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Bloomberg Intelligence: Oil Merger, U.S Earnings · Bloomberg Intelligence

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  Speaker 3: Today will take a look at Paramount Global and why
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  Speaker 3: they're said to be cutting jobs despite hosting a record
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  Speaker 3: breaking Super Bowl.
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  Speaker 4: Plus, we'll discuss why food and beverage company craft Times
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  Speaker 4: is experiencing weaker sales.
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  Speaker 3: But first we dive into a major deal that could
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  Speaker 3: redefine the US energy sector. Diamondback Energy has agreed to
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  Speaker 3: buy fellow Permian base and driller Endeavor Energy Resources and
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  Speaker 3: a twenty six billion dollar.
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  Speaker 4: Deal Love Me Energy Deals. We're joined by Vince Piazza,
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  Speaker 4: Bloomberg Intelligence senior energy research analyst, and we asked him
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  Speaker 4: first what he thought of the deal.
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  Speaker 5: I think the deal ticks all the boxes that we're
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  Speaker 5: going to need to see in this MNA.
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  Speaker 6: Wave in the Permian.
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  Speaker 5: It grows Diamondbacks acreage, it grows locations, so inventory is
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  Speaker 5: not going to be an issue.
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  Speaker 6: In terms of the price that they paid.
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  Speaker 5: Look, Diamondback, in my universe of coverage had the highest premium,
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  Speaker 5: so they're using their multiple to get this deal done
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  Speaker 5: and so elevated currency along with some.
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  Speaker 6: Cash and debt.
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  Speaker 5: They do have a fairly low leverage on their balance sheet,
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  Speaker 5: so I think the picks all of the boxes. They'll
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  Speaker 5: throw off significant free cash flow in twenty twenty four
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  Speaker 5: and twenty twenty five, so in terms of paying off
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  Speaker 5: whatever bank loans that they're going to take on for this,
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  Speaker 5: but also works out for the founding family of Endeavor,
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  Speaker 5: they get to monetize decades of hard work.
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  Speaker 4: Vince is this a merger of equals?
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  Speaker 6: Well, in this case, think about what Endeavor brings to
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  Speaker 6: the table.
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  Speaker 5: It almost doubles Diamondbacks Middlin acreage, and it brings sizeable
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  Speaker 5: oil production for the broader Diamondback franchise. So I would
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  Speaker 5: tell you that in terms of size, it is a
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  Speaker 5: merger of equals. But the family will get roughly thirty
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  Speaker 5: percent of Diamondback with selling off almost half the resource
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  Speaker 5: to Diamondbacks, so it basically doubles Diamondbacks total size, and
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  Speaker 5: the founding family gets about thirty percent of the new Diamondback.
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  Speaker 3: Let's say, Vince, are there any regulatory issues here? A
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  Speaker 3: lot of m and A going on in this space here.
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  Speaker 6: Yeah, you know it's going to get looked at.
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  Speaker 5: So Southwestern and Chesapeake getting together out in Apalachia, that's
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  Speaker 5: a gas deal. But that will get a very very
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  Speaker 5: clear look, a very very deep look by the regulators.
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  Speaker 6: This will as well.
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  Speaker 5: I don't see why it wouldn't because of the actual
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  Speaker 5: size of this entity. It's going to be an enterprise
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  Speaker 5: value of north with sixty billion. It will be the
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  Speaker 5: largest Permian pure play, so it'll get looked at.
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  Speaker 6: All these deals will get looked at and.
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  Speaker 5: It'll take a deeper look, same as Southwestern and Chesapeake.
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  Speaker 4: I was talking to jenre and she covers Antrust for
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  Speaker 4: Bloomberg Intelligence, and she's like, yes, like all of these
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  Speaker 4: are going to have to get looked at. They're particularly
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  Speaker 4: interested in the Exon Permian Pioneer deal and that all
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  Speaker 4: these deals are definite gonna have the FTC sort of
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  Speaker 4: wide eyed looking at it. But you have to wonder though,
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  Speaker 4: if they want more oil, they're going to have to
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  Speaker 4: do it, right, Vince, I mean it's gonna I'm just
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  Speaker 4: trying to think of like what the rationale will be
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  Speaker 4: to block say this deal, but like let exce On
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  Speaker 4: Pioneer and go through, Like you can't.
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  Speaker 5: This deal is much more North America centric, much more
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  Speaker 5: North America focused.
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  Speaker 6: So when you think about you know.
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  Speaker 7: Exon and Pioneer Pioneer fits within Exon's Permian portfolio, but
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  Speaker 7: Exon is a large, integrated multinational franchise.
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  Speaker 5: This is more US centric and Permian centric as well.
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  Speaker 5: But look, they're all going to get looked at. It
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  Speaker 5: is what it is. This is a very large transaction.
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  Speaker 5: Like I said, Southwestern Chesapeake is getting looked at. This
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  Speaker 5: will get looked at as well. It's an important resource.
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  Speaker 5: What you have here, though, is you have resources now
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  Speaker 5: in stronger hands. You have Exon Mobile, Chevron, you have Diamondback.
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  Speaker 5: You have very large entities with big balance sheets and
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  Speaker 5: the capability to take down even greater levels of capital
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  Speaker 5: in order to move production from the delineation phase into
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  Speaker 5: the production phase.
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  Speaker 3: Give me a sense, Vincent, I'm putting my banker hat on.
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  Speaker 3: Can I keep doing a bunch of deals here? I mean?
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  Speaker 3: How many players are left?
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  Speaker 6: Yeah, it's a very interesting question.
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  Speaker 5: So we put out last year the top twenty privately
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  Speaker 5: held PE sponsored names in the Permian. In this case
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  Speaker 5: Endeavor being the second largest, Mewborn, which has mentioned that
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  Speaker 5: it wishes to sell. That's the largest of the top
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  Speaker 5: twenty that'll go out, we think, because it has been
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  Speaker 5: mentioned as a takeover candidate. Similar situation Founding family looking
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  Speaker 5: to move the assets. If you think about the top five,
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  Speaker 5: three are now gone, so there is a great deal
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  Speaker 5: of interest. There's interest by the private players as well,
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  Speaker 5: especially the PE sponsored players. You're getting close to these
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  Speaker 5: vintages that are aged and now this capital needs to
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  Speaker 5: be recycled, so you will see more of that. You
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  Speaker 5: will see public buying private. Public does have the currency.
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  Speaker 5: In the case of Diamondback, they had a premium multiple
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  Speaker 5: elevated currency that they were able to use to monetize
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  Speaker 5: the founding families investment, and you'll see that as well,
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  Speaker 5: especially in the permium where you do have this difference
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  Speaker 5: of large cap premium valuations looking for assets and the
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  Speaker 5: smaller cap names trading at a relative discount to peers,
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  Speaker 5: but trading at a discount to the larger names as well.
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  Speaker 3: Our thanks to Vincent Piazza Bloomberg Intelligence and Senior Energy
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  Speaker 3: Research analysts, we go.
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  Speaker 4: Next to earnings and focus on Hasbro, the toy maker,
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  Speaker 4: reporting fourth quarter net revenue and adjuster earnings per share
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  Speaker 4: the trailed analyst estimates, and this comes that the toy
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  Speaker 4: industry continues to suffer from week consumer demand after that
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  Speaker 4: boom in the early days of the pandemic.
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  Speaker 3: For more on this, we talked with Lindsay Dutch Bloomberg
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  Speaker 3: Intelligence Consumer Hardlines Senior Analysts. We first asked Lindsay what
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  Speaker 3: she made of the quarter.
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  Speaker 8: Osbro definitely disappointed on the quarter as top and bottom
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  Speaker 8: line missing, but more importantly that outlook for twenty twenty
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  Speaker 8: four looks pretty rough. They're definitely thinking about the toy
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  Speaker 8: industry more bearish than some of their peers like Mattel.
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  Speaker 8: And this is coming from a place where they've had
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  Speaker 8: more challenges than Mattel. In twenty twenty three, and even
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  Speaker 8: at the very end of twenty twenty two, there's some
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  Speaker 8: concern about profitability improvement for this company. They've sort of
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  Speaker 8: struggled to raise that operating margin over the past year,
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  Speaker 8: and I think that's like a really big worry bead
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  Speaker 8: thinking about twenty twenty four. They posted an operating margin
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  Speaker 8: for twenty twenty three nine point five percent. It was
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  Speaker 8: the lowest in at least twelve years, So there's real
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  Speaker 8: concern there.
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  Speaker 3: So let's start with the top line in the toy business.
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  Speaker 3: Is this a GDP growth business? Less more, how does
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  Speaker 3: this business grew?
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  Speaker 8: Yeah, so typically, I mean the toy business. You know,
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  Speaker 8: you think about growth two to three percent a year.
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  Speaker 8: Toy business boomed with the pandemic, so we're still coming
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  Speaker 8: off of those twenty twenty twenty twenty one highs, and
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  Speaker 8: in twenty twenty three, the industry contracted about seven percent
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  Speaker 8: per Circana data. Mattel was thinking that, you know, this
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  Speaker 8: year twenty twenty four would be a little bit better
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  Speaker 8: than that, but still contraction. Hasbro is saying down eight percent,
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  Speaker 8: So definitely a more bearish view on the industry as
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  Speaker 8: a whole. But this year definitely looks rough in terms
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  Speaker 8: of toy demands, still coming off of those.
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  Speaker 4: Highs, and they don't have Barbie. I mean, I asked
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  Speaker 4: the CEO of Mattel this on TV. I was like,
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  Speaker 4: you know, do you need a Barbie two? Like, what's
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  Speaker 4: your next evolution here? I mean, I know the quarter
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  Speaker 4: was better than Hasbro, but it still has problems. There's
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  Speaker 4: still an activist investor that wants them to spin off
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  Speaker 4: their American Girl and Fisher Price business, et cetera. It's like,
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  Speaker 4: you have to sell more cars if you're not selling dolls.
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  Speaker 4: And Hasbro doesn't have Barbie. Pow Reliant is a toy business.
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  Speaker 8: On movies, yes, so content has been a big driver
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  Speaker 8: over the past couple of years. Barbie is a great
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  Speaker 8: example of that. I think we also know that you
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  Speaker 8: can't have that blockbuster type movie every single year, but
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  Speaker 8: a lot of the preschool brands, you know, you can
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  Speaker 8: link to a series. So Hasbro does own Pepa pig.
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  Speaker 8: So just getting like this the animated series there sometimes
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  Speaker 8: can help with toy sales, but there's a major connection
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  Speaker 8: with entertainment. Entertainment generally across the board, not just Hasbro
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  Speaker 8: specific is going to be light in twenty twenty four,
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  Speaker 8: so they do lose that driver. Hasbro is also different
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  Speaker 8: than Mattel in the key categories that they play in,
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  Speaker 8: so they own NERF So they're really big sort of
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  Speaker 8: on that outdoor category, which again that's an outsize grower
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  Speaker 8: during the pandemic. They play in arts and crafts with Plato.
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  Speaker 8: Plato's like they've come out with some new products, but
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  Speaker 8: it's kind of really hard to come up with new
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  Speaker 8: innovative things in that category. Some of their outperformers were
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  Speaker 8: like Transformers in the past year again and entertainment linked product,
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  Speaker 8: you know that did well because of that.
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  Speaker 3: All Right, So if I've got a business where the
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  Speaker 3: demand is challenge, what do I do on the cost
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  Speaker 3: side to try to preserve my margins here?
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  Speaker 2: Right?
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  Speaker 8: So you know, Hasbro laid out a plan in October
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  Speaker 8: of twenty twenty two cutting costs. They kind of realized
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  Speaker 8: over time that wasn't quite enough, but they were planning,
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  Speaker 8: so they wint of double that goal, a lot of
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  Speaker 8: it coming out of SG and A. They're also offloading
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  Speaker 8: some of their brands and basically licensing out to other
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  Speaker 8: manufacturers to actually make the products, and that is going
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  Speaker 8: to be a key part of you know, their outlook
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  Speaker 8: for a stronger operating margin in that toy segment in
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  Speaker 8: twenty twenty four, and by that, they're expecting a four
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  Speaker 8: to six percent operating margin this year, whereas last year
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  Speaker 8: it was an operating loss. It's still a pretty low
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  Speaker 8: number below they're targeting twenty percent over the long term,
• 11:03
  Speaker 8: so there's a lot of work to.
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  Speaker 4: Be done there. What's the Wizards of the Coast segment?
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  Speaker 4: Does that really hurt? What is that?
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  Speaker 8: That includes their magic of the gathering at tabletop gaming
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  Speaker 8: digital gaming brands, So that has been a top grower
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  Speaker 8: for this company over the past couple of years. They're
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  Speaker 8: again lapping difficult comparisons, only expecting three to five percent
• 11:26
  Speaker 8: growth in twenty twenty four. But that business is a
• 11:30
  Speaker 8: high margin business for them, So you're talking about thirty
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  Speaker 8: eight forty percent margins, but the problem is it's it's
• 11:39
  Speaker 8: closer to thirty percent of their overall business. So as
• 11:43
  Speaker 8: continued growth there is great, the margin is great, but
• 11:47
  Speaker 8: it's still a smaller part of their mix, so it
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  Speaker 8: can't quite offset this weakness that they feel sort of
• 11:54
  Speaker 8: in the traditional toy business.
• 11:56
  Speaker 3: Thanks to Lindsey Dutch Bloomberg Intelligence Consumer Hardline Secret Analyst.
• 11:59
  Speaker 4: Coming up, we're going to break down what Paramount Global
• 12:01
  Speaker 4: said be cutting jobs.
• 12:02
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• 12:37
  Speaker 4: Let's turn out to the media and entertainment industry. Earlier
• 12:39
  Speaker 4: in the week, we heard the Paramount Global is cutting
• 12:41
  Speaker 4: roughly eight hundred jobs, or three percent of its workforce.
• 12:44
  Speaker 3: We're told the cuts of our response to the continued
• 12:46
  Speaker 3: loss of cable and satellite TV subscribers to streaming services
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  Speaker 3: like Netflix, and this comes despite Paramount hosting a record
• 12:53
  Speaker 3: breaking Super Bowl TV audience.
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  Speaker 4: So for more, we're joined by either Maganathan Bloomberg intelligence
• 12:57
  Speaker 4: analyst on US Media, and we ask Ether for her
• 13:00
  Speaker 4: take on this week's news.
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  Speaker 9: This is really more of course, they did have a
• 13:03
  Speaker 9: great Super Bowl, but I think this is really more
• 13:06
  Speaker 9: about the future outlook for the company, and that is
• 13:09
  Speaker 9: super super bleak. Yes, it was a great night for
• 13:12
  Speaker 9: TV advertising. We think they gotten seven hundred million dollars
• 13:16
  Speaker 9: in roughly about four hours. But then it's throughout twenty
• 13:20
  Speaker 9: twenty three we've seen TV advertising decline by low double digits.
• 13:25
  Speaker 9: It was down almost thirteen percent in the latest quarter
• 13:28
  Speaker 9: that they reported, and it's not going to get too
• 13:29
  Speaker 9: much better. And it's not just the challenges on the
• 13:32
  Speaker 9: TV side of the equation for them. It's also about
• 13:35
  Speaker 9: their streaming business and they've made good strides absolutely in
• 13:38
  Speaker 9: terms of you know, streaming subscribers, and again I anticipate
• 13:41
  Speaker 9: that they're going to have some good streaming numbers to
• 13:43
  Speaker 9: report thanks to the Super Bowl, but it is burning
• 13:46
  Speaker 9: a lot of money, almost one point seven billion dollars
• 13:50
  Speaker 9: is what they will report in losses for twenty twenty three,
• 13:53
  Speaker 9: and before that they lost about one point eight billion.
• 13:55
  Speaker 10: So it's just been a continuous drain on the company.
• 13:59
  Speaker 3: And I know they're there's a lot of talk around
• 14:01
  Speaker 3: perhaps the controlling shareholder, Sherry Redstone, will consider selling all
• 14:05
  Speaker 3: a part of the company. What's the latest on that?
• 14:09
  Speaker 9: So the latest actually in that saga, and this has
• 14:11
  Speaker 9: now been an ongoing drama for many months now, Paul,
• 14:15
  Speaker 9: The latest is that Byron Allen actually came up with
• 14:19
  Speaker 9: a bid for all of the company, not just for
• 14:21
  Speaker 9: the controlling stake held through National Amusements.
• 14:24
  Speaker 10: And he actually put up a pretty good bid.
• 14:26
  Speaker 9: You know, it was fourteen billion dollars in terms of equity,
• 14:30
  Speaker 9: so thirty billion dollars enterprise value. We think it was
• 14:33
  Speaker 9: a pretty fair bid. The problem is, you know, Byron Allen,
• 14:36
  Speaker 9: I don't think anybody is taking him too seriously. He's
• 14:39
  Speaker 9: you know, had this track record of kind of coming
• 14:42
  Speaker 9: up with these empty bids. So while it is a number, again,
• 14:46
  Speaker 9: we've not really seen a whole lot of action that
• 14:48
  Speaker 9: we would have expected.
• 14:50
  Speaker 4: So this is a totally unfair question to Paul. Let's
• 14:54
  Speaker 4: pretend you're still an M and a banker here, investment banker.
• 14:57
  Speaker 4: What would you be talking to Paaramount about.
• 14:59
  Speaker 3: I would I would say, I think the best buyer
• 15:01
  Speaker 3: here there's a strategic buyer, maybe Warner Brothers, the Discovery,
• 15:04
  Speaker 3: But both of those companies, as keitha Wall and those
• 15:07
  Speaker 3: bound sheets are not great. I think I would be
• 15:09
  Speaker 3: shopping into a private equity because they're still good for
• 15:13
  Speaker 3: free cash flows here and let them deal with it.
• 15:15
  Speaker 3: So Githay, what is the sense here as to I
• 15:19
  Speaker 3: think about Paramount, I think about Warner Brothers, Discovery, what
• 15:23
  Speaker 3: happens to these companies because it just feels like against
• 15:25
  Speaker 3: some of the big tech companies, they're just not big
• 15:28
  Speaker 3: enough here, against Netflix, are just not big enough. What
• 15:31
  Speaker 3: did they do?
• 15:33
  Speaker 11: So?
• 15:33
  Speaker 9: I think Warner Brothers Discovery actually had a pretty interesting
• 15:36
  Speaker 9: move last week Pall, which was they banded together with ESPN,
• 15:40
  Speaker 9: Disney and Fox to kind of create this sports super
• 15:44
  Speaker 9: app which will launch in the fall. And that's one
• 15:47
  Speaker 9: way for them to kind of protect at least some
• 15:50
  Speaker 9: part of their linear revenue stream, because I mean they've
• 15:52
  Speaker 9: kind of everybody's seeing the writing.
• 15:53
  Speaker 10: On the wall here.
• 15:54
  Speaker 9: We're seeing cord cutting, we're seeing about ten percent of
• 15:58
  Speaker 9: the subscriber base get eroded ear after ear We've already
• 16:02
  Speaker 9: lost thirty million subscribers. So that's one good way for them,
• 16:05
  Speaker 9: I think, to kind of control their destiny a little
• 16:08
  Speaker 9: bit in terms of distribution. Again, remember Paramount is not
• 16:12
  Speaker 9: part of that bundle, so that again is a little
• 16:15
  Speaker 9: bit of you know, a strike against them. But you know,
• 16:18
  Speaker 9: you bring up a good point. I think at the
• 16:20
  Speaker 9: end of the day, we are going to have to
• 16:21
  Speaker 9: see consolidation. Of course, as you just pointed out, there
• 16:23
  Speaker 9: were rumors of actually Warner Brothers Discovery being interested in Paramount,
• 16:27
  Speaker 9: but that would be about more than you know, sixty
• 16:30
  Speaker 9: billion dollars I think in debt for those combined companies.
• 16:33
  Speaker 9: So yeah, it is it is definitely going to be challenging,
• 16:35
  Speaker 9: but I think consolidation is definitely on the cards.
• 16:38
  Speaker 4: Okay, So then how does that happen? Because if like,
• 16:40
  Speaker 4: three wrongs don't make a right, and you're not going
• 16:42
  Speaker 4: to put all the media companies together because it's going
• 16:43
  Speaker 4: to create more problems. So is it private equity like
• 16:47
  Speaker 4: to split up different areas of media within the company.
• 16:50
  Speaker 9: Yeah, I think Paramount I think one of the things
• 16:52
  Speaker 9: has been you know, to sell it for parts. Right,
• 16:53
  Speaker 9: there are some parts of the company, the TV networks
• 16:57
  Speaker 9: that could be very, very attractive to private equity, as
• 16:59
  Speaker 9: you just pointed out, because of the cash flows. Right,
• 17:01
  Speaker 9: it's still a business. It used to throw out about
• 17:04
  Speaker 9: six billion dollars in ebit dah, but it will still
• 17:06
  Speaker 9: throw out about four and a half to almost close
• 17:08
  Speaker 9: to four point eight billion dollars in ebit DAH. So
• 17:11
  Speaker 9: again cash highly cash generative. Of course, the future you
• 17:14
  Speaker 9: know flows don't look so great. But then there has
• 17:16
  Speaker 9: been a lot of interest in the studio part of
• 17:18
  Speaker 9: the business, right, whether that's you know, David Ellison with
• 17:21
  Speaker 9: his guy Dance Media, maybe.
• 17:22
  Speaker 10: Somebody else, maybe even an Apple.
• 17:24
  Speaker 9: We haven't necessarily seen any of those you know, bids
• 17:27
  Speaker 9: kind of come to fruition, but there definitely will be
• 17:30
  Speaker 9: a lot of interest. But I think the one thing
• 17:31
  Speaker 9: that we kind of have to wait to get some
• 17:33
  Speaker 9: clarity on is definitely the regulatory environment. We've seen big
• 17:36
  Speaker 9: tech kind of really shy away from anything too splashy,
• 17:40
  Speaker 9: but who knows, maybe when the government changes, all of
• 17:43
  Speaker 9: that will change as well.
• 17:44
  Speaker 3: You know, Githa, When these networks bid and pay billions
• 17:48
  Speaker 3: of dollars for sports rights. And even if you you know,
• 17:50
  Speaker 3: you put up that seven hundred million dollars of bad
• 17:52
  Speaker 3: revenue that you reference, you know, it's tough to make
• 17:55
  Speaker 3: a profit on that kind of business. So what the
• 17:59
  Speaker 3: networks have always said is, yes, but we promote other
• 18:02
  Speaker 3: shows on our networks, and that value is really worth
• 18:07
  Speaker 3: paying these big rights fees. But if you're promoting all
• 18:10
  Speaker 3: these shows on the CBS network that nobody's watching because
• 18:12
  Speaker 3: of chord cutting, how valuable is that? I mean, I
• 18:16
  Speaker 3: thought about that they were promoting all their shows that
• 18:19
  Speaker 3: I don't think anybody's watching because they've already cut the cord.
• 18:22
  Speaker 10: Yeah, you're absolutely right for them. Though.
• 18:24
  Speaker 9: The one thing that Paramount has done really kind of well,
• 18:27
  Speaker 9: and I don't know whether this is a plus or
• 18:28
  Speaker 9: a minus.
• 18:29
  Speaker 10: But it definitely helps them at least shore up.
• 18:31
  Speaker 9: I think the total value of their assets is they've
• 18:33
  Speaker 9: actually all of their sports properties, including the NFL, they've
• 18:37
  Speaker 9: actually kind of leaked it outside the bundle, so they
• 18:39
  Speaker 9: were showing it on Paramount Plus Day one, and they
• 18:41
  Speaker 9: did the same thing with the Super Bowl as well.
• 18:44
  Speaker 9: So I think even if they're you know, even if
• 18:45
  Speaker 9: you have cord cutters. They could make the argument that yes,
• 18:48
  Speaker 9: you know, people can potentially sign up for that service.
• 18:51
  Speaker 9: We saw, of course Peacock do that with that wildcard
• 18:54
  Speaker 9: NFL game. Again, what they know that they're losing subscribers
• 18:57
  Speaker 9: on the PATV bundle, so they're trying to they're trying
• 19:00
  Speaker 9: their best, I don't know how successfully to kind of
• 19:02
  Speaker 9: make it up on the streaming side, but you're right,
• 19:05
  Speaker 9: I mean it is kind of a lose.
• 19:06
  Speaker 4: Lose, Keitha. So what's next? Like, what are you watching?
• 19:09
  Speaker 4: Preparea amount now?
• 19:10
  Speaker 10: For Paramount, It's definitely it is an M and a place.
• 19:13
  Speaker 10: Something has to happen. It has to happen fast. Bob Backish,
• 19:17
  Speaker 10: the CEO, has pretty much said it. You know, he
• 19:19
  Speaker 10: said he's.
• 19:20
  Speaker 9: Evaluating Bayern Allen's proposal again, not sure whether that will
• 19:25
  Speaker 9: necessarily pan out, but somebody has to come up with
• 19:28
  Speaker 9: something and it has.
• 19:29
  Speaker 10: To happen quickly.
• 19:30
  Speaker 3: Our thanks to Keitha Ranganathan Bloomberg intelligence analyst on US
• 19:33
  Speaker 3: Media fall.
• 19:34
  Speaker 4: Let's turn out of Cisco So the largest maker of
• 19:37
  Speaker 4: computer networking equipment, Cisco announcing plans to cut thousands of jobs,
• 19:41
  Speaker 4: saying the cuts will affect roughly five percent of its workforce.
• 19:44
  Speaker 3: This all comes after a slow down and corporate tech
• 19:46
  Speaker 3: spending wiped out Cisco's sales growth last quarter. For more
• 19:49
  Speaker 3: on all of this, we spoke with Woojin Hoo, Bloomberg
• 19:51
  Speaker 3: Intelligence senior technology analysts. We first asked him if anything
• 19:55
  Speaker 3: stood out from Cisco's quarterly results.
• 19:57
  Speaker 1: I think after the job cuts league from last quarter,
• 20:00
  Speaker 1: I think there were expectations that there were going to
• 20:02
  Speaker 1: be cut the estimates. Quite frankly, the big standout for
• 20:05
  Speaker 1: me was that the cuts were big enough. You know,
• 20:07
  Speaker 1: five percent op X cuts. That's part of the course
• 20:10
  Speaker 1: for what Cisco typically does. But at the end of
• 20:12
  Speaker 1: the day, I mean, based on reports, it looks like
• 20:15
  Speaker 1: a lot of this was expected.
• 20:17
  Speaker 3: You know which I've followed the Cisco name for decades.
• 20:20
  Speaker 3: I mean it's one of the founding Silicon Valley tech
• 20:23
  Speaker 3: names based in San joseric smack in the middle, you know,
• 20:26
  Speaker 3: Silicon Valley. What are they not getting right here? This
• 20:29
  Speaker 3: SoC hasn't worked for a long time, and it just
• 20:32
  Speaker 3: what from your perspective, what are they just missing here?
• 20:35
  Speaker 1: Well, let's talk about large cap stocks in general, right,
• 20:38
  Speaker 1: If we if we think about the big bangs let's
• 20:41
  Speaker 1: say Microsoft, the old tech guard of the Microsoft Google, Right,
• 20:46
  Speaker 1: they all really led on a cloud software transition. If
• 20:50
  Speaker 1: we think about it, from the hardware old guard Cisco, Dell,
• 20:54
  Speaker 1: HPE or the old HP, there's still relatively a hardware business.
• 21:00
  Speaker 1: So you're not going to get the fast, sexy growth
• 21:03
  Speaker 1: from the hardware business. I mean, if you look at Cisco,
• 21:05
  Speaker 1: you know, after the estimate cuts fifty two billion for
• 21:08
  Speaker 1: fiscal twenty four, that brings them back to twenty twenty
• 21:11
  Speaker 1: four levels, right, So you're not getting the growth that
• 21:14
  Speaker 1: people want, and also you're not getting the margin profiles
• 21:17
  Speaker 1: that you want as well. So that's why the multiples
• 21:20
  Speaker 1: are lower and the growth of shallower.
• 21:23
  Speaker 3: So over the last five years, this stock has compounded
• 21:25
  Speaker 3: three percent per year, Cisco S and P five and
• 21:28
  Speaker 3: fourteen and a half percent, the S and P information
• 21:30
  Speaker 3: technology sector twenty six percent. So it's really really underperformed
• 21:35
  Speaker 3: going forward, which I guess over the next several quarters.
• 21:37
  Speaker 3: What Cisco's saying about their customers and inventory and cutting
• 21:42
  Speaker 3: this forecast suggests that they don't have a lot of
• 21:45
  Speaker 3: great visibility here.
• 21:46
  Speaker 1: If you remember the server and storage cycle from a
• 21:50
  Speaker 1: year ago, Cisco is going through that right now. Part
• 21:53
  Speaker 1: of it is because of the supply chain glut all
• 21:57
  Speaker 1: of a sudden, Their customers got their equipment two quarters
• 22:00
  Speaker 1: ago and they're taking their time implementing it. So typical
• 22:05
  Speaker 1: cycles are roughly five to six quarters. I was running
• 22:09
  Speaker 1: through the numbers and when we're talking about anywhere between
• 22:12
  Speaker 1: twenty seven to thirty percent declines for the next two
• 22:15
  Speaker 1: to three quarters for Cisco for the networking business, not sales.
• 22:18
  Speaker 1: But they won't get out of this decline until the
• 22:20
  Speaker 1: second half of fiscal year, which is about a year
• 22:22
  Speaker 1: from now. Right again, the model's going to be reworked,
• 22:26
  Speaker 1: primarily because of this Plunk deal. The hope is is
• 22:30
  Speaker 1: that they're going to have more recurring revenues to boost
• 22:33
  Speaker 1: up the multiples going forward.
• 22:36
  Speaker 4: Where's the AI component for Cisco.
• 22:39
  Speaker 1: I will tell you they're making a lot of good progress.
• 22:42
  Speaker 1: They had a billion dollars in bookings in black black
• 22:45
  Speaker 1: orders with Cloud customers, and the issue is is that
• 22:49
  Speaker 1: that only represents two percent of total orders, right so
• 22:52
  Speaker 1: it's still relatively small. It is going to be growing,
• 22:55
  Speaker 1: and they're probably going to bang the drum louder on
• 22:59
  Speaker 1: the AI the over the next couple of quarters As
• 23:02
  Speaker 1: these deals really start to balloon. The one thing is, again,
• 23:06
  Speaker 1: it's still a corporate IT name. If I were to
• 23:10
  Speaker 1: pick one AI name on the networking side, it's probably
• 23:14
  Speaker 1: going to be more Arista than Cisco for now.
• 23:16
  Speaker 3: So again, is there a way WOODS is broadly defined
• 23:20
  Speaker 3: On the hardware side, Have investors embraced any of the
• 23:23
  Speaker 3: hardware's names as AI plays?
• 23:25
  Speaker 5: Is it?
• 23:26
  Speaker 3: Because it just doesn't feel like it. It feels like what
• 23:28
  Speaker 3: I'm hearing from a lot of your folks on the
• 23:30
  Speaker 3: tech team of Bloomberg Intelligence. It's kind of software applications,
• 23:33
  Speaker 3: that kind of thing.
• 23:34
  Speaker 1: I can name for Arista Networks, Wow, super Micro and Dell.
• 23:40
  Speaker 1: And they reported in a couple of weeks there's a
• 23:42
  Speaker 1: growing AI story there and one name that's been underappreciated
• 23:47
  Speaker 1: is probably Hpe. They have a high performance computing business,
• 23:51
  Speaker 1: but the story is a little muddled because of a
• 23:53
  Speaker 1: pending Juniper deal. And then there's you know, my colleague
• 23:56
  Speaker 1: Steve saying he covers the white box vendors, and there's
• 24:00
  Speaker 1: some white box vendors that may potentially benefit because they
• 24:03
  Speaker 1: sell server equipment to the cloud guys.
• 24:06
  Speaker 3: Our thanks to Wu Jinho, Bloomberg Intelligence senior technology analysts.
• 24:09
  Speaker 4: Coming up on the program, we'll discuss why food and
• 24:11
  Speaker 4: beverage company Craft Tines is experienced in weaker sales.
• 24:14
  Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
• 24:17
  Speaker 3: depth research and data on two thousand companies in one
• 24:20
  Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence via
• 24:23
  Speaker 3: Bigo on the terminal on Paul Sweeney.
• 24:25
  Speaker 4: Anda, Alex Deeal and this is Bloomberg.
• 24:39
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• 24:43
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• 24:47
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• 24:50
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• 24:53
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• 24:57
  Speaker 4: We move next to the food and beverage industry. So
• 25:00
  Speaker 4: earlier in the week, Craft Times reported first consolidated organic
• 25:03
  Speaker 4: sales declined since the second quarter of twenty twenty one.
• 25:06
  Speaker 3: We heard from Jennifer Bartashi's Bloomberg Intelligence senior analysts retail,
• 25:09
  Speaker 3: staples and packaged food. We first asked Jennifer for her
• 25:11
  Speaker 3: key takeaways from Craft's earnings results.
• 25:13
  Speaker 12: The big surprise for Craft was that volume was down,
• 25:16
  Speaker 12: which was not a surprise, but it was down more
• 25:19
  Speaker 12: than prices rows and that really put pressure on the
• 25:22
  Speaker 12: ability to generate sales growth. And so organic sales were
• 25:27
  Speaker 12: negative for the first time since twenty twenty. And although
• 25:31
  Speaker 12: there's some momentum in the business, it's got people concerned.
• 25:34
  Speaker 3: So, jenn as I understand the package food business from
• 25:36
  Speaker 3: reading your research and talking to you, you know, I
• 25:39
  Speaker 3: guess post pandemic volumes were down, but they've been able
• 25:42
  Speaker 3: to make up for it by raising prices. More so,
• 25:45
  Speaker 3: is that game kind of played out now?
• 25:47
  Speaker 12: Yeah. Basically a lot of these companies have run out
• 25:50
  Speaker 12: of their pricing power. And what that means is, you know,
• 25:53
  Speaker 12: they were able to raise prices because their input costs
• 25:55
  Speaker 12: were hire, whether it was ingredients or transportation or packaging.
• 25:59
  Speaker 12: But as inflation is coming down, they're losing the ability
• 26:03
  Speaker 12: to pass through additional price increases, which means that if
• 26:06
  Speaker 12: you want to have top line growth or organic sales growth,
• 26:10
  Speaker 12: you have to have positive volume growth because you're not
• 26:14
  Speaker 12: getting it from just higher price anymore. And the problem
• 26:17
  Speaker 12: for craft tind size right now is that volume is
• 26:20
  Speaker 12: still down, price is lower than it's been and they're
• 26:24
  Speaker 12: not seeing that bounce back in volume that typically lower
• 26:27
  Speaker 12: pricing would encourage.
• 26:28
  Speaker 4: Okay, so a couple things to focus on. Let's go
• 26:30
  Speaker 4: to the product side then, because you mentioned that a
• 26:32
  Speaker 4: few times so volumes are down, it doesn't seem like
• 26:35
  Speaker 4: that's just a pricing power thing. Do they not have
• 26:37
  Speaker 4: the right products right now?
• 26:39
  Speaker 12: Well, I think their portfolio is actually pretty good. It's
• 26:42
  Speaker 12: just that the consumer is not buying as much as
• 26:45
  Speaker 12: they were before. So if you think back to pre pandemic,
• 26:48
  Speaker 12: people had huge pantries and everything was stocked. They had
• 26:51
  Speaker 12: lots of boxed goods in there. And now people are
• 26:54
  Speaker 12: still a little bit more conservative and buying more on
• 26:56
  Speaker 12: a need basis rather than a stockpiling basis. And so
• 27:00
  Speaker 12: until people start to bulk up those pantries again, it's
• 27:03
  Speaker 12: hard to entice them to buy more than what they
• 27:05
  Speaker 12: just need for this week.
• 27:07
  Speaker 3: So as I look at the analyst forecast, jen, I
• 27:10
  Speaker 3: kind of see the one and a half to two
• 27:12
  Speaker 3: to two and a half percent revenue growth in the
• 27:13
  Speaker 3: next several years. That really is the story for most
• 27:18
  Speaker 3: of these consumer package goods companies, isn't it.
• 27:21
  Speaker 12: It really is, especially for companies where the bulk of
• 27:24
  Speaker 12: their portfolio are what you would call center of the
• 27:26
  Speaker 12: store items, so that's the candle items, the boxed items.
• 27:31
  Speaker 12: That type of outlook for top line growth is pretty
• 27:34
  Speaker 12: much in line with where you would expect normal inflation
• 27:36
  Speaker 12: rates to be, and so that in and of itself
• 27:40
  Speaker 12: is probably a reasonable expectation for where these companies can
• 27:43
  Speaker 12: go over the next few years.
• 27:44
  Speaker 4: Do you think that prices then will come down or
• 27:48
  Speaker 4: do you think that they stay sticky?
• 27:50
  Speaker 12: Prices will slowly come down. Retailers are looking to pass
• 27:54
  Speaker 12: through cost savings to their customers, so there will be
• 27:57
  Speaker 12: higher pressure on package food companies to low prices as well.
• 28:01
  Speaker 12: And as their input costs and packaging costs come down,
• 28:04
  Speaker 12: it's harder for them to justify holding prices at a
• 28:07
  Speaker 12: higher level and not passing through some of those savings.
• 28:11
  Speaker 12: So while prices may never come back down to where
• 28:13
  Speaker 12: they were pre pandemic, they should come down a little
• 28:16
  Speaker 12: bit from where they were in terms of peak pricing
• 28:18
  Speaker 12: in the last eighteen months.
• 28:19
  Speaker 4: A little bit.
• 28:20
  Speaker 3: I don't know if we like a little bit, No,
• 28:21
  Speaker 3: we don't, And that's and that's what the problem. That's
• 28:24
  Speaker 3: a problem for a lot of people and it's a
• 28:26
  Speaker 3: problem for the politicians who are saying inflation is still
• 28:28
  Speaker 3: a bad story here. So all right, So Jen, with
• 28:31
  Speaker 3: these names like Craft Hids and General Mills and Kellogg's,
• 28:34
  Speaker 3: I got a you know, low single digit revenue growth.
• 28:36
  Speaker 3: I'm looking. I got dividend yields for Craft Highs about
• 28:40
  Speaker 3: four point seven percent. I mean, what am I owning
• 28:42
  Speaker 3: this thing for? Am I owning it for single digit
• 28:45
  Speaker 3: kind of maybe stock price return plus some dividend yield
• 28:48
  Speaker 3: And that's my game.
• 28:50
  Speaker 12: That's probably the value play at the moment, right, Meaning
• 28:52
  Speaker 12: you've got steady kind of slow and steady growth, you've
• 28:55
  Speaker 12: got a reasonable dividend. They do do share buybacks, you know,
• 28:59
  Speaker 12: so there's some some shareholder benefit there, and you know,
• 29:02
  Speaker 12: as consumers start to pick up their spending, then we
• 29:05
  Speaker 12: may see a better outlook for these companies as well.
• 29:07
  Speaker 4: Who does Craft compete with, like the cokem PEPSI I
• 29:10
  Speaker 4: know that PEPs was all like snack snack snacks, but
• 29:12
  Speaker 4: they have the soft dam business. Who's like a straight
• 29:15
  Speaker 4: up Craft competitor.
• 29:16
  Speaker 12: Someone like Canagra would be, you know, or Campbell Soup.
• 29:20
  Speaker 12: You know, those would be kind of those center type
• 29:22
  Speaker 12: store companies. That would compete most directly with the Craft Times.
• 29:26
  Speaker 3: Hey, Jen, I look at the at the holder's list
• 29:29
  Speaker 3: here and I forgot about this. Berkshire Hathway Warren Buffett
• 29:32
  Speaker 3: by far the biggest shareholder of this company with about
• 29:35
  Speaker 3: twenty six twenty seven percent ownership. What is Berkshire Hathway
• 29:38
  Speaker 3: publicly said about this investment? How long have they owned it?
• 29:41
  Speaker 3: What do they say about their stake here?
• 29:43
  Speaker 12: They've been involved for a very very long time. Haven't
• 29:46
  Speaker 12: made a lot of public comments lately. But when Kraft
• 29:50
  Speaker 12: Times began its transformation plan, which was now a little
• 29:53
  Speaker 12: over three years ago, Berkshire Hathway was very positive on
• 29:57
  Speaker 12: that transformation story. And to be fair, Kraft Times has
• 30:00
  Speaker 12: executed on that transformation plan and generally ahead of schedule
• 30:04
  Speaker 12: when it comes to cost savings initiatives, streamlining things, rebalancing
• 30:08
  Speaker 12: their portfolio. So they really have been sticking to that
• 30:11
  Speaker 12: plan and delivering ahead of schedule. It's just that it's
• 30:14
  Speaker 12: a multi year process. Jen.
• 30:15
  Speaker 3: In your coverage area, you know you got to Staples,
• 30:18
  Speaker 3: the package food companies. What's the kind of the best idea.
• 30:21
  Speaker 3: What do you talk to clients about most often?
• 30:24
  Speaker 12: Well, right now, we're talking to people about you know,
• 30:27
  Speaker 12: who is it that has taken the least amount of
• 30:30
  Speaker 12: price increases over the last say, eighteen months, and where
• 30:33
  Speaker 12: are volumes holding up? Because to be successful over twenty
• 30:37
  Speaker 12: twenty four and into twenty twenty five, it really is
• 30:39
  Speaker 12: that question of how are you going to actually drive
• 30:43
  Speaker 12: overall growth and profitability? And so the companies that have
• 30:47
  Speaker 12: been more conservative and been more prudent in that approach
• 30:51
  Speaker 12: are the ones who are positioned right now to maybe
• 30:53
  Speaker 12: benefit from that.
• 30:54
  Speaker 3: So you haven't benefit from those Actually, what's a representative
• 30:57
  Speaker 3: name there?
• 30:58
  Speaker 12: So a good example there would be Mandolies where they
• 31:01
  Speaker 12: took a lot less price than and actually the spinoff
• 31:05
  Speaker 12: from Craft Times. Yeah, they've been a little bit more
• 31:10
  Speaker 12: prudent in terms of their price increases, and what we've
• 31:13
  Speaker 12: also seen is that their volume has held up better.
• 31:16
  Speaker 4: Hey, Jen, what's something you really don't like right now?
• 31:19
  Speaker 4: Like what sort of a negative trend? Because I'm also
• 31:22
  Speaker 4: trying to understand for some of these names and normalization
• 31:25
  Speaker 4: that we've seen sort of backtrack the last four years
• 31:28
  Speaker 4: and erase that, and that's where we have to kind
• 31:30
  Speaker 4: of pick up and go from there.
• 31:32
  Speaker 12: I think one of the things that is an issue
• 31:34
  Speaker 12: for the industry is that everyone still believes that they
• 31:37
  Speaker 12: can optimize their portfolio and that they're going to find
• 31:39
  Speaker 12: a buyer for the products and the product lines that
• 31:42
  Speaker 12: they don't want at a good multiple. At the end
• 31:45
  Speaker 12: of the day, there aren't a lot of buyers out
• 31:47
  Speaker 12: there for you know, categories that are slow growth or declining,
• 31:52
  Speaker 12: and so there's maybe a little bit of a mismatch
• 31:54
  Speaker 12: in terms of the belief that they can streamline their portfolio,
• 31:57
  Speaker 12: get up you know, all the value that they think
• 31:59
  Speaker 12: they deserve out of it, and yet I don't see
• 32:02
  Speaker 12: a whole, you know, a whole suite of buyers lining
• 32:05
  Speaker 12: up to look at those products.
• 32:07
  Speaker 3: Hershey, this company went public in nineteen twenty seven. Oh boy,
• 32:12
  Speaker 3: they did one follow on offering m HM, and then
• 32:15
  Speaker 3: for about a period about twelve months in nineteen ninety
• 32:19
  Speaker 3: three or four, we pitched them hard on doing another
• 32:22
  Speaker 3: follow on. We actually had a good analyst on the
• 32:24
  Speaker 3: name in the company. Like this, We went to Hershey
• 32:27
  Speaker 3: probably six or seven times in a space of a year,
• 32:29
  Speaker 3: pitching a following off, pitching a nothing, didn't get paid,
• 32:33
  Speaker 3: but got the Hershey and got a lot of Hershey
• 32:35
  Speaker 3: chocolate there's that, So, Jen, what does a company like
• 32:39
  Speaker 3: Hershey do. It's one of those things. I know they've
• 32:41
  Speaker 3: gotten bigger through some acquisitions, but there's still relatively a
• 32:44
  Speaker 3: small player relative to some of the other big names.
• 32:47
  Speaker 3: But is there a brand so good that they can
• 32:49
  Speaker 3: kind of remain independent?
• 32:52
  Speaker 12: Yeah, I believe that the Hershey brand is really iconic,
• 32:55
  Speaker 12: and if you think about some of their biggest chocolate lines,
• 32:58
  Speaker 12: there really aren't a lot of mass targeted competitors out there.
• 33:03
  Speaker 12: When it comes to kind of that mass market. It's
• 33:05
  Speaker 12: hard for an external brand to come in and get
• 33:08
  Speaker 12: the kind of penetration that her She has. And in addition,
• 33:11
  Speaker 12: Hershey has really done a good job of diversifying into
• 33:14
  Speaker 12: the broader snacking. So they own you know, they own
• 33:17
  Speaker 12: popcorn brand, they own you know, pretzel brand. They've done
• 33:20
  Speaker 12: a good job of diversifying and that'll help them with
• 33:22
  Speaker 12: their long term growth as well.
• 33:24
  Speaker 3: Our thanks to Jennifer Bartash is Bloomberg Intelligence Senior Animals.
• 33:27
  Speaker 3: She covers retail, stables and packaged food.
• 33:28
  Speaker 4: We turn out to earnings from deer so the world's
• 33:31
  Speaker 4: biggest farm machinery producer trimmed its profit outlook for this
• 33:34
  Speaker 4: year and this comes as crop prices are giving farmers
• 33:36
  Speaker 4: less money to use on those equipment purchases to help recap.
• 33:40
  Speaker 3: We were joined by Christopher Cilino, Bloomberg Intelligence Senior US
• 33:43
  Speaker 3: machinery analyst. We first asked Chris his take on Deer's earnings.
• 33:47
  Speaker 11: The quarter was great, really much better than we anticipated
• 33:50
  Speaker 11: across the board, beats both top line and margins for
• 33:53
  Speaker 11: most of the businesses, but the outlook was the disappointment
• 33:56
  Speaker 11: of the quarter. They cut knit income guidance by about
• 33:58
  Speaker 11: five percent, and that's largely reflective of incremental weakness in
• 34:02
  Speaker 11: the ag business, specifically the largejag business. And there's really
• 34:07
  Speaker 11: two components to that. One Europe Year now plans to
• 34:10
  Speaker 11: underproduce retail demand due to some weakness in Central and
• 34:13
  Speaker 11: Eastern Europe given the conflict there, so they're going to
• 34:16
  Speaker 11: try to bring down inventories. They're already under producing in
• 34:18
  Speaker 11: Brazil as well. And then the second component of the
• 34:21
  Speaker 11: cut was really some additional softness beginning to transpire here
• 34:25
  Speaker 11: in North America. We saw some of the order velocity
• 34:28
  Speaker 11: start to moderate, so demand seems to kind of be
• 34:31
  Speaker 11: trending towards the low end of their down ten to
• 34:34
  Speaker 11: fifteen percent. Industry outlook when it comes to LARGEAG equipment.
• 34:37
  Speaker 4: Yeah, let's get through some of these here. Production precision
• 34:40
  Speaker 4: AGNET sales for their yearly forecast, they're looking down twenty
• 34:43
  Speaker 4: percent worse. An estimated construction and forestry net sales down
• 34:46
  Speaker 4: five to ten percent, small EG and turf net sales
• 34:49
  Speaker 4: down ten to fifteen percent. Yiki, is this a early cycle,
• 34:53
  Speaker 4: mid cycle or late cycle read on the economy.
• 34:56
  Speaker 11: We're early in an AG downturn. Last year was a
• 34:59
  Speaker 11: peak production level. You know, historically you don't have one
• 35:03
  Speaker 11: year downturn, so I would suspect this is kind of
• 35:05
  Speaker 11: the beginning of a multi year downturn. And some of
• 35:08
  Speaker 11: the numbers that you're seeing that your reference on their
• 35:10
  Speaker 11: guidance are well below you know, market retail demand expectations,
• 35:16
  Speaker 11: suggesting that you know, they have some more work to
• 35:18
  Speaker 11: do on bringing down inventory levels. Values continue to kind
• 35:22
  Speaker 11: of come down here over the last twelve months, and
• 35:24
  Speaker 11: I suspect you'll see further pressure on the use side.
• 35:29
  Speaker 11: New equipment pricing, you know, deers kind of guiding to
• 35:32
  Speaker 11: one and a half percent, which is kind of below
• 35:35
  Speaker 11: historical averages. And remember we're coming off of you know,
• 35:38
  Speaker 11: three years of really strong phenomenal pricing, So returning to
• 35:42
  Speaker 11: I would say below normal historical trend, which will also
• 35:45
  Speaker 11: be a drag on margins.
• 35:47
  Speaker 4: Caterpillar had a different kind of read, and I appreciate
• 35:49
  Speaker 4: they also do metals and mining and stuff. So is
• 35:51
  Speaker 4: it going to be the diversified players that are going
• 35:54
  Speaker 4: to really win on this?
• 35:55
  Speaker 2: Yeah?
• 35:55
  Speaker 11: So, I you know, constructions holding up certainly better than
• 36:00
  Speaker 11: the farmer and then the ag economy A couple of
• 36:03
  Speaker 11: different moving pieces there. I mean, you still have a
• 36:05
  Speaker 11: tremendous amount of infrastructure related funds and government stimulus coming
• 36:09
  Speaker 11: through the system that will not only be kind of
• 36:12
  Speaker 11: a tail wind here in twenty four, but even twenty
• 36:14
  Speaker 11: five and twenty six. So I think that certainly helps
• 36:17
  Speaker 11: offset some of the cyclical headwinds facing both the rezie
• 36:21
  Speaker 11: or non residential markets. But if you look at the
• 36:24
  Speaker 11: farm economy almost kind of a completely different story. You
• 36:28
  Speaker 11: look at crop prices, which are ultimately the biggest driver
• 36:30
  Speaker 11: of farm income and equipment purchases, corn, soy, wheat down
• 36:34
  Speaker 11: you know, twenty five thirty five percent plus, So that's
• 36:37
  Speaker 11: beginning to trickle through to farm incomes. Farmer incomes are
• 36:40
  Speaker 11: going to be down twenty six percent this year, and
• 36:43
  Speaker 11: I suspect will be under further pressure as we exit
• 36:45
  Speaker 11: the year.
• 36:45
  Speaker 4: Too our thanks to Chris Gillino, a Bloomberg Intelligence Senior
• 36:49
  Speaker 4: US Machinery analyst.
• 36:50
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• 36:55
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• 36:58
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• 37:02
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