July 22, 2025 • 23 mins
Watch Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Lisa Mateo
-Mary Ross Gilbert, Bloomberg Intelligence, Senior Equity Analyst, Covering Retail, discusses Kohl’s shares surging as much as 105%, a record move for the department store operator. The stock was halted for volatility after paring its gain to 62%.
-David Welch, Bloomberg Detroit Bureau Chief, discusses GM earnings. General Motors said it suffered a $1.1 billion profit hit from Donald Trump’s tariffs and revealed no plan for a near-term fix to return to pre-tariff profit levels.
-Kenneth Shea, Bloomberg Intelligence Senior Consumer Products Analyst, discusses Coca Cola and Philip Morris earnings. Coca-Cola said it is launching a new Coke product for American consumers made with US cane sugar this fall. Philip Morris International Inc.'s shares fell after shipments of its Zyn nicotine pouches accelerated by less than analysts had expected, with Zyn shipments reaching 191.3 million cans in the Americas in the second quarter.
-Will Lee, Bloomberg Intelligence Aerospace & Defense Analyst, discusses Lockheed Martin earnings. Lockheed Martin Corp. shares plunged as much as 9% after the company reported earnings that missed analyst estimates and lowered its outlook for the year.
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Speaker 1 (00:02):
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Listen on demand wherever you get your podcasts, or watch
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Speaker 2 (00:23):
Holes their shares surge as much as one hundred and
five percent in early trading. Now there's shares, well, they're
about thirty six percent. It's just a record move. A
lot of mentions by retail traders on social media. Let's
bring in someone who knows a little bit more about this.
Let's bring in Mary Ross Gilbert. She's Bloomberg Intelligence senior
equity analyst covering all things retail. So Mary, can you
(00:45):
tell us is this a meme stock?
Speaker 3 (00:47):
Well, it's acting like a memestock, that's for sure, Lisa.
And as you pointed out, it was on social media,
it looked like midday yesterday there was a post saying
showing a Bloomberg chart and showing the short interest and
if you look at the number of shares or the
shares borrowed versus the total float, it was about forty
(01:08):
nine percent, which is pretty high. And it's near a
historic high at least over the last couple of years,
and so the post sort of circled that and then
it identified and noted, hey, how can you be short
this stock and sleep well at night? And then apparently
that kind of triggered other posts throughout I guess into
(01:29):
the evening yesterday, and so of course in pre market,
you know, we saw the share surge, as you pointed out,
over two hundred over one hundred percent, and you know
yesterday the stock was up about eight percent. We saw
retail stocks on the move yesterday as well, and so
it could be you know, as one of your earlier
commendators commendators discussed, you know, with such a strong market overall,
(01:52):
this is a sector that has been beaten down largely
with tariffs and then of course with execution issues. When
we're talking about.
Speaker 4 (01:59):
Coals, Mary, has a company said anything either at last
evening or today in response to the stock movement?
Speaker 3 (02:05):
Absolutely not, there is There are no releases from the company.
Speaker 4 (02:09):
So I mean, is this something? I mean, what are
you hearing from you know, the clients that you talked to,
institutional investors that you talked to, how are they are
they selling into this? What are they doing.
Speaker 3 (02:20):
Yeah, I'm not hearing anyone discussing exactly what their activity is,
but you can imagine that there's probably a fair amount
of hedge funds involved. And so when you think about it,
the company is highly levered. They have bonds, and hedge
funds typically will take a position, let's say, in certain bonds,
(02:41):
and then they'll go short the stock. So I think
we do have some some of that activity and that's
how they're positioned. And of course, you know there could
have been a short squeeze that was triggered with this activity.
This is usually what we'll see in a situation like this,
So I think that's kind of what we're seeing in
the activity and the shares.
Speaker 2 (03:01):
And Mary before all of this news came out, How
was the stock doing before?
Speaker 4 (03:05):
How is Cole's performing before all this?
Speaker 3 (03:08):
Oh it's been atrocious. I mean, this spot is so
you can look at three years, two years, five years,
year to date, and the stock has been off significantly
and that's due to falling revenues. I mean, if you
look at the revenues over the last few years, it's
down over two billion dollars. And really, when you look
at the core business it's down even more. And that's
(03:29):
even with adding you know, one point eight billion in
revenues from so fora So it shows that there is
trouble in the core business. And of course they've rotated
through several CEOs and they're on an interim CEO as
they hunt for a permanent their fifth CEO and just
over two years.
Speaker 4 (03:46):
Oh boy, geez all right, Mary, that's that explains it all.
Mary Roskilbert, thank you so much for joining us. Mary Roskilbert.
There's the retailers for Bloomberg Intelligence. She's based out there
in our Los Angeles euro.
Speaker 1 (03:59):
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
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Speaker 2 (04:13):
General Motors. That's where we went to get to it
took a big hit from President Trump's tariffs. Are you
ready for this, Paul Okay? One point one billion dollar
profit hit. So what kind of impact is that going
to have for the company. Well, we want to hear
from the expert about all this, So let's find out,
and let's go to David Wells. He's Bloomberg Detroit bureau chief.
He's joining us live from Detroit. So, David, were you
(04:33):
surprised with that figure one point one billion dollars? I mean,
we heard from Stalantis too, kind of saying something similar yesterday.
Speaker 5 (04:40):
No, not surprised at all. GM said they were going
to take a four to five billion dollar hit, or
that they had forty five billion dollars in exposure this
year to tariffs and then they would only be able
to offset about thirty percent of it, and the measures
they're using talk set that you really won't see to
the second half. I thought there would be a pretty
big hit to it. I don't think the street was
(05:02):
surprised either, because the forecast for GM's earnings were for
a pretty big drop off of the second quarter of
last year. Already, GM did better than that because they
did have some things, better profits in China than we
saw a year ago and better sales in the US
that helped them. But overall, a pretty tough quarter, and
it really shows that the car companies are going to
(05:23):
have a tough time getting anything close to pre tariff
profits going forward, because there's just no easy way to
get around them.
Speaker 4 (05:31):
So I mean, is what we're to take away from
the Stalantis numbers yesterday and the GM numbers today is
that the autumn manufacturers, for whatever reason, maybe they're just
not able to or they chose not to pass along
the bulk of their cost increases to consumers. Is at
a policy or is that just an economic reality?
Speaker 5 (05:49):
It's an economic reality. And look Stoantis has a lot
of other issues. You know, they're going to do some
pretty heavy restructuring, which they talked about yesterday. But look,
we're at a period right now. We're interest rates are
at pretty high levels. You have historically not record but
pretty close to record new vehicle prices in the US
right now, average monthly payment well over seven hundred hours
(06:10):
a month. We have a record number of people I
think paying more than one thousand dollars a month for
their monthly payment. Cars are expensive, so you know, you
can go out there and say, hey, I'm going to
pass this tariff cost on to consumers or even some
of it, but if consumers don't pay it, then you
just lose the sales. And you haven't seen huge price increases,
You've seen small and you've seen companies sneak in, you know,
(06:32):
some bigger fees for transporting the vehicle for example, things
like that. But it's just not they just don't really
have the ability to push in big price increases to
you know, to pass on. In GM's case, a billion
dollars worth of tariffs in a quarter.
Speaker 2 (06:48):
And it's not just terrors. What else affected profits for GM?
I mean, how's their inventory for electric vehicles?
Speaker 5 (06:54):
They built that up in the quarter, and since the
vehicles lose money, they have to count for that. That
that them I think it was six hundred million dollars
in the quarter they had three hundred million. Because they've
had a big engine recalls, they've had higher warranty costs.
It wasn't just because of that recall. They've had other
issues and they're working on that. Some of it. Some
of these quality issues you're seeing that are costing companies
(07:16):
more in warranty and recall type costs are all the
software that goes into electric vehicles. These are kind of
first times out with new software, new infotainment systems, power
management systems in these vehicles, and it's just tough for
them to go out there and not be buggy, right,
you know, think about how many times there's something on
(07:38):
your smartphone that you know needs an update, and fixing
that with the cars is often more expensive. So some
of it was related to that. And actually, you know,
they saw pricing go down with some of their fleet customers.
There's a lot of competition out there for the for
the corporate and fleet business, and they actually saw some
downward price pressure there too, and that cost them a
(07:59):
couple one hundred million dollars. So a lot of things
in the quarter that pushed profits down. But tariffs are
the real story.
Speaker 4 (08:05):
Here, David. You're out there in Detroit. You live and
breathe this stuff every day. What's the feeling in Detroit
as it relates to this evolution to evs? And how
will the tariff and the tariff impact on profitability? Is
that going to slow this down even more? Do you think?
Speaker 3 (08:24):
I do?
Speaker 5 (08:25):
I think everything that Trump administration is doing is really
going to slow the ev transition. First of all, you know,
the obvious one is there. It comes September, they're going
to be getting rid of the seventy five hundred dollars
tax break for qualifying electric vehicles. But you know, with tariffs,
you've got battery components, electronic components, wiring harnesses. There's more
(08:47):
wiring in an EV than in a conventional vehicle. All
that stuff adds to the cost of vehicles that already
lose money. Some of them are actually built overseas. In
the case of Hyundai, they make some of theirs overseas.
GM makes a couple of it's evs in Mexico. They
do qualify for US MCA, but there are still some
parts component tariffs that they can be hit with on
(09:09):
some of these vehicles.
Speaker 4 (09:10):
And so.
Speaker 5 (09:12):
You add costs to vehicles that are already pretty expensive,
and you can't pass it on. If you do, even
fewer people will buy them. Companies may have less incentive
to build and sell them if they lose even more
money on these, So that's going to hurt as well.
And then, of course Trump's rhetoric for people who are
politically right of center and pretty far right is that
(09:33):
you know, evs are a dumb purchase and they don't
work for you, and I think that hurts sales as well.
So all of this is just not good for the
momentum that EV's had in the US before Trump got
in office.
Speaker 2 (09:47):
Yeah, So, David, last month, the company said it would
shift some production to the US from Mexico. So what
other changes can we expect to see from the company,
like in the last minute or so we have left.
Speaker 5 (09:58):
Yeah, I think you'll see them try to bring more parts,
more of the parts they buy into the US, so
they'll be encouraging their suppliers to do what they're doing.
Will just move some production to the United States, and
that'll take time, and you know, you may see them
make some more production related news. What they've done is
pretty big, So I'm not anticipating any big announcements. But
(10:19):
you know, as they look at this and they find
other ways to do it, you might see more vehicles,
more parts built here in the US.
Speaker 2 (10:26):
Thank you so much, David Wells, Bloomberg, Detroit ber Chief
talking about GM earnings and so much more.
Speaker 4 (10:31):
I think GM right here. If you go GM Equity,
FA just brings up the financial statements. Their net income
margin is five percent. Ok, that's it. They got like
no margin, no profit margin. Anything goes wrong for these
auto companies and they get screwed.
Speaker 2 (10:49):
You always say I never understand the auto company.
Speaker 4 (10:51):
I don't want to, just don't get it. And oh,
by the way, my top line splat. I mean, you know,
I just it's a high margin. You will make up
a volume. I guess it's one of those business So
it's just a tough, tough business. And then you throw
on top of the TIFFs and then oh, by the way,
I have to change my entire industry that I built
up over the last hundred years to go electric. Yeah,
(11:14):
I'm invest in that. Yeah, I don't know.
Speaker 2 (11:15):
We got a shift production us to Mexico. It's never
ending from them.
Speaker 1 (11:22):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
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Speaker 2 (11:36):
And we're listening to Bloomberg Intelligence. I'm Lisa Matteo alongside
Paul Sweeney, and we are in the thick of earning
season right among those companies today, one of them, Coca Cola,
beat on second quarter sales growth, profit. But it's another
headline that's getting some attention. They are launching a new
coke product that's made with cane sugar. So here to
tell us more about it is Candida Jay is Bloomberg Intelligence,
(11:57):
Senior consumer products Analysts, Kenneth, thanks for joining us here
from Princeton. How much of an impact did the President
have on this decision from Coke?
Speaker 6 (12:07):
Yeah, Hi, Lisa. Well, it's hard to say, but it
certainly is in sync with what Coca Cola has been
doing for a long time, and that is keeping its
pulse on what the consumer wants to do. It has
a lot of assets at its disposal, and a cane
sugar product is not novel to Coca Cola. I mean,
it's produced it in the US largely more more outside
(12:28):
of the US, but in the US on a selected basis,
So it's really just going to expand that. It may
have been prompted to a degree by the President's tweets
or whatever, but it's certainly in sync. Like I said,
you know, there's a there's an audience out there that
prefers sugar based as opposed to high fructose cornci based
(12:49):
full calorie sodas, and they're going to play into that.
Most likely, it's going to be a brand Coke extension,
and it's going to be sell at a premium price
in selected markets to give it an aura of exclusivity.
I'm guessing to command those prices and so just theys
a little more excitement. It's it's one of many things
Coke is doing now on the innovation front.
Speaker 4 (13:10):
So from Coca Cola's economic perspective, do they care which
ingredient they use?
Speaker 6 (13:17):
Well, it depends, Paul, it depends if they can capture
the premium price they're going to you know, price it
at Kine. Shugar costs more than high frucos corns here.
You know, a corn is a heavily, heavily subsidized crop
in the US. They built their supply chain around HFCs
because of that, and most consumers early, you know, they
don't really notice the difference. Some do, but buy and large.
(13:40):
You know, they've grown that franchise very well. But I
guess you know some tourists that go to Mexico and
they taste the sugar cane sugar coke down the air
and they say, you know what, this is really good,
and they want to capture the same experience in the US.
Speaker 4 (13:55):
I'm going to Chipotle today and they do offer the
Mexican zoda there.
Speaker 7 (14:00):
Can I give you the history of high fructose corn syrup.
It was in the nineteen seventies, with high inflation and
high sugar prices. President Nixon said, do something about this,
and this guy said, well, we can make a sugary
tasting stuff from corn from American farmers and US high
fructose corn syrup, which most doctors say is like poison
(14:23):
to your system. There we go, thank.
Speaker 4 (14:26):
Don taker with the value added there. Let me ask,
let me shift gears here. What is a ZIN patch?
Speaker 6 (14:36):
A Zin patch? Do you want to patch it? I
think they made a pouch pouch. Zin pouch is a pouch,
you know, it's it's an oral tobacco product. Actually, Zin
doesn't even contain tobacco. It's a synthetic product. Its lads
with nicotine that is a facsimile for tobacco, which a
lot of people will say causes harm, and a lot
(14:57):
of people are right. So this is a product that
you know, people can get their nicotine buzz in a
you know, hands off kind of way, doesn't emit smoke,
doesn't offend your neighbor that you're working with, and it's
done really really well. So those are really the Zin
pouches that are doing really well.
Speaker 4 (15:14):
Yeah, yeah, I thought it was Zinfindel. The line that's
no kidding, No, I that pouch so but I mean
it's it's big enough a business can that Philip mars
would would call it out.
Speaker 6 (15:27):
Oh yeah, it is in it's about eight percent of
the sales, I believe at this point. But it's growing,
you know, a twenty thirty percent rate, as opposed cigarettes
which are flat, if not down. But you know, Icoas
is their smoke free device segment, which is doing very well.
But if the low large numbers at some point, that's
going to slow and Zen is filling the gap. They
(15:48):
keep the overall volumes in a positive trend. They price
these things very high. There's not a lot of competition
in this space. So you know, one of the things
investors would say about the world of tobacco, because it's
so consolidated, they can pass on a very high pricing
and that's what really drives a top line and you
know the cash flows and so on. And Zen plays very,
(16:09):
very very well into that model.
Speaker 2 (16:11):
And how does it fair as far as we're hear
about e cigarettes vaping things like that, how has Philip
Marris been doing competing with this category.
Speaker 6 (16:20):
So they have a product called viv which is their
e vapor product as opposed to what they call heat
not burn, which has actual tobacco in it, and they
would say as a more appealing alternative for smokers who
are trying to quit. It's a lower margin product. It's
kind of seen by Philip Morris as a kind of
an entry level product. If for those who are trying
(16:43):
to move away from combustible cigarettes, they can turn to
e cigarettes a low cost method, and their hope is that,
you know, even though it's a low margin product, their
hope is that they can get that consumer maybe some
at some point to trade up to their heat not
burn product, which is, you know, a more profitable product
(17:04):
for them.
Speaker 4 (17:04):
All right, good stuff. I mean I learned about the
zin pouch today. How about it's not Zinfindel. Okay, all right,
very good, so good stuff there, Ken Shay, thanks so much.
Ken covers all those consumer products at companies for Bloomberg Intelligence.
Appreciate getting a few minutes of this time.
Speaker 1 (17:22):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts or watch us live on YouTube.
Speaker 4 (17:36):
Lis MITTEO, Paul Sweety, We're live here on Bloomberg Interactive
Broker Studio. Let's talk about Lockheed Martin. Put out some
numbers disappointing here, took some losses here. Let's break it
down with will Lee Aerospace and Defense channels for Bloomberg Intelligence. Well,
Lockheed Martin, I mean, they just do everything. What happened
in the quarter.
Speaker 8 (17:54):
Yeah, So, I mean if you look at the quarter
of the performance was modeled by this hefty one point
six billion dollars chart on program losses and then another
one hundred sixty nine million of other charges. There was
the end gap right off. I think that was around
like sixty sixty six.
Speaker 4 (18:10):
Let's go back to the big one one point six billion,
So what's that for?
Speaker 8 (18:14):
So out that one point six nine hundred and fifty
million is for for a classified aeronautics.
Speaker 4 (18:19):
Program, so they can't tell us.
Speaker 6 (18:20):
They can't tell us what it is.
Speaker 8 (18:22):
But if it's something that big and it's been going on,
and in fourth quarter they also recorded another four hundred
and forty million dollars or four hundred and seventy seven stop.
Speaker 4 (18:31):
Doing that program, then I don't know what they could
tell you, but then they have to kill you.
Speaker 8 (18:36):
Well, given that it's a huge program and they're taking
over a billion dollars of charges, what could possibly be
so important so big and most likely is the A
name six generation ISR. What's IRR Intelligence surveillance reconstants, So
think of as the replacement for the SR seventy SRC.
Speaker 4 (18:56):
Now we're talking SR seventy one to Okay, So.
Speaker 8 (19:02):
If you think about in that respect, Bowen has the
F forty seven, that's the sixth generator, sixth generation of
fighter jet. That's going to be the biggest sixth generation program.
Navy wants their own sixth generation, the FAXX. I think
that Northrope has the inside tractor. When that given that
Dood doesn't want to make the same mistake that I
made with F thirty five, given lot UH with F
(19:24):
three five F twenty two, given Lockie both control of
the fifth generation fighters, so they break up into multiple
defense contractors and have more resilient industrial base. So in
that with that mindset, Bowen has F forty seven UH,
Northrope pass the FAXX, and Lockie could potentially have the
(19:46):
sixth generation reconnaissance aircraft.
Speaker 2 (19:48):
So what all those numbers that my son would be
having a field day with this conversation right now. He
is so into this is this typical of defense contracting environment?
I mean growth is marginal there, you were mentoring a
number of numbers before.
Speaker 8 (20:01):
Is this typical? I mean to this large extent, this
is sort of unusual. I mean they've locky teased that
they were going to they were looking at additional charges
after the quarter. They didn't mention or indicate how large
that magnitude was. So this sort of caught the street
by surprise the size of it. But I mean, I
(20:22):
think it just shows that this is a key program
that's that's going to keep going for But even if
you just strip out all the charges from the quarter
and you look at the underlying performance, the performance actually
was not bad. In second quarter, Aeron ONLYYX grew seven
percent on high F thirty five volumes and the F
thirty five, and they also took up the the prop
(20:44):
a cumulative profit booking rates on the F thirty five
in the quarter, and the Missile and fire control segment
it grew eleven percent on strong demand on tactical and
strike missiles. So you're talking about the jazzm the JASM
air to service missile, the Lorasm anti ship missiles, and
the gimblers that are used on the High Mars those
(21:05):
are those are rockets that we've been sending over to
Ukraine are.
Speaker 4 (21:10):
So I'm looking at the comps. They're all trading up
on the year. Defense contractors stocks are doing great this year,
with the exception of Lockey Martin it's down eleven percent
year to date. What helpout that well?
Speaker 8 (21:21):
I mean, the biggest headwind is the F thirty five
you have F thirty five is the news you have
talks of why do we need to have F thirty five?
In the fiscal twenty six budget requests the Air Force.
The Air Force cut the number of F thirty fives
to twenty four and that's down from forty four, So
across the board, I think that's the biggest headwind on
(21:41):
Lockie and the fact that you're not seeing you're not
seeing that more. You're you're seeing flat revenues and no
real margin improvement. So I think those are the two
big headwinds.
Speaker 2 (21:51):
Yeah, can you get into that a little bit more
like RTX Corp North or Grumman, Like, what are they
doing better? That that that lockade isn't well.
Speaker 8 (21:59):
I mean our stuff with north by their lever to
the b TOY one program and the Sentinel. So with
the b TY one, you're here in talks of the
Air Force looking to accelerate production and more quantities. And
that program right now is in this e M D
phase Engine Engineering Manufacturing development. So think of as sort
(22:20):
of this is still in the development low rate production phase,
but then it's going to transition to a production phase,
and when it goes to a production phase, you can
see potentially higher quantities. At Northrop talk to that on
their earnings called this morning saying that we're in discussions
with the Air Force and if we increase the production rate,
(22:40):
we might have to take additional we might have to
make additional investments, which means I had went to to earnings.
But at the same time they could potentially realize profit
on these low rate initial production lots and not to
exceed subsequent follower production, whereas before they were expecting no
(23:01):
profits on the l RIP phase and some profit on
the next NTE phase.
Speaker 4 (23:06):
All Right, it just seems like it's good to be
in the defense business. It seems like, you know, we
spend money on the defense ear in and you're at Lockey.
Martin had a tough day today. It is down six percent.
LMT is the ticker will Thanks so much for joining
us A will Lee Aerospace Defense sanels for Bloomberg Intelligence
breaking down the LMT data here.
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Speaker 2 (00:23):
Holes their shares surge as much as one hundred and
five percent in early trading. Now there's shares, well, they're
about thirty six percent. It's just a record move. A
lot of mentions by retail traders on social media. Let's
bring in someone who knows a little bit more about this.
Let's bring in Mary Ross Gilbert. She's Bloomberg Intelligence senior
equity analyst covering all things retail. So Mary, can you
(00:45):
tell us is this a meme stock?
Speaker 3 (00:47):
Well, it's acting like a memestock, that's for sure, Lisa.
And as you pointed out, it was on social media,
it looked like midday yesterday there was a post saying
showing a Bloomberg chart and showing the short interest and
if you look at the number of shares or the
shares borrowed versus the total float, it was about forty
(01:08):
nine percent, which is pretty high. And it's near a
historic high at least over the last couple of years,
and so the post sort of circled that and then
it identified and noted, hey, how can you be short
this stock and sleep well at night? And then apparently
that kind of triggered other posts throughout I guess into
(01:29):
the evening yesterday, and so of course in pre market,
you know, we saw the share surge, as you pointed out,
over two hundred over one hundred percent, and you know
yesterday the stock was up about eight percent. We saw
retail stocks on the move yesterday as well, and so
it could be you know, as one of your earlier
commendators commendators discussed, you know, with such a strong market overall,
(01:52):
this is a sector that has been beaten down largely
with tariffs and then of course with execution issues. When
we're talking about.
Speaker 4 (01:59):
Coals, Mary, has a company said anything either at last
evening or today in response to the stock movement?
Speaker 3 (02:05):
Absolutely not, there is There are no releases from the company.
Speaker 4 (02:09):
So I mean, is this something? I mean, what are
you hearing from you know, the clients that you talked to,
institutional investors that you talked to, how are they are
they selling into this? What are they doing.
Speaker 3 (02:20):
Yeah, I'm not hearing anyone discussing exactly what their activity is,
but you can imagine that there's probably a fair amount
of hedge funds involved. And so when you think about it,
the company is highly levered. They have bonds, and hedge
funds typically will take a position, let's say, in certain bonds,
(02:41):
and then they'll go short the stock. So I think
we do have some some of that activity and that's
how they're positioned. And of course, you know there could
have been a short squeeze that was triggered with this activity.
This is usually what we'll see in a situation like this,
So I think that's kind of what we're seeing in
the activity and the shares.
Speaker 2 (03:01):
And Mary before all of this news came out, How
was the stock doing before?
Speaker 4 (03:05):
How is Cole's performing before all this?
Speaker 3 (03:08):
Oh it's been atrocious. I mean, this spot is so
you can look at three years, two years, five years,
year to date, and the stock has been off significantly
and that's due to falling revenues. I mean, if you
look at the revenues over the last few years, it's
down over two billion dollars. And really, when you look
at the core business it's down even more. And that's
(03:29):
even with adding you know, one point eight billion in
revenues from so fora So it shows that there is
trouble in the core business. And of course they've rotated
through several CEOs and they're on an interim CEO as
they hunt for a permanent their fifth CEO and just
over two years.
Speaker 4 (03:46):
Oh boy, geez all right, Mary, that's that explains it all.
Mary Roskilbert, thank you so much for joining us. Mary Roskilbert.
There's the retailers for Bloomberg Intelligence. She's based out there
in our Los Angeles euro.
Speaker 1 (03:59):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (04:13):
General Motors. That's where we went to get to it
took a big hit from President Trump's tariffs. Are you
ready for this, Paul Okay? One point one billion dollar
profit hit. So what kind of impact is that going
to have for the company. Well, we want to hear
from the expert about all this, So let's find out,
and let's go to David Wells. He's Bloomberg Detroit bureau chief.
He's joining us live from Detroit. So, David, were you
(04:33):
surprised with that figure one point one billion dollars? I mean,
we heard from Stalantis too, kind of saying something similar yesterday.
Speaker 5 (04:40):
No, not surprised at all. GM said they were going
to take a four to five billion dollar hit, or
that they had forty five billion dollars in exposure this
year to tariffs and then they would only be able
to offset about thirty percent of it, and the measures
they're using talk set that you really won't see to
the second half. I thought there would be a pretty
big hit to it. I don't think the street was
(05:02):
surprised either, because the forecast for GM's earnings were for
a pretty big drop off of the second quarter of
last year. Already, GM did better than that because they
did have some things, better profits in China than we
saw a year ago and better sales in the US
that helped them. But overall, a pretty tough quarter, and
it really shows that the car companies are going to
(05:23):
have a tough time getting anything close to pre tariff
profits going forward, because there's just no easy way to
get around them.
Speaker 4 (05:31):
So I mean, is what we're to take away from
the Stalantis numbers yesterday and the GM numbers today is
that the autumn manufacturers, for whatever reason, maybe they're just
not able to or they chose not to pass along
the bulk of their cost increases to consumers. Is at
a policy or is that just an economic reality?
Speaker 5 (05:49):
It's an economic reality. And look Stoantis has a lot
of other issues. You know, they're going to do some
pretty heavy restructuring, which they talked about yesterday. But look,
we're at a period right now. We're interest rates are
at pretty high levels. You have historically not record but
pretty close to record new vehicle prices in the US
right now, average monthly payment well over seven hundred hours
(06:10):
a month. We have a record number of people I
think paying more than one thousand dollars a month for
their monthly payment. Cars are expensive, so you know, you
can go out there and say, hey, I'm going to
pass this tariff cost on to consumers or even some
of it, but if consumers don't pay it, then you
just lose the sales. And you haven't seen huge price increases,
You've seen small and you've seen companies sneak in, you know,
(06:32):
some bigger fees for transporting the vehicle for example, things
like that. But it's just not they just don't really
have the ability to push in big price increases to
you know, to pass on. In GM's case, a billion
dollars worth of tariffs in a quarter.
Speaker 2 (06:48):
And it's not just terrors. What else affected profits for GM?
I mean, how's their inventory for electric vehicles?
Speaker 5 (06:54):
They built that up in the quarter, and since the
vehicles lose money, they have to count for that. That
that them I think it was six hundred million dollars
in the quarter they had three hundred million. Because they've
had a big engine recalls, they've had higher warranty costs.
It wasn't just because of that recall. They've had other
issues and they're working on that. Some of it. Some
of these quality issues you're seeing that are costing companies
(07:16):
more in warranty and recall type costs are all the
software that goes into electric vehicles. These are kind of
first times out with new software, new infotainment systems, power
management systems in these vehicles, and it's just tough for
them to go out there and not be buggy, right,
you know, think about how many times there's something on
(07:38):
your smartphone that you know needs an update, and fixing
that with the cars is often more expensive. So some
of it was related to that. And actually, you know,
they saw pricing go down with some of their fleet customers.
There's a lot of competition out there for the for
the corporate and fleet business, and they actually saw some
downward price pressure there too, and that cost them a
(07:59):
couple one hundred million dollars. So a lot of things
in the quarter that pushed profits down. But tariffs are
the real story.
Speaker 4 (08:05):
Here, David. You're out there in Detroit. You live and
breathe this stuff every day. What's the feeling in Detroit
as it relates to this evolution to evs? And how
will the tariff and the tariff impact on profitability? Is
that going to slow this down even more? Do you think?
Speaker 3 (08:24):
I do?
Speaker 5 (08:25):
I think everything that Trump administration is doing is really
going to slow the ev transition. First of all, you know,
the obvious one is there. It comes September, they're going
to be getting rid of the seventy five hundred dollars
tax break for qualifying electric vehicles. But you know, with tariffs,
you've got battery components, electronic components, wiring harnesses. There's more
(08:47):
wiring in an EV than in a conventional vehicle. All
that stuff adds to the cost of vehicles that already
lose money. Some of them are actually built overseas. In
the case of Hyundai, they make some of theirs overseas.
GM makes a couple of it's evs in Mexico. They
do qualify for US MCA, but there are still some
parts component tariffs that they can be hit with on
(09:09):
some of these vehicles.
Speaker 4 (09:10):
And so.
Speaker 5 (09:12):
You add costs to vehicles that are already pretty expensive,
and you can't pass it on. If you do, even
fewer people will buy them. Companies may have less incentive
to build and sell them if they lose even more
money on these, So that's going to hurt as well.
And then, of course Trump's rhetoric for people who are
politically right of center and pretty far right is that
(09:33):
you know, evs are a dumb purchase and they don't
work for you, and I think that hurts sales as well.
So all of this is just not good for the
momentum that EV's had in the US before Trump got
in office.
Speaker 2 (09:47):
Yeah, So, David, last month, the company said it would
shift some production to the US from Mexico. So what
other changes can we expect to see from the company,
like in the last minute or so we have left.
Speaker 5 (09:58):
Yeah, I think you'll see them try to bring more parts,
more of the parts they buy into the US, so
they'll be encouraging their suppliers to do what they're doing.
Will just move some production to the United States, and
that'll take time, and you know, you may see them
make some more production related news. What they've done is
pretty big, So I'm not anticipating any big announcements. But
(10:19):
you know, as they look at this and they find
other ways to do it, you might see more vehicles,
more parts built here in the US.
Speaker 2 (10:26):
Thank you so much, David Wells, Bloomberg, Detroit ber Chief
talking about GM earnings and so much more.
Speaker 4 (10:31):
I think GM right here. If you go GM Equity,
FA just brings up the financial statements. Their net income
margin is five percent. Ok, that's it. They got like
no margin, no profit margin. Anything goes wrong for these
auto companies and they get screwed.
Speaker 2 (10:49):
You always say I never understand the auto company.
Speaker 4 (10:51):
I don't want to, just don't get it. And oh,
by the way, my top line splat. I mean, you know,
I just it's a high margin. You will make up
a volume. I guess it's one of those business So
it's just a tough, tough business. And then you throw
on top of the TIFFs and then oh, by the way,
I have to change my entire industry that I built
up over the last hundred years to go electric. Yeah,
(11:14):
I'm invest in that. Yeah, I don't know.
Speaker 2 (11:15):
We got a shift production us to Mexico. It's never
ending from them.
Speaker 1 (11:22):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (11:36):
And we're listening to Bloomberg Intelligence. I'm Lisa Matteo alongside
Paul Sweeney, and we are in the thick of earning
season right among those companies today, one of them, Coca Cola,
beat on second quarter sales growth, profit. But it's another
headline that's getting some attention. They are launching a new
coke product that's made with cane sugar. So here to
tell us more about it is Candida Jay is Bloomberg Intelligence,
(11:57):
Senior consumer products Analysts, Kenneth, thanks for joining us here
from Princeton. How much of an impact did the President
have on this decision from Coke?
Speaker 6 (12:07):
Yeah, Hi, Lisa. Well, it's hard to say, but it
certainly is in sync with what Coca Cola has been
doing for a long time, and that is keeping its
pulse on what the consumer wants to do. It has
a lot of assets at its disposal, and a cane
sugar product is not novel to Coca Cola. I mean,
it's produced it in the US largely more more outside
(12:28):
of the US, but in the US on a selected basis,
So it's really just going to expand that. It may
have been prompted to a degree by the President's tweets
or whatever, but it's certainly in sync. Like I said,
you know, there's a there's an audience out there that
prefers sugar based as opposed to high fructose cornci based
(12:49):
full calorie sodas, and they're going to play into that.
Most likely, it's going to be a brand Coke extension,
and it's going to be sell at a premium price
in selected markets to give it an aura of exclusivity.
I'm guessing to command those prices and so just theys
a little more excitement. It's it's one of many things
Coke is doing now on the innovation front.
Speaker 4 (13:10):
So from Coca Cola's economic perspective, do they care which
ingredient they use?
Speaker 6 (13:17):
Well, it depends, Paul, it depends if they can capture
the premium price they're going to you know, price it
at Kine. Shugar costs more than high frucos corns here.
You know, a corn is a heavily, heavily subsidized crop
in the US. They built their supply chain around HFCs
because of that, and most consumers early, you know, they
don't really notice the difference. Some do, but buy and large.
(13:40):
You know, they've grown that franchise very well. But I
guess you know some tourists that go to Mexico and
they taste the sugar cane sugar coke down the air
and they say, you know what, this is really good,
and they want to capture the same experience in the US.
Speaker 4 (13:55):
I'm going to Chipotle today and they do offer the
Mexican zoda there.
Speaker 7 (14:00):
Can I give you the history of high fructose corn syrup.
It was in the nineteen seventies, with high inflation and
high sugar prices. President Nixon said, do something about this,
and this guy said, well, we can make a sugary
tasting stuff from corn from American farmers and US high
fructose corn syrup, which most doctors say is like poison
(14:23):
to your system. There we go, thank.
Speaker 4 (14:26):
Don taker with the value added there. Let me ask,
let me shift gears here. What is a ZIN patch?
Speaker 6 (14:36):
A Zin patch? Do you want to patch it? I
think they made a pouch pouch. Zin pouch is a pouch,
you know, it's it's an oral tobacco product. Actually, Zin
doesn't even contain tobacco. It's a synthetic product. Its lads
with nicotine that is a facsimile for tobacco, which a
lot of people will say causes harm, and a lot
(14:57):
of people are right. So this is a product that
you know, people can get their nicotine buzz in a
you know, hands off kind of way, doesn't emit smoke,
doesn't offend your neighbor that you're working with, and it's
done really really well. So those are really the Zin
pouches that are doing really well.
Speaker 4 (15:14):
Yeah, yeah, I thought it was Zinfindel. The line that's
no kidding, No, I that pouch so but I mean
it's it's big enough a business can that Philip mars
would would call it out.
Speaker 6 (15:27):
Oh yeah, it is in it's about eight percent of
the sales, I believe at this point. But it's growing,
you know, a twenty thirty percent rate, as opposed cigarettes
which are flat, if not down. But you know, Icoas
is their smoke free device segment, which is doing very well.
But if the low large numbers at some point, that's
going to slow and Zen is filling the gap. They
(15:48):
keep the overall volumes in a positive trend. They price
these things very high. There's not a lot of competition
in this space. So you know, one of the things
investors would say about the world of tobacco, because it's
so consolidated, they can pass on a very high pricing
and that's what really drives a top line and you
know the cash flows and so on. And Zen plays very,
(16:09):
very very well into that model.
Speaker 2 (16:11):
And how does it fair as far as we're hear
about e cigarettes vaping things like that, how has Philip
Marris been doing competing with this category.
Speaker 6 (16:20):
So they have a product called viv which is their
e vapor product as opposed to what they call heat
not burn, which has actual tobacco in it, and they
would say as a more appealing alternative for smokers who
are trying to quit. It's a lower margin product. It's
kind of seen by Philip Morris as a kind of
an entry level product. If for those who are trying
(16:43):
to move away from combustible cigarettes, they can turn to
e cigarettes a low cost method, and their hope is that,
you know, even though it's a low margin product, their
hope is that they can get that consumer maybe some
at some point to trade up to their heat not
burn product, which is, you know, a more profitable product
(17:04):
for them.
Speaker 4 (17:04):
All right, good stuff. I mean I learned about the
zin pouch today. How about it's not Zinfindel. Okay, all right,
very good, so good stuff there, Ken Shay, thanks so much.
Ken covers all those consumer products at companies for Bloomberg Intelligence.
Appreciate getting a few minutes of this time.
Speaker 1 (17:22):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts or watch us live on YouTube.
Speaker 4 (17:36):
Lis MITTEO, Paul Sweety, We're live here on Bloomberg Interactive
Broker Studio. Let's talk about Lockheed Martin. Put out some
numbers disappointing here, took some losses here. Let's break it
down with will Lee Aerospace and Defense channels for Bloomberg Intelligence. Well,
Lockheed Martin, I mean, they just do everything. What happened
in the quarter.
Speaker 8 (17:54):
Yeah, So, I mean if you look at the quarter
of the performance was modeled by this hefty one point
six billion dollars chart on program losses and then another
one hundred sixty nine million of other charges. There was
the end gap right off. I think that was around
like sixty sixty six.
Speaker 4 (18:10):
Let's go back to the big one one point six billion,
So what's that for?
Speaker 8 (18:14):
So out that one point six nine hundred and fifty
million is for for a classified aeronautics.
Speaker 4 (18:19):
Program, so they can't tell us.
Speaker 6 (18:20):
They can't tell us what it is.
Speaker 8 (18:22):
But if it's something that big and it's been going on,
and in fourth quarter they also recorded another four hundred
and forty million dollars or four hundred and seventy seven stop.
Speaker 4 (18:31):
Doing that program, then I don't know what they could
tell you, but then they have to kill you.
Speaker 8 (18:36):
Well, given that it's a huge program and they're taking
over a billion dollars of charges, what could possibly be
so important so big and most likely is the A
name six generation ISR. What's IRR Intelligence surveillance reconstants, So
think of as the replacement for the SR seventy SRC.
Speaker 4 (18:56):
Now we're talking SR seventy one to Okay, So.
Speaker 8 (19:02):
If you think about in that respect, Bowen has the
F forty seven, that's the sixth generator, sixth generation of
fighter jet. That's going to be the biggest sixth generation program.
Navy wants their own sixth generation, the FAXX. I think
that Northrope has the inside tractor. When that given that
Dood doesn't want to make the same mistake that I
made with F thirty five, given lot UH with F
(19:24):
three five F twenty two, given Lockie both control of
the fifth generation fighters, so they break up into multiple
defense contractors and have more resilient industrial base. So in
that with that mindset, Bowen has F forty seven UH,
Northrope pass the FAXX, and Lockie could potentially have the
(19:46):
sixth generation reconnaissance aircraft.
Speaker 2 (19:48):
So what all those numbers that my son would be
having a field day with this conversation right now. He
is so into this is this typical of defense contracting environment?
I mean growth is marginal there, you were mentoring a
number of numbers before.
Speaker 8 (20:01):
Is this typical? I mean to this large extent, this
is sort of unusual. I mean they've locky teased that
they were going to they were looking at additional charges
after the quarter. They didn't mention or indicate how large
that magnitude was. So this sort of caught the street
by surprise the size of it. But I mean, I
(20:22):
think it just shows that this is a key program
that's that's going to keep going for But even if
you just strip out all the charges from the quarter
and you look at the underlying performance, the performance actually
was not bad. In second quarter, Aeron ONLYYX grew seven
percent on high F thirty five volumes and the F
thirty five, and they also took up the the prop
(20:44):
a cumulative profit booking rates on the F thirty five
in the quarter, and the Missile and fire control segment
it grew eleven percent on strong demand on tactical and
strike missiles. So you're talking about the jazzm the JASM
air to service missile, the Lorasm anti ship missiles, and
the gimblers that are used on the High Mars those
(21:05):
are those are rockets that we've been sending over to
Ukraine are.
Speaker 4 (21:10):
So I'm looking at the comps. They're all trading up
on the year. Defense contractors stocks are doing great this year,
with the exception of Lockey Martin it's down eleven percent
year to date. What helpout that well?
Speaker 8 (21:21):
I mean, the biggest headwind is the F thirty five
you have F thirty five is the news you have
talks of why do we need to have F thirty five?
In the fiscal twenty six budget requests the Air Force.
The Air Force cut the number of F thirty fives
to twenty four and that's down from forty four, So
across the board, I think that's the biggest headwind on
(21:41):
Lockie and the fact that you're not seeing you're not
seeing that more. You're you're seeing flat revenues and no
real margin improvement. So I think those are the two
big headwinds.
Speaker 2 (21:51):
Yeah, can you get into that a little bit more
like RTX Corp North or Grumman, Like, what are they
doing better? That that that lockade isn't well.
Speaker 8 (21:59):
I mean our stuff with north by their lever to
the b TOY one program and the Sentinel. So with
the b TY one, you're here in talks of the
Air Force looking to accelerate production and more quantities. And
that program right now is in this e M D
phase Engine Engineering Manufacturing development. So think of as sort
(22:20):
of this is still in the development low rate production phase,
but then it's going to transition to a production phase,
and when it goes to a production phase, you can
see potentially higher quantities. At Northrop talk to that on
their earnings called this morning saying that we're in discussions
with the Air Force and if we increase the production rate,
(22:40):
we might have to take additional we might have to
make additional investments, which means I had went to to earnings.
But at the same time they could potentially realize profit
on these low rate initial production lots and not to
exceed subsequent follower production, whereas before they were expecting no
(23:01):
profits on the l RIP phase and some profit on
the next NTE phase.
Speaker 4 (23:06):
All Right, it just seems like it's good to be
in the defense business. It seems like, you know, we
spend money on the defense ear in and you're at Lockey.
Martin had a tough day today. It is down six percent.
LMT is the ticker will Thanks so much for joining
us A will Lee Aerospace Defense sanels for Bloomberg Intelligence
breaking down the LMT data here.
Speaker 1 (23:29):
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