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PepsiCo’s Snacks Business Starts to Rebound After Price Cuts · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: All right, let's keep to the earnings flow.
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  Speaker 3: Here.
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  Speaker 2: We got Pepsi reported earnings here. Kensha joins us here
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  Speaker 2: senior consumer Product Scannels for Bloomberg Intelligence. He's based down
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  Speaker 2: in Princeton. And again, Scarlett, you probably know my feeling here.
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  Speaker 2: I am a Coca Cola person. I identify as a
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  Speaker 2: Coca Cola person. But you put a Pepsi from me.
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  Speaker 2: I'm just as happy. I really don't care my brand
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  Speaker 2: lowth He's pretty low there. They're both good. Hey, Ken,
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  Speaker 2: talk to us about Pepsi. What do we see in
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  Speaker 2: the earnings report?
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  Speaker 4: A Hi?
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  Speaker 5: Well, so the PepsiCo report was pretty encouraging if you're
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  Speaker 5: bullish on the story here. The first quarter showed good progress.
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  Speaker 5: Top line volumes. International business was particular really strong. I
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  Speaker 5: guess the key takeaway here for investors why they're looking
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  Speaker 5: at it positively today is because their efforts to have
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  Speaker 5: a better balance between volume and pricing really came through
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  Speaker 5: in the quarter. Companies. Critics of the company over the
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  Speaker 5: last couple of years have been saying, look, you know,
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  Speaker 5: all your sales gains are coming on at all, but
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  Speaker 5: most of your sales gains is driven by price increases.
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  Speaker 5: And so they made a real effort. They've reduced prices
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  Speaker 5: in most of their snack lines. They're also adding a
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  Speaker 5: lot of innovation and through delay, North America combined with Quaker,
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  Speaker 5: put up a one percent volume game. That doesn't sound
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  Speaker 5: like a huge deal, but relative to declientes, it was
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  Speaker 5: a positive sign. So all in all, it was a
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  Speaker 5: positive sign, and I think it showed our signaled that
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  Speaker 5: they're going to hit their targets for the year, at
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  Speaker 5: least so far.
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  Speaker 6: So when you talk about PepsiCo making its products more affordable,
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  Speaker 6: cutting costs, that was something that Elliott Investment, the activist investor,
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  Speaker 6: had been put pushing PepsiCo to do. We know that
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  Speaker 6: Elliott built a steak in Pepsi last year. Things are
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  Speaker 6: now moving in the direction that Elliott wants to see.
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  Speaker 6: What other changes do you anticipate PepsiCo making.
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  Speaker 5: Well, that's a good question, Scarlett I mean, it's really
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  Speaker 5: what the focus was from Elliott was improve the margins
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  Speaker 5: and particularly at the food area, the food and so far,
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  Speaker 5: you know, it seems to be making progress. Now it's
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  Speaker 5: still unfolding. Will be the benefits of all this innovation
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  Speaker 5: and productivity that they're targeting. Now, keep in mind that
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  Speaker 5: it's happening not in a vacuum. It's happening with oil,
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  Speaker 5: you know, rising aluminum prices going up, and so that
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  Speaker 5: was a big focus of the call also where Animals said, look,
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  Speaker 5: you know, you have your plan. It seems to be
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  Speaker 5: moving well, but it's the monkey being We're throwing a
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  Speaker 5: monkey wrench into the works here with oil prices and
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  Speaker 5: so on spiking up. And they said, look, you know
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  Speaker 5: we hedge the six months, We've probably covered their supply
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  Speaker 5: chains in good shape. There might they hinted at possibly
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  Speaker 5: raising price end of the year if they have to,
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  Speaker 5: But I think right now, if you're an activist, you
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  Speaker 5: have to be pretty pleased with the balance of the growth.
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  Speaker 5: And like I said, it's the international, it's the beverage,
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  Speaker 5: it's the food. All performed well in the quarter.
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  Speaker 2: And ken with a lot of your companies. I look
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  Speaker 2: at the dividend yield. I look at the dividend growth
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  Speaker 2: because that's such a big part of the investment story
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  Speaker 2: for some of the some of your names. So for
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  Speaker 2: PEPs I got a dividend yield of three point six percent.
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  Speaker 2: They've been growing their their dividend. What is their dividend policy.
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  Speaker 5: Uh, they're committed to growing a dividend and they have
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  Speaker 5: a pretty much, you know, a mid single digit rate.
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  Speaker 5: They selectly buy shares back, they reinvesting. You know, they
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  Speaker 5: really do a balance capital allocation strategy. And I would
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  Speaker 5: I would suspect that's going to continue. I mean a lot,
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  Speaker 5: a lot of the shareholders like those total returns.
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  Speaker 7: Yeah, they certainly do.
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  Speaker 6: I mean that's why you go into consumer staples right
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  Speaker 6: before that steady payout Ken, before we let you go,
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  Speaker 6: I got to ask you about what happens when it
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  Speaker 6: comes to pricing. Obviously, these companies, these consomer package companies
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  Speaker 6: are facing higher expenses with fuel costs going up, Logistics
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  Speaker 6: becomes a lot more expensive as well. What did PepsiCo
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  Speaker 6: say about pricing, about inflation at how it sees prices
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  Speaker 6: moving forward?
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  Speaker 5: Well, they never candid and they said they said, look,
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  Speaker 5: you know, inflation is likely to pick up at the
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  Speaker 5: end of the year. And while we would certainly like
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  Speaker 5: to target more productivity of gains to upset a lot
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  Speaker 5: of that, the hedging programs I mentioned before, and the
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  Speaker 5: price mix is improving some of the acquisitions they've made
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  Speaker 5: recently are really going to move that up high higher.
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  Speaker 5: But they said, look, you know, in between the lines anyway,
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  Speaker 5: you know, pricing is not off the table just because
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  Speaker 5: we took it, you know, early this year as part
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  Speaker 5: of this plan. So I think it's kind of I
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  Speaker 5: will wait and see it, as most companies are taking
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  Speaker 5: right now. I mean, no companies really immune to some
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  Speaker 5: of these inflationary pressures out there, and this is no exception.
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  Speaker 2: All right, Ken great stuff as always, Ken Chase Senior
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  Speaker 2: Consumer Products aannels for Bloomberg Intelligence down there in Princeton,
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  Speaker 2: New Jersey. We've been talking a lot about substituting private
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  Speaker 2: label for brands as you don't do.
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  Speaker 6: That for soda, no, because soda has a very specific
• 5:23
  Speaker 6: taste and people are so beholden to their favorite baction.
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  Speaker 2: I just thought of that today, thought, just Kendemin, I'm not.
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  Speaker 7: Doing it for soda, for Seltzer, but not for soda.
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  Speaker 2: Yes, good point. Good point. So you're right, maybe that's
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  Speaker 2: a lifetime of brand building.
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  Speaker 7: Yeah, thank you, mad man.
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  Speaker 2: Yes, exactly exactly. So there you go.
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  Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 6:02
  Speaker 6: Spirit Airlines. Have you ever flown Spirit? I have not
• 6:05
  Speaker 6: because you are based out of Newark, So.
• 6:07
  Speaker 2: I am captive to United. That's why I'm a million milers.
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  Speaker 7: What they can I know you're proud of this discusion.
• 6:13
  Speaker 2: I got the medallion, I got the little thing.
• 6:15
  Speaker 6: Little Lamilt comes out to visit him every time he
• 6:18
  Speaker 6: steps foot in a United Jet.
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  Speaker 2: YEP bottle champagne, which I gave to my seat mates,
• 6:22
  Speaker 2: and SI will drink champagne.
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  Speaker 8: Well.
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  Speaker 6: The reason I ask about Spirit is because it now
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  Speaker 6: looks like it's headed ever closer to liquidation. SID Philip
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  Speaker 6: is our global U correspondent for aviation.
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  Speaker 7: It talks about all the airlines. SID. Spirit is already
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  Speaker 7: in bankruptcy protection.
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  Speaker 6: It's still operating, What does it mean if it's at
• 6:41
  Speaker 6: risk of being liquidated.
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  Speaker 8: So Spirit in its second bankruptcy in just about a year,
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  Speaker 8: and so what it means is that the assets of
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  Speaker 8: the airline that sort of the few assets that are
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  Speaker 8: remaining those sort of go away, and the airline sees
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  Speaker 8: is to operate. Essentially, their current plan was to shrink
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  Speaker 8: down from to about seventy five eighty planes and sort
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  Speaker 8: of operate only the profitable routes. But then with jet
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  Speaker 8: fuel prices soaring, it no longer is even viable to
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  Speaker 8: do that.
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  Speaker 2: Is there any scenario like there? Remind us there was
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  Speaker 2: an M and A scenario involving Spirit Allianes. What was that?
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  Speaker 8: So there was an M and A that that was scuttled.
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  Speaker 8: So Spirit Airlines was set to be acquired by Jet
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  Speaker 8: Blue and that was scuttled by the Biden administration back
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  Speaker 8: in twenty twenty four.
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  Speaker 2: We all said it at the time, you got to
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  Speaker 2: let these guys merge. Otherwise these thing's going it's going
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  Speaker 2: to be gone, and then you can have all these
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  Speaker 2: markets with no coverage.
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  Speaker 8: Absolutely, and the low cost carriers have been hit harder,
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  Speaker 8: particularly because United and Delta have been able to cash
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  Speaker 8: in on the premium travel demand, and that's sort of
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  Speaker 8: really given them a buffer that Spirit and others haven't
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  Speaker 8: really been able to sort of tap into where they
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  Speaker 8: aren't able to sort of get those that United and
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  Speaker 8: Delta have and that's really been something that's been a
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  Speaker 8: really big pain point for.
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  Speaker 6: The Okay, so the government prevented jabluin Spirit from getting together.
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  Speaker 6: But then I remember that we reported that Frontier and
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  Speaker 6: Spirit reheld discussions to merge.
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  Speaker 7: What happened to that one?
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  Speaker 6: And the spreadter need to team up with someone to
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  Speaker 6: get through this period.
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  Speaker 8: So Frontiers in a slightly better financial position than Spirit,
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  Speaker 8: and so they were not as desperate for a deal
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  Speaker 8: as Spirit was, and that sort of those talks fell apart,
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  Speaker 8: and they sort of revived those talks back in twenty
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  Speaker 8: twenty five, and they sort of walked away without a deal.
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  Speaker 8: And so now we're looking at Spirit eala and second
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  Speaker 8: bankruptcy and still got big piles of debt, unable to
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  Speaker 8: unlock cash from creditors, and this could be the end
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  Speaker 8: for the airline.
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  Speaker 2: All right, So what is this? What's just the general
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  Speaker 2: update about We know that premium like lots of this economy,
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  Speaker 2: the premium consumers spend the premium money on a premium stuff. Okay,
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  Speaker 2: Now the other part of the k that's where some
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  Speaker 2: of these regional airlines cater to. What are we seeing
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  Speaker 2: there is that? I mean, are they seeing a pullback
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  Speaker 2: and travel?
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  Speaker 8: So we haven't really heard much about the impact of
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  Speaker 8: the war and the rising prices and then consequent rise
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  Speaker 8: and ticket prices on demand yet because as the airlines
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  Speaker 8: sort of talked through their earnings and talk about how
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  Speaker 8: demand is looking as they get I mean, we still
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  Speaker 8: we've seen jet field prices double more than double in March,
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  Speaker 8: and so that was really a big trigger for a
• 9:36
  Speaker 8: lot of airlines where you have to charge more for
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  Speaker 8: a seat, but then you don't charge too much more
• 9:41
  Speaker 8: because people will not book. And that's the really the
• 9:43
  Speaker 8: chicky balancing curve for the airlines.
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  Speaker 7: If Spirit goes away, who benefits.
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  Speaker 8: The rest of the industry does, because there's one less
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  Speaker 8: player to compete against, there's one less ultra because I mean,
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  Speaker 8: the low cost carriers compete with each other to offer
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  Speaker 8: the lowest fares. Because those customers aren't really typically sticky,
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  Speaker 8: then out sort of looking then they're not a million
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  Speaker 8: milers and so they're looking to sort of try and
• 10:05
  Speaker 8: sort of find the best deal, the best fare that
• 10:08
  Speaker 8: they can get. And that's really the chicky part for
• 10:11
  Speaker 8: the ultra locus carriers because you need to get those
• 10:14
  Speaker 8: customers with low fares every time, and sometimes those loafers
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  Speaker 8: come with high costs for the airlines.
• 10:20
  Speaker 2: All right, sid, thanks so much, appreciate it, said Philip
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  Speaker 2: Covers all the aviation stuff for Bloomberg News. And you
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  Speaker 2: just we kind of knew it at the time.
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  Speaker 7: Yeah, it felt like you let this.
• 10:28
  Speaker 2: Deal go through, let them be jet Blue's problem, you know,
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  Speaker 2: and let them figure it out.
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  Speaker 6: And jet Blue itself is kind of looking for some
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  Speaker 6: kind of partner right now, right, I mean, there were
• 10:36
  Speaker 6: reports that Jeblu was looking to, you know, again, look
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  Speaker 6: for some kind of m and a partner to kind
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  Speaker 6: of get through this difficult period because unlike Delta or United,
• 10:44
  Speaker 6: it's not a premium player.
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  Speaker 7: It's trying to move in that direction, but it'll take
• 10:48
  Speaker 7: a while.
• 10:48
  Speaker 2: And jet fuel doubling, I don't know how you deal
• 10:50
  Speaker 2: with that. I mean, that is just no one anymore. Again,
• 10:53
  Speaker 2: they don't and if you don't own a if you
• 10:54
  Speaker 2: don't own a refinery like Delta right. Stay with us.
• 10:57
  Speaker 2: More from Bloomberg Intelligence coming up there.
• 10:59
  Speaker 1: For you're listening to the Bloomberg Intelligence podcast. Catch US
• 11:07
  Speaker 1: Live weekdays at ten am Eastern on Apple, Cocklay and
• 11:10
  Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand
• 11:13
  Speaker 1: wherever you get your podcasts, or watch US Live on YouTube.
• 11:17
  Speaker 2: Bank earnings. We had the big money center banks report
• 11:20
  Speaker 2: earlier this week, and now we're starting to hear from
• 11:22
  Speaker 2: some of the regional banks. Today we had US Bank Corp.
• 11:25
  Speaker 2: They came in the topp the estimates with revenue climbing
• 11:28
  Speaker 2: nearly five percent, the stocks trading off about one point
• 11:30
  Speaker 2: eight percent today. It's up. That was tes I have
• 11:35
  Speaker 2: it Tesla up it there, then that's stocks trading on.
• 11:38
  Speaker 2: Let's check out with Hermit Chant, senior analysts for US
• 11:40
  Speaker 2: Banks for Bloomberg Intelligence, talk to us about US Bank Corp.
• 11:44
  Speaker 2: What did you hear today and how representative do you
• 11:46
  Speaker 2: think it's going to be for some of the other
• 11:47
  Speaker 2: regional banks.
• 11:48
  Speaker 4: Yeah, US Bank Corp, despite the stop being down today
• 11:52
  Speaker 4: really showed strong results and reverberated what we've heard from
• 11:58
  Speaker 4: the largest banks that reported early in the week. I
• 12:01
  Speaker 4: would say universally, the regional and the largest banks. I've
• 12:04
  Speaker 4: talked about strong loan growth, and it's been more broad based. Right, So,
• 12:08
  Speaker 4: last year a lot of the growth was from areas
• 12:10
  Speaker 4: like private credit and other non bank financial institutions. For
• 12:14
  Speaker 4: this year, to start out, at least in the first quarter,
• 12:17
  Speaker 4: broad based activity. US Bank talked about growth in areas
• 12:21
  Speaker 4: like energy, customers, food and beverage, and customers really using
• 12:26
  Speaker 4: those new borrowings to fuel cap X and M and
• 12:31
  Speaker 4: A activities. So those are actually all really positive and
• 12:34
  Speaker 4: demonstrates that the economy's are really firm. Footing the fact that.
• 12:39
  Speaker 6: The Federal Reserve has not cut interest rates like a
• 12:42
  Speaker 6: lot of people had wanted and had anticipated, how is
• 12:45
  Speaker 6: that affecting the profitability of loanmaking right.
• 12:48
  Speaker 7: Now for these banks?
• 12:49
  Speaker 4: Yeah, that's a great question. Heading into this year, a
• 12:53
  Speaker 4: lot of the banks were expecting two rate cuts and
• 12:55
  Speaker 4: that was baked into their twenty twenty six guidance. Now
• 12:58
  Speaker 4: the market's saying no rate cuts. So for banks that
• 13:02
  Speaker 4: are maybe like a bit more sensitive to interest rates,
• 13:06
  Speaker 4: you know, that's probably on the margin positive for the
• 13:10
  Speaker 4: net interest income trajectory of the top line trajectory. But
• 13:14
  Speaker 4: those rate cuts that were previously contemplated were sort of
• 13:17
  Speaker 4: towards the back end of the year, so not it's
• 13:23
  Speaker 4: it's a marginal benefits, but not a Gangbusters hit one
• 13:27
  Speaker 4: way or the other.
• 13:28
  Speaker 2: One of my favorite regional banks has always been Key Corp.
• 13:32
  Speaker 2: How did I know they had some numbers here? How
• 13:33
  Speaker 2: did that look?
• 13:34
  Speaker 4: Yeah? Key Corp was was really strong. They posted for
• 13:39
  Speaker 4: them their highest first quarter investment banking revenue period for
• 13:46
  Speaker 4: and so that's really driven by some of the build
• 13:49
  Speaker 4: out that they've done in the investment banking platform over
• 13:52
  Speaker 4: the years. They also mentioned really strong lending activity. I
• 13:57
  Speaker 4: mentioned Usbank Court talked about broad based commercial growth, Key
• 14:01
  Speaker 4: Corp seeing the same, and there was some really positive
• 14:05
  Speaker 4: commentary on that lending driving improved net interest income. So
• 14:11
  Speaker 4: that's flowing through. Gave better guidance for the full year
• 14:14
  Speaker 4: given the lending activity, and the stocks had a nice
• 14:19
  Speaker 4: jump today up one point two percent thus far in
• 14:22
  Speaker 4: the trading session.
• 14:22
  Speaker 6: Okay, so Key Corp reported, US Bank Corps recorded Citizens
• 14:26
  Speaker 6: also reported as well, that's talk marshally lower. Are any
• 14:29
  Speaker 6: of these names obvious acquirers or targets in the expected
• 14:34
  Speaker 6: consolidation that we are looking for among these regional banks.
• 14:38
  Speaker 2: That's right.
• 14:38
  Speaker 4: Expected consolidation is a good way to put it. U
• 14:42
  Speaker 4: S Spain Corp probably is the one that we think
• 14:47
  Speaker 4: is well positioned for that. They recently a couple of
• 14:51
  Speaker 4: years back by a California bank called Union Bank that
• 14:55
  Speaker 4: was previously owned by MUFG. The Japanese conglomerates continuing to
• 15:01
  Speaker 4: work out well for them. They highlighted California as a
• 15:04
  Speaker 4: strong area of growth. We expect potential for them to
• 15:09
  Speaker 4: really boaster that over time, even though they're really focused
• 15:12
  Speaker 4: on organic in the near term. Key Corp has mentioned
• 15:16
  Speaker 4: that there was some Bloomberg News reporting a couple quarters
• 15:21
  Speaker 4: ago that they were looking the potential to do a
• 15:23
  Speaker 4: deal in the Pacific Northwest, but Key Corpse management team
• 15:28
  Speaker 4: has sort of pooh pooed that over the past few quarters.
• 15:31
  Speaker 4: So we'll see. But I would say that they probably
• 15:34
  Speaker 4: don't have the currency to do a deal without it
• 15:37
  Speaker 4: being super deluded at this point. So it really is
• 15:41
  Speaker 4: dependent on your valuation, and US Bank Corp does have
• 15:46
  Speaker 4: that premium valuation to do a deal.
• 15:48
  Speaker 7: Herman.
• 15:49
  Speaker 6: A couple of years ago, we saw Silicon Valley Bank collapse.
• 15:51
  Speaker 6: We saw First Republic also get pushed under as well,
• 15:54
  Speaker 6: there was this mismatch of assets and liabilities where a
• 15:56
  Speaker 6: lot of these banks held super long dated treasury on
• 16:00
  Speaker 6: their books thinking that they're safe, but then got caught
• 16:02
  Speaker 6: off sides when rates began rising.
• 16:05
  Speaker 7: Is that period over? I mean, are they all in
• 16:08
  Speaker 7: good standing at this point?
• 16:09
  Speaker 4: Yeah, So that happened when when interest rates were near zero.
• 16:14
  Speaker 4: A lot of those securities are maturing quarter after quarters,
• 16:19
  Speaker 4: so a lot of that have burned down off the
• 16:22
  Speaker 4: balance sheets. And really there were two issues, right, You
• 16:25
  Speaker 4: had those unrealized losses, but then what exacerbated it was
• 16:30
  Speaker 4: the deposit outflow, the deposit flight front from banks like SVB,
• 16:35
  Speaker 4: when you know, luminarias like Peter Dial told everybody and
• 16:39
  Speaker 4: and they're in the community, in the in the Silicon
• 16:43
  Speaker 4: Valley community to take their deposits out of SVB. So
• 16:47
  Speaker 4: that really was the impetus of the demise for that
• 16:50
  Speaker 4: particular institution. So we're not we are way out of
• 16:54
  Speaker 4: the woods in terms of deposit volatility. That's nothing. We're
• 16:59
  Speaker 4: not seeing that and haven't seen that for over a year.
• 17:03
  Speaker 4: And then the unrealized losses are continued to burn down.
• 17:07
  Speaker 4: So BIGS are a really good standing on that front.
• 17:10
  Speaker 4: We think that risk is over at this point.
• 17:14
  Speaker 2: All right, Herman, thanks so much. Appreciated as always, Herman
• 17:16
  Speaker 2: chand senior analyst covers all the US banks. I'm going
• 17:18
  Speaker 2: to get you another associate, dude, like a couple of
• 17:20
  Speaker 2: phone calls, covers like a million different banks and gets
• 17:23
  Speaker 2: like half a minute.
• 17:24
  Speaker 7: Just add another sector to speet exactly.
• 17:26
  Speaker 2: Exactly, so I'll make a few phone calls. I know
• 17:28
  Speaker 2: a guy. So there you go. We got some the
• 17:30
  Speaker 2: banks reporting some pretty decent numbers. I was just going
• 17:32
  Speaker 2: to keep Corp, you know, on a trailing twelve month
• 17:35
  Speaker 2: basis up about fifty percent of the stocks had a
• 17:38
  Speaker 2: nice run, and I see similar type returns for some
• 17:40
  Speaker 2: other I mean citizens on a trailing twelve month basis
• 17:44
  Speaker 2: that stocks of eighty percent. So some pretty nice performance
• 17:47
  Speaker 2: coming out of the financials here. So that's good to see.
• 17:50
  Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.
• 17:57
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 18:01
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• 18:07
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• 18:11
  Speaker 2: All right, let's check out what's happening with Madison Air.
• 18:13
  Speaker 2: Matthew Griffin Bloomberg News Joints is here. Matthew talk to
• 18:16
  Speaker 2: us about Madison Air and this IPO, big big number.
• 18:20
  Speaker 3: Yes, well, Paul, I know you said this isn't an
• 18:22
  Speaker 3: AI IPO, and that is true, but there is an AI.
• 18:26
  Speaker 7: Connection sure of course.
• 18:28
  Speaker 3: So this is a company in the industrial sector. They
• 18:32
  Speaker 3: sell they're sort of specialized HVAC so cooling systems, ventilation systems,
• 18:38
  Speaker 3: things like that. A lot of their business is to
• 18:40
  Speaker 3: commercial industries and so data centers are a part of that.
• 18:45
  Speaker 3: It's something that comes up in their pitch to investors,
• 18:49
  Speaker 3: and it's something that has come up repeatedly in my
• 18:51
  Speaker 3: conversations with investors as a reason this company has gotten
• 18:55
  Speaker 3: the valuation that it has and the reason it's been
• 18:58
  Speaker 3: able again to raise more than two point two billion dollars,
• 19:01
  Speaker 3: the biggest industrial IPO here in the US since nineteen
• 19:03
  Speaker 3: ninety nine.
• 19:04
  Speaker 6: So that's interesting because it's an industrial company, but it's
• 19:07
  Speaker 6: got that connection to data centers. So it's kind of
• 19:09
  Speaker 6: straddling both worlds, the high tech world and the growth
• 19:12
  Speaker 6: that we get from AI and data centers, but also
• 19:16
  Speaker 6: the fact that it's a real business that generates real
• 19:19
  Speaker 6: cash flow and is profitable, and people like that in
• 19:23
  Speaker 6: this kind of environment.
• 19:24
  Speaker 3: Yes, and that's something again that has come up with
• 19:27
  Speaker 3: investors is that this is sort of a picks and
• 19:29
  Speaker 3: shovels AI play. So, you know, think about the last
• 19:32
  Speaker 3: few months, the really choppy trading we've seen in companies
• 19:36
  Speaker 3: like Microsoft maybe rebounding a bit now, but names that
• 19:39
  Speaker 3: are trying to monetize AI directly. But the companies that
• 19:42
  Speaker 3: are selling to those companies, whether it's semiconductors, whether it's
• 19:46
  Speaker 3: AI compute, whether it's the physical products that go into
• 19:50
  Speaker 3: the data centers, may be seen as a little bit
• 19:52
  Speaker 3: safer from investors because you don't have to know exactly
• 19:55
  Speaker 3: what AI tools we're going to end up using. You
• 19:57
  Speaker 3: just have to trust in this idea that we're at
• 20:00
  Speaker 3: the beginning of a real boom here.
• 20:02
  Speaker 2: So the company saying in some of their remarks here
• 20:06
  Speaker 2: that they think the a lot of stuff is driving
• 20:08
  Speaker 2: growth for specialized air systems, like restoring, advanced manufacturing, data
• 20:14
  Speaker 2: center growth, all that kind of stuff. They think this
• 20:17
  Speaker 2: market's going to grow.
• 20:18
  Speaker 3: Yes, and yeah, so this is a a play not
• 20:23
  Speaker 3: just on data centers, but as you said, for example,
• 20:26
  Speaker 3: advanced manufacturing. They sell to you know, basically all all
• 20:32
  Speaker 3: kinds of commercial commercial plants that you can imagine. I
• 20:38
  Speaker 3: think it will be interesting to watch that reshoring piece
• 20:41
  Speaker 3: in particular, because that's something that you know, Trump has
• 20:43
  Speaker 3: set out to do President Trump with his tariffs. That
• 20:47
  Speaker 3: being said, you had some peer companies like Modine and
• 20:51
  Speaker 3: they sell cooling systems for data centers. They fell six
• 20:54
  Speaker 3: point one percent yesterday because of concerns about some changes
• 20:58
  Speaker 3: to the tariffs on metal. And I think it will
• 21:01
  Speaker 3: be interesting to see how investors process this when this
• 21:05
  Speaker 3: company goes public, what their level of exposure is there.
• 21:08
  Speaker 6: My understanding of Madison Era is that it was formed
• 21:11
  Speaker 6: through a series of acquisitions I believe thirteen of them
• 21:14
  Speaker 6: since twenty seventeen.
• 21:15
  Speaker 7: So a lot of them. A lot of investors talk.
• 21:17
  Speaker 6: About this being kind of a roll up of ventilation
• 21:19
  Speaker 6: infiltration companies. Is the indication that this is a strategy
• 21:24
  Speaker 6: Medicine Air will continue to build on as a publicly
• 21:26
  Speaker 6: traded company.
• 21:27
  Speaker 3: Well, so, yes, I do think this is sort of
• 21:31
  Speaker 3: their broad their broad strategy, and it's sort of the
• 21:36
  Speaker 3: broad strategy of Madison Industries, which is their parent company.
• 21:41
  Speaker 3: You know again, something that I've heard from investors is
• 21:45
  Speaker 3: that this is kind of a target rich environment. There
• 21:48
  Speaker 3: are a lot of PE backed companies that are are
• 21:52
  Speaker 3: still private in the sort of data center product space
• 21:56
  Speaker 3: in HVAC in particular. And now you've got the IPO
• 21:59
  Speaker 3: mar opening up a little bit, You've got hunger from investors,
• 22:03
  Speaker 3: so some of them going public, but also probably a
• 22:07
  Speaker 3: lot of potential targets for a company like this.
• 22:10
  Speaker 2: Interesting here and you're reporting the company's founder, Larry gyees
• 22:14
  Speaker 2: ergeis he's going to set to control the company through
• 22:18
  Speaker 2: super voting stock.
• 22:19
  Speaker 7: An industrial company with super voting.
• 22:21
  Speaker 2: Stock, Isn't that interesting? We've seen it in media and
• 22:23
  Speaker 2: tech companies or the decades, and now even some of
• 22:26
  Speaker 2: the tech companies. Yeah, this is not meta. Was that
• 22:29
  Speaker 2: an issue at all for shareholders?
• 22:31
  Speaker 3: It's not something that came up. I mean again, he
• 22:34
  Speaker 3: is the founder of this the larger company, Madison Industries.
• 22:38
  Speaker 3: They're sort of a multi industrial company, and the structure here,
• 22:42
  Speaker 3: you know, you can you can think of this as
• 22:43
  Speaker 3: still being a subsidiary in a sense of Madison Industries,
• 22:48
  Speaker 3: because I think it's Geese will actually control the company
• 22:51
  Speaker 3: through his company Madison industry. So not to over complicate
• 22:56
  Speaker 3: things there, but you know, you have this larger company
• 22:59
  Speaker 3: that has a track record of success, and I think
• 23:02
  Speaker 3: investors actually like that connection there. Now again, we'll see
• 23:06
  Speaker 3: what happens when they go public.
• 23:07
  Speaker 6: We've talked a lot about the commercial business data centers,
• 23:10
  Speaker 6: manufacturing that exposure to that kind of growth segment very quickly.
• 23:15
  Speaker 7: There is a residential part of this business, isn't there, Yes, and.
• 23:19
  Speaker 3: That it's about a third of their business. It's an
• 23:22
  Speaker 3: area that's been a problem for some publicly traded peers
• 23:24
  Speaker 3: like Carrier. Now this company is more specialized. It's not
• 23:28
  Speaker 3: like basic home HVAC systems, So maybe that'll win the
• 23:32
  Speaker 3: more points with investors.
• 23:33
  Speaker 2: All Right, very good, interesting story, matt Matthew Griffin, thank
• 23:37
  Speaker 2: you very much. Appreciate that Madison are going public today.
• 23:41
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