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Kohl’s Skyrockets as Stock Becomes Traders’ Latest Meme Darling · Bloomberg Intelligence

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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Speaker 2: Holes their shares surge as much as one hundred and
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Speaker 2: five percent in early trading. Now there's shares, well, they're
0:29
Speaker 2: about thirty six percent. It's just a record move. A
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Speaker 2: lot of mentions by retail traders on social media. Let's
0:36
Speaker 2: bring in someone who knows a little bit more about this.
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Speaker 2: Let's bring in Mary Ross Gilbert. She's Bloomberg Intelligence senior
0:41
Speaker 2: equity analyst covering all things retail. So Mary, can you
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Speaker 2: tell us is this a meme stock?
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Speaker 3: Well, it's acting like a memestock, that's for sure, Lisa.
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Speaker 3: And as you pointed out, it was on social media,
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Speaker 3: it looked like midday yesterday there was a post saying
0:57
Speaker 3: showing a Bloomberg chart and showing the short interest and
1:02
Speaker 3: if you look at the number of shares or the
1:04
Speaker 3: shares borrowed versus the total float, it was about forty
1:08
Speaker 3: nine percent, which is pretty high. And it's near a
1:11
Speaker 3: historic high at least over the last couple of years,
1:14
Speaker 3: and so the post sort of circled that and then
1:17
Speaker 3: it identified and noted, hey, how can you be short
1:21
Speaker 3: this stock and sleep well at night? And then apparently
1:25
Speaker 3: that kind of triggered other posts throughout I guess into
1:29
Speaker 3: the evening yesterday, and so of course in pre market,
1:32
Speaker 3: you know, we saw the share surge, as you pointed out,
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Speaker 3: over two hundred over one hundred percent, and you know
1:39
Speaker 3: yesterday the stock was up about eight percent. We saw
1:41
Speaker 3: retail stocks on the move yesterday as well, and so
1:44
Speaker 3: it could be you know, as one of your earlier
1:47
Speaker 3: commendators commendators discussed, you know, with such a strong market overall,
1:52
Speaker 3: this is a sector that has been beaten down largely
1:55
Speaker 3: with tariffs and then of course with execution issues. When
1:58
Speaker 3: we're talking about.
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Speaker 4: Coals, Mary, has a company said anything either at last
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Speaker 4: evening or today in response to the stock movement?
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Speaker 3: Absolutely not, there is There are no releases from the company.
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Speaker 4: So I mean, is this something? I mean, what are
2:12
Speaker 4: you hearing from you know, the clients that you talked to,
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Speaker 4: institutional investors that you talked to, how are they are
2:17
Speaker 4: they selling into this? What are they doing.
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Speaker 3: Yeah, I'm not hearing anyone discussing exactly what their activity is,
2:26
Speaker 3: but you can imagine that there's probably a fair amount
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Speaker 3: of hedge funds involved. And so when you think about it,
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Speaker 3: the company is highly levered. They have bonds, and hedge
2:36
Speaker 3: funds typically will take a position, let's say, in certain bonds,
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Speaker 3: and then they'll go short the stock. So I think
2:43
Speaker 3: we do have some some of that activity and that's
2:46
Speaker 3: how they're positioned. And of course, you know there could
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Speaker 3: have been a short squeeze that was triggered with this activity.
2:52
Speaker 3: This is usually what we'll see in a situation like this,
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Speaker 3: So I think that's kind of what we're seeing in
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Speaker 3: the activity and the shares.
3:01
Speaker 2: And Mary before all of this news came out, How
3:04
Speaker 2: was the stock doing before?
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Speaker 4: How is Cole's performing before all this?
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Speaker 3: Oh it's been atrocious. I mean, this spot is so
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Speaker 3: you can look at three years, two years, five years,
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Speaker 3: year to date, and the stock has been off significantly
3:18
Speaker 3: and that's due to falling revenues. I mean, if you
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Speaker 3: look at the revenues over the last few years, it's
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Speaker 3: down over two billion dollars. And really, when you look
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Speaker 3: at the core business it's down even more. And that's
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Speaker 3: even with adding you know, one point eight billion in
3:32
Speaker 3: revenues from so fora So it shows that there is
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Speaker 3: trouble in the core business. And of course they've rotated
3:37
Speaker 3: through several CEOs and they're on an interim CEO as
3:41
Speaker 3: they hunt for a permanent their fifth CEO and just
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Speaker 3: over two years.
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Speaker 4: Oh boy, geez all right, Mary, that's that explains it all.
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Speaker 4: Mary Roskilbert, thank you so much for joining us. Mary Roskilbert.
3:52
Speaker 4: There's the retailers for Bloomberg Intelligence. She's based out there
3:55
Speaker 4: in our Los Angeles euro.
3:59
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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4:13
Speaker 2: General Motors. That's where we went to get to it
4:15
Speaker 2: took a big hit from President Trump's tariffs. Are you
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Speaker 2: ready for this, Paul Okay? One point one billion dollar
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Speaker 2: profit hit. So what kind of impact is that going
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Speaker 2: to have for the company. Well, we want to hear
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Speaker 2: from the expert about all this, So let's find out,
4:27
Speaker 2: and let's go to David Wells. He's Bloomberg Detroit bureau chief.
4:30
Speaker 2: He's joining us live from Detroit. So, David, were you
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Speaker 2: surprised with that figure one point one billion dollars? I mean,
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Speaker 2: we heard from Stalantis too, kind of saying something similar yesterday.
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Speaker 5: No, not surprised at all. GM said they were going
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Speaker 5: to take a four to five billion dollar hit, or
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Speaker 5: that they had forty five billion dollars in exposure this
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Speaker 5: year to tariffs and then they would only be able
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Speaker 5: to offset about thirty percent of it, and the measures
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Speaker 5: they're using talk set that you really won't see to
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Speaker 5: the second half. I thought there would be a pretty
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Speaker 5: big hit to it. I don't think the street was
5:02
Speaker 5: surprised either, because the forecast for GM's earnings were for
5:07
Speaker 5: a pretty big drop off of the second quarter of
5:09
Speaker 5: last year. Already, GM did better than that because they
5:12
Speaker 5: did have some things, better profits in China than we
5:15
Speaker 5: saw a year ago and better sales in the US
5:18
Speaker 5: that helped them. But overall, a pretty tough quarter, and
5:21
Speaker 5: it really shows that the car companies are going to
5:23
Speaker 5: have a tough time getting anything close to pre tariff
5:28
Speaker 5: profits going forward, because there's just no easy way to
5:30
Speaker 5: get around them.
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Speaker 4: So I mean, is what we're to take away from
5:34
Speaker 4: the Stalantis numbers yesterday and the GM numbers today is
5:37
Speaker 4: that the autumn manufacturers, for whatever reason, maybe they're just
5:40
Speaker 4: not able to or they chose not to pass along
5:43
Speaker 4: the bulk of their cost increases to consumers. Is at
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Speaker 4: a policy or is that just an economic reality?
5:49
Speaker 5: It's an economic reality. And look Stoantis has a lot
5:52
Speaker 5: of other issues. You know, they're going to do some
5:54
Speaker 5: pretty heavy restructuring, which they talked about yesterday. But look,
5:58
Speaker 5: we're at a period right now. We're interest rates are
6:01
Speaker 5: at pretty high levels. You have historically not record but
6:05
Speaker 5: pretty close to record new vehicle prices in the US
6:07
Speaker 5: right now, average monthly payment well over seven hundred hours
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Speaker 5: a month. We have a record number of people I
6:12
Speaker 5: think paying more than one thousand dollars a month for
6:14
Speaker 5: their monthly payment. Cars are expensive, so you know, you
6:18
Speaker 5: can go out there and say, hey, I'm going to
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Speaker 5: pass this tariff cost on to consumers or even some
6:22
Speaker 5: of it, but if consumers don't pay it, then you
6:25
Speaker 5: just lose the sales. And you haven't seen huge price increases,
6:29
Speaker 5: You've seen small and you've seen companies sneak in, you know,
6:32
Speaker 5: some bigger fees for transporting the vehicle for example, things
6:36
Speaker 5: like that. But it's just not they just don't really
6:40
Speaker 5: have the ability to push in big price increases to
6:43
Speaker 5: you know, to pass on. In GM's case, a billion
6:46
Speaker 5: dollars worth of tariffs in a quarter.
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Speaker 2: And it's not just terrors. What else affected profits for GM?
6:51
Speaker 2: I mean, how's their inventory for electric vehicles?
6:54
Speaker 5: They built that up in the quarter, and since the
6:56
Speaker 5: vehicles lose money, they have to count for that. That
6:59
Speaker 5: that them I think it was six hundred million dollars
7:03
Speaker 5: in the quarter they had three hundred million. Because they've
7:05
Speaker 5: had a big engine recalls, they've had higher warranty costs.
7:08
Speaker 5: It wasn't just because of that recall. They've had other
7:10
Speaker 5: issues and they're working on that. Some of it. Some
7:13
Speaker 5: of these quality issues you're seeing that are costing companies
7:16
Speaker 5: more in warranty and recall type costs are all the
7:19
Speaker 5: software that goes into electric vehicles. These are kind of
7:23
Speaker 5: first times out with new software, new infotainment systems, power
7:28
Speaker 5: management systems in these vehicles, and it's just tough for
7:32
Speaker 5: them to go out there and not be buggy, right,
7:35
Speaker 5: you know, think about how many times there's something on
7:38
Speaker 5: your smartphone that you know needs an update, and fixing
7:42
Speaker 5: that with the cars is often more expensive. So some
7:45
Speaker 5: of it was related to that. And actually, you know,
7:48
Speaker 5: they saw pricing go down with some of their fleet customers.
7:51
Speaker 5: There's a lot of competition out there for the for
7:53
Speaker 5: the corporate and fleet business, and they actually saw some
7:57
Speaker 5: downward price pressure there too, and that cost them a
7:59
Speaker 5: couple one hundred million dollars. So a lot of things
8:02
Speaker 5: in the quarter that pushed profits down. But tariffs are
8:05
Speaker 5: the real story.
8:05
Speaker 4: Here, David. You're out there in Detroit. You live and
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Speaker 4: breathe this stuff every day. What's the feeling in Detroit
8:12
Speaker 4: as it relates to this evolution to evs? And how
8:16
Speaker 4: will the tariff and the tariff impact on profitability? Is
8:19
Speaker 4: that going to slow this down even more? Do you think?
8:24
Speaker 3: I do?
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Speaker 5: I think everything that Trump administration is doing is really
8:29
Speaker 5: going to slow the ev transition. First of all, you know,
8:33
Speaker 5: the obvious one is there. It comes September, they're going
8:35
Speaker 5: to be getting rid of the seventy five hundred dollars
8:37
Speaker 5: tax break for qualifying electric vehicles. But you know, with tariffs,
8:41
Speaker 5: you've got battery components, electronic components, wiring harnesses. There's more
8:47
Speaker 5: wiring in an EV than in a conventional vehicle. All
8:49
Speaker 5: that stuff adds to the cost of vehicles that already
8:52
Speaker 5: lose money. Some of them are actually built overseas. In
8:54
Speaker 5: the case of Hyundai, they make some of theirs overseas.
8:58
Speaker 5: GM makes a couple of it's evs in Mexico. They
9:01
Speaker 5: do qualify for US MCA, but there are still some
9:05
Speaker 5: parts component tariffs that they can be hit with on
9:09
Speaker 5: some of these vehicles.
9:10
Speaker 4: And so.
9:12
Speaker 5: You add costs to vehicles that are already pretty expensive,
9:15
Speaker 5: and you can't pass it on. If you do, even
9:19
Speaker 5: fewer people will buy them. Companies may have less incentive
9:22
Speaker 5: to build and sell them if they lose even more
9:24
Speaker 5: money on these, So that's going to hurt as well.
9:26
Speaker 5: And then, of course Trump's rhetoric for people who are
9:30
Speaker 5: politically right of center and pretty far right is that
9:33
Speaker 5: you know, evs are a dumb purchase and they don't
9:35
Speaker 5: work for you, and I think that hurts sales as well.
9:39
Speaker 5: So all of this is just not good for the
9:42
Speaker 5: momentum that EV's had in the US before Trump got
9:46
Speaker 5: in office.
9:47
Speaker 2: Yeah, So, David, last month, the company said it would
9:49
Speaker 2: shift some production to the US from Mexico. So what
9:52
Speaker 2: other changes can we expect to see from the company,
9:54
Speaker 2: like in the last minute or so we have left.
9:58
Speaker 5: Yeah, I think you'll see them try to bring more parts,
10:01
Speaker 5: more of the parts they buy into the US, so
10:03
Speaker 5: they'll be encouraging their suppliers to do what they're doing.
10:06
Speaker 5: Will just move some production to the United States, and
10:08
Speaker 5: that'll take time, and you know, you may see them
10:12
Speaker 5: make some more production related news. What they've done is
10:15
Speaker 5: pretty big, So I'm not anticipating any big announcements. But
10:19
Speaker 5: you know, as they look at this and they find
10:20
Speaker 5: other ways to do it, you might see more vehicles,
10:22
Speaker 5: more parts built here in the US.
10:26
Speaker 2: Thank you so much, David Wells, Bloomberg, Detroit ber Chief
10:28
Speaker 2: talking about GM earnings and so much more.
10:31
Speaker 4: I think GM right here. If you go GM Equity,
10:35
Speaker 4: FA just brings up the financial statements. Their net income
10:39
Speaker 4: margin is five percent. Ok, that's it. They got like
10:44
Speaker 4: no margin, no profit margin. Anything goes wrong for these
10:48
Speaker 4: auto companies and they get screwed.
10:49
Speaker 2: You always say I never understand the auto company.
10:51
Speaker 4: I don't want to, just don't get it. And oh,
10:53
Speaker 4: by the way, my top line splat. I mean, you know,
10:56
Speaker 4: I just it's a high margin. You will make up
11:00
Speaker 4: a volume. I guess it's one of those business So
11:02
Speaker 4: it's just a tough, tough business. And then you throw
11:05
Speaker 4: on top of the TIFFs and then oh, by the way,
11:07
Speaker 4: I have to change my entire industry that I built
11:10
Speaker 4: up over the last hundred years to go electric. Yeah,
11:14
Speaker 4: I'm invest in that. Yeah, I don't know.
11:15
Speaker 2: We got a shift production us to Mexico. It's never
11:19
Speaker 2: ending from them.
11:22
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
11:25
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
11:29
Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
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Speaker 1: get your podcasts, or watch us live on YouTube.
11:36
Speaker 2: And we're listening to Bloomberg Intelligence. I'm Lisa Matteo alongside
11:39
Speaker 2: Paul Sweeney, and we are in the thick of earning
11:41
Speaker 2: season right among those companies today, one of them, Coca Cola,
11:45
Speaker 2: beat on second quarter sales growth, profit. But it's another
11:48
Speaker 2: headline that's getting some attention. They are launching a new
11:51
Speaker 2: coke product that's made with cane sugar. So here to
11:55
Speaker 2: tell us more about it is Candida Jay is Bloomberg Intelligence,
11:57
Speaker 2: Senior consumer products Analysts, Kenneth, thanks for joining us here
12:01
Speaker 2: from Princeton. How much of an impact did the President
12:04
Speaker 2: have on this decision from Coke?
12:07
Speaker 6: Yeah, Hi, Lisa. Well, it's hard to say, but it
12:10
Speaker 6: certainly is in sync with what Coca Cola has been
12:12
Speaker 6: doing for a long time, and that is keeping its
12:15
Speaker 6: pulse on what the consumer wants to do. It has
12:18
Speaker 6: a lot of assets at its disposal, and a cane
12:21
Speaker 6: sugar product is not novel to Coca Cola. I mean,
12:24
Speaker 6: it's produced it in the US largely more more outside
12:28
Speaker 6: of the US, but in the US on a selected basis,
12:31
Speaker 6: So it's really just going to expand that. It may
12:34
Speaker 6: have been prompted to a degree by the President's tweets
12:39
Speaker 6: or whatever, but it's certainly in sync. Like I said,
12:42
Speaker 6: you know, there's a there's an audience out there that
12:44
Speaker 6: prefers sugar based as opposed to high fructose cornci based
12:49
Speaker 6: full calorie sodas, and they're going to play into that.
12:51
Speaker 6: Most likely, it's going to be a brand Coke extension,
12:54
Speaker 6: and it's going to be sell at a premium price
12:56
Speaker 6: in selected markets to give it an aura of exclusivity.
13:00
Speaker 6: I'm guessing to command those prices and so just theys
13:04
Speaker 6: a little more excitement. It's it's one of many things
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Speaker 6: Coke is doing now on the innovation front.
13:10
Speaker 4: So from Coca Cola's economic perspective, do they care which
13:14
Speaker 4: ingredient they use?
13:17
Speaker 6: Well, it depends, Paul, it depends if they can capture
13:19
Speaker 6: the premium price they're going to you know, price it
13:22
Speaker 6: at Kine. Shugar costs more than high frucos corns here.
13:25
Speaker 6: You know, a corn is a heavily, heavily subsidized crop
13:28
Speaker 6: in the US. They built their supply chain around HFCs
13:32
Speaker 6: because of that, and most consumers early, you know, they
13:36
Speaker 6: don't really notice the difference. Some do, but buy and large.
13:40
Speaker 6: You know, they've grown that franchise very well. But I
13:44
Speaker 6: guess you know some tourists that go to Mexico and
13:47
Speaker 6: they taste the sugar cane sugar coke down the air
13:50
Speaker 6: and they say, you know what, this is really good,
13:52
Speaker 6: and they want to capture the same experience in the US.
13:55
Speaker 4: I'm going to Chipotle today and they do offer the
13:58
Speaker 4: Mexican zoda there.
14:00
Speaker 7: Can I give you the history of high fructose corn syrup.
14:03
Speaker 7: It was in the nineteen seventies, with high inflation and
14:06
Speaker 7: high sugar prices. President Nixon said, do something about this,
14:10
Speaker 7: and this guy said, well, we can make a sugary
14:14
Speaker 7: tasting stuff from corn from American farmers and US high
14:19
Speaker 7: fructose corn syrup, which most doctors say is like poison
14:23
Speaker 7: to your system. There we go, thank.
14:26
Speaker 4: Don taker with the value added there. Let me ask,
14:29
Speaker 4: let me shift gears here. What is a ZIN patch?
14:36
Speaker 6: A Zin patch? Do you want to patch it? I
14:38
Speaker 6: think they made a pouch pouch. Zin pouch is a pouch,
14:42
Speaker 6: you know, it's it's an oral tobacco product. Actually, Zin
14:47
Speaker 6: doesn't even contain tobacco. It's a synthetic product. Its lads
14:51
Speaker 6: with nicotine that is a facsimile for tobacco, which a
14:55
Speaker 6: lot of people will say causes harm, and a lot
14:57
Speaker 6: of people are right. So this is a product that
15:01
Speaker 6: you know, people can get their nicotine buzz in a
15:04
Speaker 6: you know, hands off kind of way, doesn't emit smoke,
15:07
Speaker 6: doesn't offend your neighbor that you're working with, and it's
15:10
Speaker 6: done really really well. So those are really the Zin
15:12
Speaker 6: pouches that are doing really well.
15:14
Speaker 4: Yeah, yeah, I thought it was Zinfindel. The line that's
15:17
Speaker 4: no kidding, No, I that pouch so but I mean
15:21
Speaker 4: it's it's big enough a business can that Philip mars
15:24
Speaker 4: would would call it out.
15:27
Speaker 6: Oh yeah, it is in it's about eight percent of
15:30
Speaker 6: the sales, I believe at this point. But it's growing,
15:32
Speaker 6: you know, a twenty thirty percent rate, as opposed cigarettes
15:36
Speaker 6: which are flat, if not down. But you know, Icoas
15:39
Speaker 6: is their smoke free device segment, which is doing very well.
15:43
Speaker 6: But if the low large numbers at some point, that's
15:46
Speaker 6: going to slow and Zen is filling the gap. They
15:48
Speaker 6: keep the overall volumes in a positive trend. They price
15:53
Speaker 6: these things very high. There's not a lot of competition
15:55
Speaker 6: in this space. So you know, one of the things
15:57
Speaker 6: investors would say about the world of tobacco, because it's
16:00
Speaker 6: so consolidated, they can pass on a very high pricing
16:04
Speaker 6: and that's what really drives a top line and you
16:06
Speaker 6: know the cash flows and so on. And Zen plays very,
16:09
Speaker 6: very very well into that model.
16:11
Speaker 2: And how does it fair as far as we're hear
16:14
Speaker 2: about e cigarettes vaping things like that, how has Philip
16:16
Speaker 2: Marris been doing competing with this category.
16:20
Speaker 6: So they have a product called viv which is their
16:24
Speaker 6: e vapor product as opposed to what they call heat
16:26
Speaker 6: not burn, which has actual tobacco in it, and they
16:30
Speaker 6: would say as a more appealing alternative for smokers who
16:35
Speaker 6: are trying to quit. It's a lower margin product. It's
16:38
Speaker 6: kind of seen by Philip Morris as a kind of
16:40
Speaker 6: an entry level product. If for those who are trying
16:43
Speaker 6: to move away from combustible cigarettes, they can turn to
16:46
Speaker 6: e cigarettes a low cost method, and their hope is that,
16:50
Speaker 6: you know, even though it's a low margin product, their
16:52
Speaker 6: hope is that they can get that consumer maybe some
16:56
Speaker 6: at some point to trade up to their heat not
16:59
Speaker 6: burn product, which is, you know, a more profitable product
17:04
Speaker 6: for them.
17:04
Speaker 4: All right, good stuff. I mean I learned about the
17:06
Speaker 4: zin pouch today. How about it's not Zinfindel. Okay, all right,
17:12
Speaker 4: very good, so good stuff there, Ken Shay, thanks so much.
17:15
Speaker 4: Ken covers all those consumer products at companies for Bloomberg Intelligence.
17:19
Speaker 4: Appreciate getting a few minutes of this time.
17:22
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
17:29
Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
17:33
Speaker 1: get your podcasts or watch us live on YouTube.
17:36
Speaker 4: Lis MITTEO, Paul Sweety, We're live here on Bloomberg Interactive
17:39
Speaker 4: Broker Studio. Let's talk about Lockheed Martin. Put out some
17:42
Speaker 4: numbers disappointing here, took some losses here. Let's break it
17:45
Speaker 4: down with will Lee Aerospace and Defense channels for Bloomberg Intelligence. Well,
17:50
Speaker 4: Lockheed Martin, I mean, they just do everything. What happened
17:53
Speaker 4: in the quarter.
17:54
Speaker 8: Yeah, So, I mean if you look at the quarter
17:56
Speaker 8: of the performance was modeled by this hefty one point
17:59
Speaker 8: six billion dollars chart on program losses and then another
18:02
Speaker 8: one hundred sixty nine million of other charges. There was
18:06
Speaker 8: the end gap right off. I think that was around
18:08
Speaker 8: like sixty sixty six.
18:10
Speaker 4: Let's go back to the big one one point six billion,
18:13
Speaker 4: So what's that for?
18:14
Speaker 8: So out that one point six nine hundred and fifty
18:16
Speaker 8: million is for for a classified aeronautics.
18:19
Speaker 4: Program, so they can't tell us.
18:20
Speaker 6: They can't tell us what it is.
18:22
Speaker 8: But if it's something that big and it's been going on,
18:25
Speaker 8: and in fourth quarter they also recorded another four hundred
18:28
Speaker 8: and forty million dollars or four hundred and seventy seven stop.
18:31
Speaker 4: Doing that program, then I don't know what they could
18:34
Speaker 4: tell you, but then they have to kill you.
18:36
Speaker 8: Well, given that it's a huge program and they're taking
18:39
Speaker 8: over a billion dollars of charges, what could possibly be
18:42
Speaker 8: so important so big and most likely is the A
18:46
Speaker 8: name six generation ISR. What's IRR Intelligence surveillance reconstants, So
18:52
Speaker 8: think of as the replacement for the SR seventy SRC.
18:56
Speaker 4: Now we're talking SR seventy one to Okay, So.
19:02
Speaker 8: If you think about in that respect, Bowen has the
19:06
Speaker 8: F forty seven, that's the sixth generator, sixth generation of
19:09
Speaker 8: fighter jet. That's going to be the biggest sixth generation program.
19:13
Speaker 8: Navy wants their own sixth generation, the FAXX. I think
19:17
Speaker 8: that Northrope has the inside tractor. When that given that
19:20
Speaker 8: Dood doesn't want to make the same mistake that I
19:22
Speaker 8: made with F thirty five, given lot UH with F
19:24
Speaker 8: three five F twenty two, given Lockie both control of
19:27
Speaker 8: the fifth generation fighters, so they break up into multiple
19:30
Speaker 8: defense contractors and have more resilient industrial base. So in
19:35
Speaker 8: that with that mindset, Bowen has F forty seven UH,
19:42
Speaker 8: Northrope pass the FAXX, and Lockie could potentially have the
19:46
Speaker 8: sixth generation reconnaissance aircraft.
19:48
Speaker 2: So what all those numbers that my son would be
19:50
Speaker 2: having a field day with this conversation right now. He
19:53
Speaker 2: is so into this is this typical of defense contracting environment?
19:57
Speaker 2: I mean growth is marginal there, you were mentoring a
19:59
Speaker 2: number of numbers before.
20:01
Speaker 8: Is this typical? I mean to this large extent, this
20:04
Speaker 8: is sort of unusual. I mean they've locky teased that
20:08
Speaker 8: they were going to they were looking at additional charges
20:12
Speaker 8: after the quarter. They didn't mention or indicate how large
20:16
Speaker 8: that magnitude was. So this sort of caught the street
20:19
Speaker 8: by surprise the size of it. But I mean, I
20:22
Speaker 8: think it just shows that this is a key program
20:25
Speaker 8: that's that's going to keep going for But even if
20:28
Speaker 8: you just strip out all the charges from the quarter
20:32
Speaker 8: and you look at the underlying performance, the performance actually
20:35
Speaker 8: was not bad. In second quarter, Aeron ONLYYX grew seven
20:38
Speaker 8: percent on high F thirty five volumes and the F
20:40
Speaker 8: thirty five, and they also took up the the prop
20:44
Speaker 8: a cumulative profit booking rates on the F thirty five
20:48
Speaker 8: in the quarter, and the Missile and fire control segment
20:51
Speaker 8: it grew eleven percent on strong demand on tactical and
20:54
Speaker 8: strike missiles. So you're talking about the jazzm the JASM
20:58
Speaker 8: air to service missile, the Lorasm anti ship missiles, and
21:02
Speaker 8: the gimblers that are used on the High Mars those
21:05
Speaker 8: are those are rockets that we've been sending over to
21:08
Speaker 8: Ukraine are.
21:10
Speaker 4: So I'm looking at the comps. They're all trading up
21:13
Speaker 4: on the year. Defense contractors stocks are doing great this year,
21:16
Speaker 4: with the exception of Lockey Martin it's down eleven percent
21:19
Speaker 4: year to date. What helpout that well?
21:21
Speaker 8: I mean, the biggest headwind is the F thirty five
21:23
Speaker 8: you have F thirty five is the news you have
21:26
Speaker 8: talks of why do we need to have F thirty five?
21:28
Speaker 8: In the fiscal twenty six budget requests the Air Force.
21:32
Speaker 8: The Air Force cut the number of F thirty fives
21:35
Speaker 8: to twenty four and that's down from forty four, So
21:39
Speaker 8: across the board, I think that's the biggest headwind on
21:41
Speaker 8: Lockie and the fact that you're not seeing you're not
21:44
Speaker 8: seeing that more. You're you're seeing flat revenues and no
21:48
Speaker 8: real margin improvement. So I think those are the two
21:50
Speaker 8: big headwinds.
21:51
Speaker 2: Yeah, can you get into that a little bit more
21:53
Speaker 2: like RTX Corp North or Grumman, Like, what are they
21:56
Speaker 2: doing better? That that that lockade isn't well.
21:59
Speaker 8: I mean our stuff with north by their lever to
22:02
Speaker 8: the b TOY one program and the Sentinel. So with
22:05
Speaker 8: the b TY one, you're here in talks of the
22:07
Speaker 8: Air Force looking to accelerate production and more quantities. And
22:13
Speaker 8: that program right now is in this e M D
22:15
Speaker 8: phase Engine Engineering Manufacturing development. So think of as sort
22:20
Speaker 8: of this is still in the development low rate production phase,
22:24
Speaker 8: but then it's going to transition to a production phase,
22:28
Speaker 8: and when it goes to a production phase, you can
22:30
Speaker 8: see potentially higher quantities. At Northrop talk to that on
22:33
Speaker 8: their earnings called this morning saying that we're in discussions
22:36
Speaker 8: with the Air Force and if we increase the production rate,
22:40
Speaker 8: we might have to take additional we might have to
22:42
Speaker 8: make additional investments, which means I had went to to earnings.
22:46
Speaker 8: But at the same time they could potentially realize profit
22:50
Speaker 8: on these low rate initial production lots and not to
22:55
Speaker 8: exceed subsequent follower production, whereas before they were expecting no
23:01
Speaker 8: profits on the l RIP phase and some profit on
23:05
Speaker 8: the next NTE phase.
23:06
Speaker 4: All Right, it just seems like it's good to be
23:09
Speaker 4: in the defense business. It seems like, you know, we
23:12
Speaker 4: spend money on the defense ear in and you're at Lockey.
23:14
Speaker 4: Martin had a tough day today. It is down six percent.
23:18
Speaker 4: LMT is the ticker will Thanks so much for joining
23:21
Speaker 4: us A will Lee Aerospace Defense sanels for Bloomberg Intelligence
23:25
Speaker 4: breaking down the LMT data here.
23:29
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