
Do we care about how many cars they make and
whether they make any money in the old car business?
Speaker 5 (34:35):
Seed we do.
Speaker 10 (34:37):
And you know a lot of people think that, you know,
it's a it's a full pivot towards AI, But I
think making cars and UH and developing that AI UH
software it goes hand in hand. It's almost like Apple
and its ecosystem.
Speaker 5 (34:55):
UH.
Speaker 10 (34:55):
I mean, there are opportunities for Tesla to actually license
the FSD, the full self driving software out, but I
think in the meantime it's not it's not something he's
looking to do. I think he wants to build out
Robotaxi internally and actually drive revenue and profits. He's does
(35:16):
see huge profits from from the Robotaxi and from the
FSD software. If you look at other software companies, margins
are high double digits on the software for any software.
But then you know with with his FSD software, the
car isn't an integrated component to it. It's it's it's
(35:37):
it's very important that he continues to make cars, not
only for the for cash, but for for really marketing
that software.
Speaker 9 (35:45):
That he has.
Speaker 11 (35:46):
You have a lot of pressuring Tesla over the last
few months. I mean we're looking at a stock. It's
the worst performing stock within all the mag seven stocks
that there are right now. Explain to me right now
what the latest overhangs are right now for the company.
Speaker 10 (35:58):
Well, I think one big overhang that's to remove this
it is his pay package. There is a lot of
fear in terms of him potentially being kicked out of Tesla.
But I think the biggest overhang right now, or where
the investors are more focused on, is the expansion of Robotaxi.
Right He's he launched it back in June in Austin.
(36:22):
He's launching it in the San Francisco Bay area, and
he's also thinking about launching it in Nevada. And it's
from the looks of it, it's going quite well. I mean,
there are some hiccups here and there with this complex
engineering system that he's putting in place for cars. It's
it's normal, it's normal. So but you know, safety is
(36:45):
still his priority, and you know he's gonna going at
it at a measured pace, but it seems like he's
expanding it relatively fast. You know, his the the area
of coverage is is much bigger than initially was back
in Austin back in June, and we're seeing something similar
(37:05):
in San Francisco. So investors are really focused on when
Robotaxi will start contributing to the bottom line, and we
think that you're probably more likely in twenty twenty seven.
Speaker 4 (37:17):
Our thanks to Steve Man, Bloomberg Intelligence, Global Autos and
Industrials Research analyst.
Speaker 1 (37:21):
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Speaker 2 (00:13):
The real app performance has been the US corporate high yield.
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Breaking market headlines and corporate news from across the globe.
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Down, there is the possibility of the debt spirals.
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Speaker 4 (00:42):
I'm Paul Sweeney and I'm Lisa Matteo filling in on
Bloomberg Intelligence.
Speaker 2 (00:46):
On the Face Bloomberg Intelligence Show, we dig inside the
big business stories impacting Wall Street and the global markets.
Each and every week, we provide in depth research and
data on some of the two thousand companies in one
hundred and thirty industries our analysts cover worldwide. Today, we'll
look at why Volunteer Technologies reported its biggest ever quarterly
sales growth since the company went public.
Speaker 4 (01:04):
Plus, we'll look at how the fast food Jay McDonald's
returned to sales growth last quarter.
Speaker 2 (01:09):
But first we begin with earnings from the median entertainment
giant Walt Disney.
Speaker 4 (01:12):
This week, Disney shares fell after the company gave a
mixed earnings report in the third quarter. The results, well,
they showed strength in Disney streaming and parks business, but
the company gave a lukewarm outlook for profit this year.
Speaker 2 (01:23):
For more guest hosts, Isabelle Lee and I rejoined by
Keitha Rong Onathan Bloomberg Intelligence Analysts on US media. We
first asked Etha what exactly concerns investors about Disney.
Speaker 5 (01:33):
You know, expectations might have been, you know, slightly high,
and the fact that they didn't necessarily give us any
specific guidance for fiscal twenty twenty six. They did point
to a raised guidance for EPs growth for fiscal twenty
twenty five eighteen percent now and sort of sixteen percent,
but they didn't necessarily give us anything specific for fiscal
twenty twenty six. That could be a slight source of disappointment.
(01:56):
They did say that they will stop disclosing Disney plusses
criber numbers, but again this is not something totally unexpected.
I mean, Netflix has stopped doing this. We're seeing this
kind of move away from just subscriber numbers to a
greater focus and profitability.
Speaker 6 (02:10):
I want to zero in on parks because I'm still
scarred by how expensive it was when I visited a
couple of years ago as an adult. But how sustainable
is there strong parks performance given the divergent domestic and
international performance.
Speaker 5 (02:23):
Very sustainable isabell. So, you know, we saw domestic parks,
and I say that because you know, domestic parks actually
coming into this year, coming into this quarter, there were
a lot of worries, one of course, about the general
macroeconomic environment, but the bigger source of worry was really
the opening of Epic Universe, which is you know, Universal's
big Florida theme parket traction. But the fact that it
(02:44):
had absolutely no impact at all, or very very modest impact,
if at all, is really amazing, and it just kind
of speaks to the resilience in Disney's business model. They
reported again very very strong per capita growth, you know,
in terms of food beverages, in terms of concessions. So
all of that doing really well, and the reason I'm
so positive about this business going forward. First of all
(03:06):
it contributes about fifty five to sixty percent of Disney profits.
Are really really important to their top line, to their
bottom line. Definitely. They have a lot of upcoming capacity,
So the biggest source of expansion over the next few
months is really going to be their cruise ships. They're
launching two new cruise ships, their biggest ever actually, which
is going to come on board in November and December.
(03:27):
One of them sets sail from Asia and that basically
takes the number of cruise ships to eight cruise ships,
effectively kind of doubling their capacity in a span of
just maybe two to three years. So that is going
to really buoy both top line and bottom line going
into twenty twenty six. And then beyond that, you really
have this huge sixty billion capital expansion plan that is
(03:49):
really going to play out over the next five to
ten years. So we're going to see a lot more
attractions all over the world. We're going to see that
new Abu Dhabi park come out. So there is really
a lot of you know, sustained momentum that we can
expect at the parks going forward.
Speaker 2 (04:03):
Keith It talk to us about that deal they just
made with the NFL it seems like a really positive
development for the company.
Speaker 5 (04:09):
Yeah, it's really good. I think from a Disney from
an ESPN standpoint, that they're so closely aligned now with
the NFL. I mean, the NFL is absolutely the premium property,
the gold standard, Paul, you know this well when it
comes to you know, sports properties in the US. And
the fact now that they're going to be able to
use all of this content for their upcoming ESPN streaming launch,
(04:30):
I mean that that itself just kind of gives it
a tremendous boost, I think even before you know it
comes on board. So it's great for the product. It's
also great from a strategic standpoint because the NFL is
obviously one of the most important sports properties, and this
really gives them access or it at least definitely gives
them a little bit of an advantageous position compared to
(04:51):
let's say, an Amazon or a Netflix or an Apple
if they want to ever outbid you know, the current
media partners. So definitely, I think strategically, very very sound
move on the part of Disney.
Speaker 6 (05:02):
So it seems like we had a good quarter. Runway
for growth is really just long and wide. What downside
risks remain then, especially around the macro uncertainty and tiriff exposure.
Speaker 5 (05:10):
Do you see, Yeah, maybe a little bit of execution risks.
So we still really don't know how this hole. I mean,
obviously everybody's very excited for the ESPN product launch, but
we still don't know how exactly that's going to play out. Again,
a huge source of upside is going to be the
streaming business. Everybody is expecting huge cost savings when it
comes to the integration of Hulu and Disney Plus. But
again execution is a little bit of a risk. And
(05:32):
then you pointed out, you know, macro factors. Remember, Disney
still obviously has huge exposure because of its parks business,
and anytime we see kind of a slowdown in the economy,
we do feel that in the parks as well. And
of course advertising also, so you know, they do have
a substantial exposure to advertising because of their TV networks business.
So there again we can see a little bit of
(05:53):
an impact. But overall, as it stands right now, the
business seems to be in really good shape all right here.
Speaker 2 (05:58):
The problem childs though, are the podcast networks in the
cable networks. What you know, just because of cord cutting,
that they're just declining businesses. What's the company saying that
what we're going to do with those businesses.
Speaker 5 (06:08):
They haven't said anything explicitly, Paul. So a few years ago,
you know, this idea was floated that maybe they kind
of spin off ABC their broadcast network, maybe they spin
off their linear cable channels, all of that. You know,
noise has kind of quietened down. You know, Bob Biger
basically said, no, no, no, we need these businesses. They're
all kind of integral to the whole Disney story. So
(06:28):
we haven't heard anything recently that being said. Just this
whole deal with the NFL, the NFL kind of taking
an equity stake, it almost seems like they are prepping
for ESPN to kind of ESPN and maybe ABC to
kind of coast solo. Remember, Bob Biger only has a
few more months left, so the end of twenty twenty
(06:49):
six he leaves Disney, or at least that's what he says. Yeah,
we think, and I really think he kind of wants
to get this deal done so to separate es because
it's not really core to the rest of the Disney properties.
But again, it's a little bit of a weight and watch,
but nothing explicitly stated from Disney management about what they
(07:09):
want to do with the linear piece of the business.
Speaker 6 (07:11):
So ESPN is getting a fresh spin. Within August twenty
one launch, it will be thirty dollars a month for
the new streaming app. What do you make of that price?
You think people will pay up for it or is
that steep?
Speaker 5 (07:22):
It's a high price point, There's no doubt about it.
I think most people were kind of expecting somewhere in
the twenty three to twenty five dollars range. That said,
what you know, we just ran a survey actually at
Bloomberg Intelligence, and what we found is that there's actually
a lot of interest in this product. So we think
that the updake will be fairly strong. And the updake
not so much as a standalone product, but when you
bundle it with Disney Plus and Hulu, so they are
(07:45):
running a pretty attractive promotion. So for the first year,
you can get Disney Plus, Hulu and ESPN at a
thirty to thirty dollars price point, which which seems like
really good value. So I think we're going to see
a lot of people come in initially through the bund
at least.
Speaker 4 (08:01):
Our thanks to Githa Ranganath and Bloomberg Intelligence analyst on
US media.
Speaker 2 (08:05):
We move next to recent news from the beverage company
Molson Cores.
Speaker 4 (08:08):
This week, the company lowered its full year guidance for
the second quarter in a row. It cited continued pressure
from a week consumer, falling US market share, and rising
costs tied to aluminum tariffs.
Speaker 2 (08:19):
For more, Lisa and I were joined by Ken Shay,
Bloomberg Intelligence senior consumer products analysts. We first asked Ken
just how much aluminum tariffs have been impacting Molson.
Speaker 3 (08:28):
Course, it's material, you know, they describe it as an
indirect cost, but it really spiked up there in the quarter,
you know, encroaching on their margin. I think though the
bigger picture though here is the continued week sales, the
lackluster sales were seeing in the US beer market and
alcoholic beverages in general. You know, this is their peak
(08:48):
summer selling season. This is when you know these companies
should be thriving, and it looks like the summer selling
season in the US for alcoholic beverages is going to
be a dud. It's a cautious consumer, it's a particular
pressures on the Hispanic demographic. It's it was a lousy
June in terms of the weather and key markets, and
(09:10):
basically all the big brewers are setting up for a
tough second half as you know, these trends continue. You know,
I expect continued sluggish performance in the second half as well.
Speaker 2 (09:22):
So is this beer thing? Is it the kind of
a global thing? I mean, I know, you guys at
Bloomberg Intelligence, you get the data that choose consumption of
everything out there.
Speaker 3 (09:31):
In the case of most in course, Paul, yeah, they
have a big operation in Europe, Eastern Europe, many parts
of Western Europe, and that they had lower volumes as well.
It was saved by higher prices to a degree. But
you know, again the big picture is that consumers are
just not going out to the bars as much. On
premise sales, we're particularly weak. That could be weather related,
(09:52):
I mean, that's just another example, but also I think
it could be, you know, the culmination of a lot
of price increases over the last few years. Maybe we've
hit a point where there's some sticker shot going on here.
Speaker 4 (10:05):
And what about people drinking he said, not going to
the bar, But what about just drinking less alcohol in general.
Speaker 3 (10:12):
Well, that's a great point, least, I think longer term,
you have some secular headwinds as well, things you've talked
about in the past. You know, the spread of legal cannabis,
particularly here in the US. In the US, you also
have these intoxicating hemp drinks which are all the rage
now in many markets. You have the GLP one users
are cutting back. Gen Z doesn't seem to embrace alcohol
(10:33):
as much as their parents did. All those things are
weighing on it longer term, but that, combined with some
near term pressures, is really weighing on these companies.
Speaker 2 (10:41):
It's a disappointing discussion here. I mean, not that we're
gonna have fun here. I'll tell you here's the problem
with all this white claw and sea breeze and I
don't know what you know, the iced tea and vodka,
what's that all about?
Speaker 5 (10:53):
Is that a fad?
Speaker 3 (10:54):
It seems to have some legs there, you know, the
pre mixed cocktails. Well, let me put it this way.
With some of the things that did l in the
quarter are things like bush light apple, you know, some flavor.
You know, some of the hard teas are doing well.
The premixes continue to do well, So I think the
way you could take away is maybe the consumer, while
(11:15):
you know economizing, is also looking for a flavor and
different variety. And also the non alcoholic and low alcoholic
segment continues to do well from a low base. So
I think in the second half I would expect a
higher level of promotion and innovation along those themes low
alcohol and no alcohol flavor innovation that's going to be
(11:37):
really popular. I think in the second half the super volume.
Speaker 4 (11:40):
Hey, before you go, can you break down some of
those macro economic headwinds that the company's facing.
Speaker 3 (11:45):
Sure, well, they The primary one is just you know,
consumer confidence. Consumers just feel you know, they're reading the
papers all these you know, tire fund certainties, and you
know the pressure on the Hispanics in particular, what's going
on there. Those are the big things, you know, And
I don't think it's anything major, but it's it's just
enough on the margin that these are purchases that can
(12:06):
be deferred and consumers by and large r.
Speaker 4 (12:11):
A our thanks to Kenhey Bloomberg Intelligence senior consumer products analysts.
Coming up, we'll look at earnings from one of the
world's biggest producers of heavy machinery Caterpillar.
Speaker 2 (12:20):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies one hundred
and thirty industries.
Speaker 4 (12:27):
You can access Bloomberg Intelligence via bi Go and the terminal.
Speaker 2 (12:30):
I'm Lise Matteo and I'm Paul Sweeney. This is Bloomberg.
Speaker 1 (12:38):
You're listening to the Bloomberg Intelligence podcast. Catch us live
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Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (12:52):
I'm Paul Sweeney and I'm Lice Matteo. Filling in on
Bloomberg Intelligence.
Speaker 2 (12:55):
Move now to earning from the software company Palaneer Technologies.
Speaker 4 (12:59):
This week, palente reported its biggest ever quarterly sales growth
since the company went public, and Palenteer cited astonishing impact
of artificial intelligence technology on its business.
Speaker 2 (13:09):
For more, Lisa and I were joined by Mandeep saying
Bloomberg Intelligence, senior tech industry analyst. We first asked man
Deep if Palenteer should be considered a dominant software company
of the future.
Speaker 7 (13:19):
I mean, clearly there is a lot baked into the valuation,
But I want to focus on, you know, the net
new ERR, which is a metric that software companies are
measured on. And when you compare Palenteers commercial segment revenue,
which everyone is excited about, their total deal value that's
(13:42):
remaining is around two point eight billion, the new ARR
increased by five hundred million. Contrast that with a Microsoft
or a Google Cloud. Microsoft added almost nine billion in
net new ARR this quarter, and they talked about, you know,
being used across one hundred million Microsoft Copilot users twenty
(14:05):
million GitHub Copilot users. So from that perspective, you know,
Balenteers increase in remaining deal value of five hundred million
looks pretty small. I mean, Palenteers overall revenue rund rate
is four billion. Microsoft clearly is you know, a company
that's almost one hundred times or eighty times more bigger
(14:28):
than Palenteer. But it just goes to show that even
on a net new AIRR basis, Microsoft is adding more
revenue per quarter than a Palenteer is. And still people
are very excited about Palenteers prospects. And to my mind, clearly,
you know, they have a product that is appealing to
(14:48):
a certain section of enterprise users. But at this valuation,
I mean, they can't sustain that for the next thirty
forty quarters, which is what they need to show to
grow into the evaluation. And I just don't see from
a product perspective they'll have the same kind of appeal
as a Microsoft Copilot or a Google Cloud or you know,
(15:10):
any of these large companies.
Speaker 2 (15:12):
Some question today, how do you guys value this thing?
I mean, I got it at like two three hundred
times earning, So that's not the way to go.
Speaker 7 (15:18):
So we've seen that with you know, new IPOs. When
they come to the market, they get a premium multiple.
They get traded at you know, thirty forty time sales.
Snowflake which is a competitor to Palenteer, when it went public,
it traded at sixty seventy time sales. Look at where
the stock is now. It's flat since the IPO. Even
(15:39):
though the company has grown top line at thirty thirty
five percent Kegger, the stock is flat. So that's what
I mean by growing into the valuation, because there is
so much embedded in that upfront multiple that even growing
at thirty percent is not enough. Palenteer really needs to
grow at fifty percent to be able to show any
(16:00):
sort of stock return from this point on, Can I
do that? No? I mean that's why I said I
compare the product. My initial comments were around comparing Palenteers
product versus other large enterprise software makers and even you know,
you go down the list Salesforce Service, now Adobe like,
these are much bigger companies and they have compounded at
(16:23):
twenty percent Keger over the years because they had a
seat base or a consumption based model. We don't even
know what kind of a business model Palenteer has. Yes,
it's winning government deals, Yes it's winning some enterprise deals,
but we don't know how they account for that revenue
every quarter. Is it a seat based model, is a
consumption base? We don't have that kind of visibility to
(16:46):
their business model.
Speaker 2 (16:48):
In a Concter party, I can tell you the Google story,
I can tell you that Microsoft story. I have no
idea what the Palenteer story is. Can you explain it
to me like I'm a five year old?
Speaker 7 (16:57):
Yeah, so their software out of the box will help
you make sense of your big data strategy. They really
curved out a name for themselves when big data became
the thing. When a company had a large amount of data,
whether it's log data or some other type of reporting data,
they would help you make sense of it because they
(17:19):
have something proprietary that no one else has in terms
of organizing that data and making it usable. So that's
their value proposition. But with the AI wave and llms,
they were able to integrate LLM calls within their offering
to develop a customer service or a supply chain use
(17:40):
case that you can apply AI on top of their ontology,
which is their core product. And a lot of other
companies are doing the same. To my mind, Microsoft is
doing the same for their customers. They're trying to embed
open AI with their core offerings with their CRM system
and help them deploy customer service use case. So the
(18:01):
differentiation of Balenteer versus Microsoft, to my mind is not
that big as the valuation reflects. And that's where I'm
betting they're not going to grow fifty percent for the
next twelve to twenty quarters, which is what the valuation
is implying.
Speaker 4 (18:16):
Now, how would you compare what they do as far
as a government contractor versus the commercial side, like which
is doing better for them?
Speaker 7 (18:23):
Yeah, so they have a much higher exposure to government side.
I mean, government side is still more than fifty percent
of their revenue, and all these large enterprise software companies
they have ten to fifteen percent government exposure. So Palenteer's
government exposure is way too large compared to other software makers.
And on top of that, their international sales seem to
(18:45):
be declining at least, you know, on the commercial side
because of the polarizing views of the management. So if
they were more balanced, probably they would win more international business.
But right now this is a US centric story, and
that's where I think it sort of puts a dent
to the growth rate down the line once they run
(19:06):
out of the deals that they currently have signed.
Speaker 4 (19:09):
Our thanks to Man Deep, saying Bloomberg Intelligence senior tech
industry analyst.
Speaker 2 (19:13):
We look next at earnings from one of the world's
biggest producers of heavy machinery, Caterpillar. This week, the company
posted qually earnings that missed analyst expectations.
Speaker 4 (19:22):
Caterpillar also said it now expects full year adjusted operating
profit to fall in the bottom of its annual target range,
even with higher annual sales and the companies that it
expects to face net incremental tariffs on one point three
to one point five billion dollars this year.
Speaker 2 (19:36):
For more, Lisa and I were joined by Chris Gielino,
Bloomberg Intelligence senior US machinery analyst. We first asked Chris
to discuss his takeaways from Caterpillar's earnings.
Speaker 8 (19:46):
The print was a little weak. It came in a
little below expectations. The big takeaway here is that underlying
demand is still pretty darn resilient. You had backlog ubsequentially
again this quarter, which set another record. You had improving
order trad across all three of their main businesses. Dealer
inventories still remain quite low, and the company actually raise
(20:06):
their sales guidance for the year. So you know, that
seems to suggest us that underlying demand is still intact
despite all these these tariff headwinds.
Speaker 4 (20:15):
And now, how do their results kind of match up
to some of their their peers. They believe there's Terex Lindsay,
who already opened their books. How does Caterpillar match up?
Speaker 8 (20:24):
Yeah, I characterized the overall earning season for for US
machinery is kind of mixed if you think about really
construction peers, which which is kind of more Caterpillars sweet spot.
That's a market that's you know, kind of bouncing along
the bottom.
Speaker 7 (20:40):
Here.
Speaker 8 (20:41):
We do have you know, infrastructure projects and these large
meggat projects which are helping to offset some of the
weakness that you're seeing on the private, non residential side,
things that are more interest rate sensitive. But you know,
you're starting to see some positive indicators that would you know,
lead us to believe that you're going to start to
see a cycle clover emerge in twenty twenty six. There's
(21:02):
a number of you know, leading indicators out there that
would support that. And I think really Caterpillars results here
with orders being up in the construction business, with the
backlog being up, really kind of reinforced that view.
Speaker 2 (21:14):
Where does Caterpillar make their big trucks and stuff like
that everywhere?
Speaker 8 (21:19):
Right, They're they're a global company. They've got a large
footprint that spans you know, every continent in you know,
most countries. But if you think about it, at the
end of the day, it's North America, right, it's more
than half of their revenues. Europe is called it, you know,
twenty percent, ish Asia Pacific a little bit below that,
(21:39):
and then you know Latin America is kind of closer
to ten percent. They are a net exporter out of
the US, but as we saw, Tariff's probably going to
be a little bit more of a head wind they
than they had initially anticipated. They're looking for, you know,
somewhere between a one point three to one point five
billion dollar hit for this year.
Speaker 4 (21:57):
So, Chris, you kind of touched upon this sales lie
in construction resource industries, but energy and transportation unit that
had some higher sales. What is that that driving force
behind the growth in engines and transportation?
Speaker 8 (22:11):
So this continues to be one of really the big
highlights for Caterpillar, you know, despite some of the cyclical
softness that they're seeing, is the energy and transportation business,
particularly in power generation. So think you know, data centers
that are becoming an increasingly larger part of the portfolio.
Power gen continues to drive outsize growth within the energy
(22:33):
and transportation business. There's you know, a multi year backlog there,
so we have, you know, veryly tremendous visibility, and what
Caterpillar is doing now is really expanding capacity to help
you know, meet this growing demand for data centers and
power generation. So there's a long secular tailwind at play.
Here and really, you know, we think we have a
(22:54):
pretty good visibility here over the back half of the decade.
Speaker 2 (22:57):
Is Caterpillar and companies like Caterpillar, are they benefit or
do you expect them to benefit from maybe on shoring
even more manufacturing in this country if to the extend
that President Trump you know, wants to do that and
he's been talking about that a lot. Is that something
where kat would will see it?
Speaker 8 (23:14):
Yeah, I mean I would say we haven't really heard
of you know, I would say concrete or tangible evidence
of that happening yet, And it's really difficult to you know,
get a lens on that on a quarter to quarter
I think, you know, if we look back maybe over
a five year window, maybe we'll have a better picture
of that. But yet, no doubt Caterpillar is a big
(23:34):
beneficiary of any kind of construction activity here domestically. And
then not only on top of you know, not only
just moving the dirt and building the facilities, they're also,
like I mentioned, having have a bigger piece of the
data center and power generation needs within our within our
country as well. So it's really kind of twofold. Not
(23:58):
only you know, with the moving the dirt and the facilities,
but also you know, longer term, we think the secular
tailwinds around power generation. Are you pretty favorable?
Speaker 4 (24:09):
Hey, Chris, before you go, we have like about a
minute or so left. People usually say this is like
the Bell weather for a look at the economy. Is
this company going to continue to be that spot and
to hold that title?
Speaker 8 (24:20):
I don't see anything changing in the near term here.
They are the largest global manufacturer of heavy machinery. They
have the scale, the dealer network, and really there's not
too many competitors that are that close to them. So
they are the leading indicator for the heavy machinery markets
(24:41):
and construction activity, and I don't foresee that changing anytime soon.
Speaker 4 (24:45):
Our thanks to Christopher Chiolio, Bloomberg Intelligence senior US machinery analyst.
Coming up, well, look at why the ev giant Tesla
approved a thirty billion dollar stock award for its CEO,
Elon Musk listening.
Speaker 2 (24:57):
To Bloomberg Intelligence on Bloomberg Radio providing in the research
and data on two thousand companies in one hundred and
thirty industries.
Speaker 4 (25:03):
You can access Bloomberg Intelligence via bi go on the terminal.
I'm Lice Matteo and.
Speaker 2 (25:08):
I'm Paul Sweeney.
Speaker 7 (25:09):
This is Bloomberg.
Speaker 1 (25:17):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Easterned on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (25:31):
I'm Paul Sweeney and I'm Lace Matteo filling out on
Bloomberg Intelligence. We move now to second quarter earnings from
the fast food giant McDonald's.
Speaker 2 (25:39):
This week, McDonald's reported their global sales at restaurants open
at least thirteen months rose three point eight percent last quarter.
Speaker 4 (25:45):
This suggests that pop culture focused collaborations and budget meals
are helping to offset diners' economic anxiety.
Speaker 2 (25:51):
More guest hosts Isabelle Lee and I were joined by
Michael Halen, Bloomberg Intelligence senior restaurant and food service analysts.
Your first ask, Mike, if returning to sales growth feels
like a waiting for McDonald's.
Speaker 9 (26:01):
It's definitely a win for you know, overall industry, saam
source sales because it's such a monster. It also could
be bad news for some of their competitors. With fourteen
thousand stores in the United States. Listen, man, they know
how to run run good restaurants right right now in
the US, they're starting to lap some easier comparisons and
(26:25):
you know that's showing up and the you know, that's
helping their results. They're also you know, doing a good
job with you know, the menu, right, They're bringing back
snack wraps, they're bringing back the mccrispy strip. They just
debuted a daily double. They've been pressing on value all year.
That was a big thing since the first quarter. And
so you know, McDonald's has the scale that they can
(26:46):
you know, offer products a little bit cheaper than their
peers and still in the franchisees can still make a
little bit of money off of it, right, So you know,
they they seem to really be hitting their stride and
their lap easy comps in the second half of the year.
So you know, we're looking at a pretty good second
half for McDonald's.
Speaker 6 (27:06):
And international markets led the company's growth. What regions of
the world did they really pushed aggressively towards.
Speaker 9 (27:13):
Yeah, they mentioned some really good strength in Germany. They
talked about some improvement in some markets that had been struggling,
like France and Australia and so you know, what they're
doing overseas is similar to the US playbook, right, but
they're probably ahead of the game, ahead of the US
in terms of providing everyday value. Their value messaging has
(27:37):
been on point and it's really helped them grow internationally
and that's why we've seen international grow faster than the
US for the last year or so. They also cited
the fact that there's less competition overseas, so they're really,
you know, a pricing leader overseas. You know, they can
the same type of thing in the US where they
can offer price points that competitors just can't match. And
(27:59):
then they're also in improving the operations, improving the quality
of the product, which has been an ongoing theme here.
They're improving the quality of the beef, better burgers, the
way they cook the burgers their day being the big
Arch which is a big, bigger sized burger in their lineup.
They're also expanding chicken overseas. So this company's humming along
(28:21):
right now.
Speaker 2 (28:22):
What does a company say, Like when I think about McDonald's,
I think a lot of folks probably feel like the
low end, low income consumers probably it's bread and butter
there and maybe that consumers more at risk in this
economic environment. What's the company saying about low income patrons.
Speaker 9 (28:38):
Yeah, you know what I like about this call call
is that you know, they're talking about what they can control.
You know, they cited the fact that low income consumer
traffic is down double digits, right, versus a small gain
for middle income consumers and steady consistent gains with high
income consumers. So they are seeing, you know, weakness with
low income consumers like everyone else. That's why they push
(29:00):
so hard on value. That's why they have these you know,
five dollars meals and buy one, get one for a dollar,
and why they put marketing dollars behind that. That's part
of the you know, the beauty of the snack wraps.
They're coming back at a two ninety nine price point.
We think that's going to bring some low income consumers
back into the fold, right, So they understand that that
people are very priced sensitive right now, and you know,
(29:24):
they're addressing it with the price points. But they're also
trying to give people better quality and better service. At
the same time.
Speaker 6 (29:31):
They also plan to taste new beverages and this includes
cold coffees and crafted sodas at more than five hundred
US locations. How much of a pull are beverages when
it comes to McDonald's offerings or is food really still king?
Speaker 9 (29:45):
Food is still king? But listen, beverages are hot. Beverages
are hot everywhere right during highlges, energy and very high margin, right.
And so we think this is a very good opportunity
for McDonald's. I think this is kind of a problem
for Sonic, which has long done a really good job
(30:06):
with their drink offering. But yeah, we think this is
something that can help drive sales at McDonald's. Taco Bell
is something Taco Bell's expanding as well, But we think
this is going to be more of a twenty twenty
six story for McDonald's.
Speaker 2 (30:22):
For McDonald's, my percentage of the revenue comes from owned
and operated stores versus franchise stores.
Speaker 9 (30:30):
Oh, they're ninety eight percent franchised. So there, Yeah, they're
heavily franchised. And you know, it's a beautiful model, man.
There's not a lot of operating leverage in the model.
They generate a ton of cash that they return to shareholders.
Speaker 2 (30:44):
It really is a buy What's so, what's the royalty
rate on there's a franchise e paid McDonald's based upon revenue,
based upon net income, based upon how many Big Max
say sale. How does that work?
Speaker 9 (30:55):
Yeah, yeah, yeah. McDonald's is a little bit unique. They
have a five ish percent royalty eight plus they own
a lot of the real estate. So a lot of
franchises in the United States are paying a rent, which
is typically you know, a ten inch percent of sales,
we'll say, and then they'll pay another three and a
half to four percent into the ad fun.
Speaker 2 (31:13):
I didn't know that until I saw the movie and
then that famous scene. Yeah, you're not in the hamburger business,
you're in the real estate business. And that was such
a great scene. I learned a lot there. All Right,
I can't let you go without Crackerbrowl and I need
my daily update Country Boy Breakfast. How's that company doing? Listen.
Speaker 9 (31:29):
We're we're big fans of new CEO Julie Messino. That
stock's been a bit of a rollercoaster, not a surprise
since it's a small cap. It rows more than one
hundred percent off its April lows. Now it's in the
midst of a pretty aggressive downturn.
Speaker 5 (31:44):
But you know, we like it.
Speaker 9 (31:46):
We like Julie's plans to improve the operations, to spend
more and be more efficient with their marketing spend. We
think this is a chain that hadn't been taken care of,
It hadn't been run really well for the last decade,
and so we see a lot of low hanging fruit
for the current management team to turn things around and
really drive strong seam source sales through year end twenty
(32:08):
twenty five and well into twenty twenty six.
Speaker 4 (32:10):
All right, thanks to Michael Hale and Bloomberg Intelligence senior
restaurant and food service analyst. We move next to news
at the ev giant Tesla.
Speaker 2 (32:18):
This week, we heard that Tesla proved an interim stock
award worth about thirty billion dollars for chief executive officer
Elon Musk to keep his attention on the automaker.
Speaker 4 (32:27):
The award includes ninety six million shares of the automaker
that will vest if Musk continues to serve in the
top post for another two years.
Speaker 2 (32:34):
For more, guest host Norma, Linda and I were joined
by Steve Man Bloomberg Intelligence, Global Autos and Industrials Research Channels. First,
ask Steve what he makes of this stock award.
Speaker 10 (32:42):
I think it's very positive news for Tesla because you know,
they are going through a pivot right now, not only
an automaker, but they're very focused on AI. But if
you look at Elon Musk, you know he's Tesla is
not his only business, right He's got x Ai, his
AI company, which owns the former Twitter, and he also
(33:07):
Hash you know, space x Neurlink. I think they're all
related in some ways to AI. And I think, you know,
without you know, must and Tesla, I think you know,
there's going to be a lot of risk to that
vision for Tesla without him there.
Speaker 11 (33:26):
See, if you mentioned that there are a lot of
different things that are vying for Musk's attention. Of course,
we do know that he was really politically involved and
then we thought kind of pulled back, and then he
mentioned his intention for creating the America Party. So clearly
he still remains in these conversations here. But what are
investors looking for right now from him? And doesn't seem
as though his attention is devoted as much as it
(33:46):
should be to Tesla.
Speaker 10 (33:48):
Yeah, I think fortunately for now, his attention is very
much devoted to Tesla. He set that at the second
quarter earnings call. I think, you know, his presence is
important because you know, you know, right now the company
is going through a changeover in terms of the direction
the strategy right uh. You know, cars has been very
(34:10):
important continues to be important to drive that AI theme.
But without must there, I think the company will have
to you know, won't able to find the next person
really to drive the company to the next step and
expanding robo taxi, expanding their optimness robot offering in the future.
Speaker 2 (34:31):
Do we care about how many cars they make and
whether they make any money in the old car business?
Speaker 5 (34:35):
Seed we do.
Speaker 10 (34:37):
And you know a lot of people think that, you know,
it's a it's a full pivot towards AI, But I
think making cars and UH and developing that AI UH
software it goes hand in hand. It's almost like Apple
and its ecosystem.
Speaker 5 (34:55):
UH.
Speaker 10 (34:55):
I mean, there are opportunities for Tesla to actually license
the FSD, the full self driving software out, but I
think in the meantime it's not it's not something he's
looking to do. I think he wants to build out
Robotaxi internally and actually drive revenue and profits. He's does
(35:16):
see huge profits from from the Robotaxi and from the
FSD software. If you look at other software companies, margins
are high double digits on the software for any software.
But then you know with with his FSD software, the
car isn't an integrated component to it. It's it's it's
(35:37):
it's very important that he continues to make cars, not
only for the for cash, but for for really marketing
that software.
Speaker 9 (35:45):
That he has.
Speaker 11 (35:46):
You have a lot of pressuring Tesla over the last
few months. I mean we're looking at a stock. It's
the worst performing stock within all the mag seven stocks
that there are right now. Explain to me right now
what the latest overhangs are right now for the company.
Speaker 10 (35:58):
Well, I think one big overhang that's to remove this
it is his pay package. There is a lot of
fear in terms of him potentially being kicked out of Tesla.
But I think the biggest overhang right now, or where
the investors are more focused on, is the expansion of Robotaxi.
Right He's he launched it back in June in Austin.
(36:22):
He's launching it in the San Francisco Bay area, and
he's also thinking about launching it in Nevada. And it's
from the looks of it, it's going quite well. I mean,
there are some hiccups here and there with this complex
engineering system that he's putting in place for cars. It's
it's normal, it's normal. So but you know, safety is
(36:45):
still his priority, and you know he's gonna going at
it at a measured pace, but it seems like he's
expanding it relatively fast. You know, his the the area
of coverage is is much bigger than initially was back
in Austin back in June, and we're seeing something similar
(37:05):
in San Francisco. So investors are really focused on when
Robotaxi will start contributing to the bottom line, and we
think that you're probably more likely in twenty twenty seven.
Speaker 4 (37:17):
Our thanks to Steve Man, Bloomberg Intelligence, Global Autos and
Industrials Research analyst.
Speaker 1 (37:21):
This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon Eastern on Bloomberg dot Com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
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