Latest / Bloomberg Intelligence / BI Weekend: Nvidia Earnings, Paramount Saga

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BI Weekend: Nvidia Earnings, Paramount Saga · Bloomberg Intelligence

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence
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Speaker 1: Bloomberg Intelligence with Alex Steinehl and Paul Sweeney on Bloomberg Radio.
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Speaker 5: I'm Paul Sweeney and I'm Emi Graffeo filling in for
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Speaker 5: Alex Steele.
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Speaker 2: On today's Bloomberg Intelligence Show. We dig inside the big
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Speaker 5: Each and every week, we provide in depth research and
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Speaker 5: hundred and thirty industries our analysts cover worldwide.
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Speaker 2: Today, we'll discuss how patients can now get Eli Lilly's
1:02
Speaker 2: blockbuster weight loss rug at nearly fifty percent discount plus.
1:05
Speaker 5: We'll look at a slew of US retail earnings that
1:07
Speaker 5: are painting a mixed picture of the consumer.
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Speaker 2: But first we dive into the earning from AI giant
1:12
Speaker 2: n Vidia. This week, the chipmaker gave a revenue forecast
1:15
Speaker 2: that fell short of some of the most optimistic analyst expectations.
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Speaker 5: The outlook threatens to tamp down an AI frenzy that
1:21
Speaker 5: has transformed in Vidia into the world's second most valuable company.
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Speaker 2: For more, Emily and I were joined by kun John Sobani,
1:27
Speaker 2: Bloomberg Intelligence senior semiconductor analysts.
1:30
Speaker 5: We first asked Koon John for his take on the
1:32
Speaker 5: company's results.
1:33
Speaker 4: Look, this not enough negatives.
1:35
Speaker 6: Fundamentally, they are a victim of their own recent success
1:39
Speaker 6: and strength and really unrealistic expectations.
1:42
Speaker 5: I'm wondering, this is a company where a lot of
1:45
Speaker 5: their their customers are highly concentrated. Something like forty percent
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Speaker 5: of the customer base is just a few big tech companies.
1:53
Speaker 5: What are the risks associated with that?
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Speaker 6: I mean, the concentration has been a significant risk. It's
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Speaker 6: sort of a double eds. You know, by the function
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Speaker 6: of spending. These customers are the ones who really spend
2:06
Speaker 6: major I app capex dollars, So you do want them
2:09
Speaker 6: to be your biggest customers. Because that's who are really
2:12
Speaker 6: creating the market. At the same time, we have seen
2:15
Speaker 6: signs like over the last two quarters, the cloud players
2:18
Speaker 6: make up about forty five percent of its data center revenue,
2:22
Speaker 6: which is down from its peak of mid fifty percent
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Speaker 6: over last year, so that's a good sign. Over the
2:27
Speaker 6: last few quarters, we have seen enterprises and the consumer
2:30
Speaker 6: internet and vertical companies growing faster for NVDA data center
2:35
Speaker 6: revenues compared to the cloud revenues for NVDA data center,
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Speaker 6: so that's again a good sign. Another third sign that
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Speaker 6: shows that ditaversification is happening and that risk is easy
2:45
Speaker 6: is what we have seen in front of geographical demand perspective.
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Speaker 6: So over the last few quarters, we have seen rest
2:51
Speaker 6: of the world outside of US continue to sustainably keep
2:55
Speaker 6: growing sequentially. In fact, this quarter was the first time
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Speaker 6: we ever saw US decline slightly quarter work quarter.
3:02
Speaker 2: So Kunjan, can those new types, new verticals of customers,
3:05
Speaker 2: can they offset what might be slowing demand from the
3:09
Speaker 2: Amazons of the world, the Googles of the world who
3:12
Speaker 2: are developing their own chips.
3:13
Speaker 6: So we have not seen signs of slowing demand from
3:17
Speaker 6: the Amazons and Googles of the world. You know, when
3:19
Speaker 6: you look at quarter to quarter things can look lumpy,
3:22
Speaker 6: but from a year and perspective, annual perspective, we are
3:26
Speaker 6: not seeing slowing demand. In fact, when we look at
3:28
Speaker 6: these earning seasons, all of these customers beat their capex
3:32
Speaker 6: estimation and guided for more capex spending, most of it
3:35
Speaker 6: going to a Yeah, most of it going to in media. Yes,
3:38
Speaker 6: the risk is there of these customers using their own chips,
3:41
Speaker 6: but that's more of a out year risk. They still
3:44
Speaker 6: do are not slowing down or stopping purchasing in media chips.
3:48
Speaker 5: What do investors need to know about the Blackwell processor lineup?
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Speaker 5: Ian King of Bloomberg News said this is in Nvidia's
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Speaker 5: next big cash cow exactly.
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Speaker 6: I mean, from our perspective, the biggest question or the
4:00
Speaker 6: risk going into the earnings was what's happening with the
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Speaker 6: Blackwell delay? Is it going to ramp? And if so?
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Speaker 6: When I think the comment that Jensen made about seven
4:09
Speaker 6: billion dollars shipment in their fiscal four Q should put
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Speaker 6: a lid on these uncertainty around Blackwell. And yes, Blackwell
4:17
Speaker 6: is supposed to be the next growth driver. Specifically, most
4:21
Speaker 6: of the twenty twenty five growth is hinged on Blackwell's success.
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Speaker 2: Layout for US kind of how the competitive environment looks
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Speaker 2: at their Kunjan. I'm thinking about advanced micro devices, broad coom,
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Speaker 2: maybe to Qualcom to less extent Intel. I guess where
4:34
Speaker 2: are all these competitors here? Why can't they do this stuff?
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Speaker 6: I mean, and Media has almost more than a decade
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Speaker 6: of R and D behind them in this arena. Right,
4:43
Speaker 6: they are the ones who, for the most part, invented GPUs.
4:48
Speaker 6: They have been working on GPUs for like I said,
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Speaker 6: investing in it more than a decade. These other companies
4:54
Speaker 6: that we talked about I have not been investing in
4:56
Speaker 6: this area. So it's not as easy to come in
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Speaker 6: and immediately replace someone who has been ahead of you
5:03
Speaker 6: by multi years. Second, there's a lot other entries to barrier.
5:07
Speaker 6: It's not just about creating comparable chips, their software, system
5:11
Speaker 6: their systems. They're not a chip solution provider anymore. They
5:15
Speaker 6: are a system solution provider. So you don't need a
5:17
Speaker 6: comparable chip. You also need the software, you need the ecosystem,
5:20
Speaker 6: you need the vertical integration and the system integration capabilities.
5:24
Speaker 6: At the same time, they are not just sitting right,
5:27
Speaker 6: they are running much faster than they have in the past.
5:29
Speaker 6: So it's not just about catching up to in Media,
5:32
Speaker 6: which is already two plus years ahead of its closest competitor.
5:35
Speaker 6: It's also trying to catch up when they are even
5:37
Speaker 6: running faster. One example of that is they are now
5:40
Speaker 6: launching new products at a cadence of twelve months. This
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Speaker 6: is unprecedented in the semi conductor world for this complex technology.
5:47
Speaker 6: Usually you see eighteen to twenty four months of a
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Speaker 6: product lon cycle.
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Speaker 2: How about valuation here again, you know, you look at
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Speaker 2: it and it's like seventy times trailing forty five times
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Speaker 2: this year, is thirty times next year? Is this a
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Speaker 2: stock that real, realistically with a straight face you can
6:01
Speaker 2: say to clients is earning its way into its multiple.
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Speaker 6: Also, we look at forward looking multiples and when you
6:07
Speaker 6: still compare it today compared to most of its peers, right,
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Speaker 6: it's still growing faster than most of its peers, even
6:15
Speaker 6: at this large scale, which is very important that people
6:17
Speaker 6: forget when you look at other fundamental metrics, the gross margin,
6:21
Speaker 6: the earnings growth, the free cashual generation still top of
6:25
Speaker 6: the list. So I mean that does demand a certain
6:28
Speaker 6: premium versus its peers, right, And when you look at
6:30
Speaker 6: the other air peers. It doesn't seem that expensive on
6:33
Speaker 6: a relative basis.
6:35
Speaker 5: Give us some final thoughts on is this a market
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Speaker 5: that is only going to be powered by in video
6:40
Speaker 5: or are we going to see more trading days The tech
6:42
Speaker 5: trade is kind of you know, in the green without Invidia.
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Speaker 1: I would say both.
6:46
Speaker 6: I mean you have to really separate out right. We
6:48
Speaker 6: think if if there is fundamental weakness or concern coming
6:52
Speaker 6: out of in media, which did not happen, by the way,
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Speaker 6: we think there will be a broader impact to the market.
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Speaker 6: But in the absence of that, right, there was no
7:00
Speaker 6: real concerns, There was no real flag risks that were
7:04
Speaker 6: macro risks outlined here that the demand is slowing, the
7:07
Speaker 6: spending is slowing. So I believe until and unless we
7:10
Speaker 6: don't see those risks come out, the impact should be
7:13
Speaker 6: limited to Invidia. But when, if, and when we do
7:16
Speaker 6: see those come out, it could spread across.
7:18
Speaker 2: Thanks to Kunjhan Sobani, Bloomberg Intelligence senior semiconductor analysts.
7:22
Speaker 5: We move now to the media space.
7:24
Speaker 2: Pretty sure, David Ellison Skydance Media looks set to become
7:27
Speaker 2: the new owner of Paramount Global.
7:28
Speaker 5: That's after seacrem air. Edgar Bronform Jr. Dropped his bid
7:32
Speaker 5: for Paramount this week. Paramount said it now expects to
7:35
Speaker 5: complete a deal with sky Dance in the first half
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Speaker 5: of twenty twenty five.
7:38
Speaker 2: For More and All This, host Alex Steele and Bailly
7:40
Speaker 2: Lipschaltz were joined by Keitha rung Anathan Bloomberg intelligence analyst
7:43
Speaker 2: on US media.
7:44
Speaker 5: They first asked Etha for her take on the latest news.
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Speaker 7: This one's been a tough one, right, It's not over
7:50
Speaker 7: until it's over. I think Skydance does seem to be,
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Speaker 7: you know, the only bidding party here for Paramount, and
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Speaker 7: you know, the Edgar Braffman bid, and you know, we
8:02
Speaker 7: were talking about this last week, Alex. It was really
8:05
Speaker 7: a little bit of a head scratcher because they made
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Speaker 7: that eleventh hour move. He cobbled together something like twenty
8:10
Speaker 7: outside investors and then when you know, kind of push
8:13
Speaker 7: came to shove, he really couldn't find the equity financing
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Speaker 7: required to back his six billion dollar offer.
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Speaker 8: Am I reading too much into it to question why
8:23
Speaker 8: the eleventh hour offer, Like if if it seemed like
8:27
Speaker 8: there wasn't enough time early, enough time, and you're trying
8:29
Speaker 8: to find people and get funding. It kind of I.
8:32
Speaker 7: Don't know, Yeah, I think, you know, a couple of
8:35
Speaker 7: different things. Maybe he had difficulty kind of finding all
8:39
Speaker 7: the different parties interested. Obviously he didn't you know, there
8:43
Speaker 7: was a ghost shop period that was a forty five
8:45
Speaker 7: day period and he literally submitted it on August twentieth.
8:49
Speaker 7: Then August twenty first was the end of that forty
8:51
Speaker 7: five day go shop period. One could argue that maybe
8:53
Speaker 7: he didn't want to, you know, kind of show his
8:55
Speaker 7: hand too early so that there, you know, would be
8:58
Speaker 7: other parties kind of jumping in. But at the end
9:00
Speaker 7: of the day, you know, he obviously does not have
9:03
Speaker 7: the financial firepower of the Allison family, and that's something
9:07
Speaker 7: I think investors are going to have to come to
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Speaker 7: terms with.
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Speaker 3: So all right, let's just walk it forward. You get Skuidance,
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Speaker 3: gets paramount, et cetera. There were some reports that maybe
9:15
Speaker 3: some of the TV networks I'm assuming Local would be
9:18
Speaker 3: spun off or sold, etc. What are we expecting of
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Speaker 3: that sort to unfold?
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Speaker 7: So they right now have three co CEOs and this
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Speaker 7: kind of structure, this temporary structure, is going to continue
9:28
Speaker 7: till this Guy Dance deal closes, which might happen sometime
9:31
Speaker 7: towards the latter half of twenty twenty five. Until then,
9:35
Speaker 7: what they're really trying to do is number one is
9:37
Speaker 7: make streaming profitable. They already did do that in the
9:41
Speaker 7: second quarter. So they're really kind of cutting down on
9:44
Speaker 7: marketing spend, they're cutting down on content expenses, They're doing
9:47
Speaker 7: everything they can to write the ship. They're also kind
9:50
Speaker 7: of trying to undertake cost cuts across the whole enterprise
9:54
Speaker 7: and get rid of non core assets. So the news
9:57
Speaker 7: that we got about them looking to divest some of
9:59
Speaker 7: their low local TV stations exactly kind of goes to
10:02
Speaker 7: that strategy. You know, they could potentially end up with
10:05
Speaker 7: about five hundred million, I mean about half a billion
10:08
Speaker 7: or a billion dollars for those you know, TV stations. Again,
10:11
Speaker 7: that's going to help them pay down debt. And debt
10:14
Speaker 7: has been a huge problem for Paramount. They have almost
10:18
Speaker 7: about fourteen and a half billion dollars in debt, and
10:21
Speaker 7: that has really kind of complicated the whole story because
10:24
Speaker 7: it you know, they have low ebit, low free cash flow,
10:28
Speaker 7: and then very high debt.
10:29
Speaker 8: And what does the path forward look like. I'm just
10:31
Speaker 8: looking through your latest note kind of looking at strengthening
10:35
Speaker 8: the balance sheet. To your point, more than fourteen a
10:36
Speaker 8: half billion in debt. Market cap is seven point six
10:39
Speaker 8: billion dollars, so you never really want to see numbers
10:41
Speaker 8: that stretched. But what does Ellison's d pockets bring to
10:44
Speaker 8: the table, Like, how does this potentially revamp Paramount if
10:48
Speaker 8: at all?
10:50
Speaker 7: Absolutely, that's that's a great point, Bailey. So I think
10:53
Speaker 7: the main reason that Ellison has been chasing after Paramount
10:56
Speaker 7: for all these months is really his interest in kind
10:58
Speaker 7: of getting his hands on the studio. So he does
11:01
Speaker 7: have a long history with Paramount. They have, you know,
11:04
Speaker 7: the Ellisons have been a co financer on many of
11:07
Speaker 7: the Paramount TV and film projects, most notably a lot
11:11
Speaker 7: of the Tom Cruise movies. So they do kind of
11:14
Speaker 7: know how, you know, that business works. They have a
11:16
Speaker 7: lot of expertise, so they are going to kind of
11:19
Speaker 7: double down on the Paramount studio business. The theatrical business
11:23
Speaker 7: is rebounding nicely, so I think it does make sense
11:27
Speaker 7: for them. And historically, if you just look at Paramount,
11:29
Speaker 7: this is you know, the studio has always kind of
11:31
Speaker 7: been a step child. So it's nice that it's going
11:33
Speaker 7: to now come into focus, and then along with that,
11:36
Speaker 7: you have almost one thousand person animation team that Skuydance
11:40
Speaker 7: is going to bring to Paramount, so really kind of
11:43
Speaker 7: doubling down on the animation business. And this is important
11:46
Speaker 7: because we see studios kind of going deeper and deeper
11:49
Speaker 7: into animation. This is animation is one of the most
11:52
Speaker 7: profitable genres across the whole movie space, so it makes
11:56
Speaker 7: a lot of sense for them to get into that
11:58
Speaker 7: in a bigger way because they can really kind of
12:00
Speaker 7: enhance the profitability of the studio business as a whole.
12:04
Speaker 2: Our Thanks to Githa Ranganathan, Bloomberg Intelligence analyst on US Media.
12:08
Speaker 5: Coming up a conversation with the executive director of the
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Speaker 5: Port of Los Angeles on cargo volumes and the shipping industry.
12:14
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Speaker 5: I'm Paul Sweeney and I'm Emily Graffeo. This is Bloomberg.
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Speaker 5: I'm Paul Sweeney and I'm Emily Graffeo filling in for
12:49
Speaker 5: Alex Steele.
12:50
Speaker 2: We move now to the biotech space. This week we
12:53
Speaker 2: heard the pharmaceutical company Eli Lilly is selling vials of
12:55
Speaker 2: its blockbuster weight loss drug to patients at a fifty
12:58
Speaker 2: percent discount to its shots.
13:00
Speaker 5: Patients with a prescription for Zetbound can now purchase a
13:03
Speaker 5: month's supply of single use vials through Lily's direct to
13:07
Speaker 5: consumer site.
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Speaker 2: This is being done to help Eli Lily overcomes supply
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Speaker 2: shortages of its widely popular shots. For more, hosts Alex
13:13
Speaker 2: Stale and Billy Lipschutz were joined by Michael Shaw, Bloomberg
13:16
Speaker 2: Intelligence Senior Pharma analyst.
13:19
Speaker 5: They first asked Michael why it's easier for Eli Lilly
13:21
Speaker 5: to produce vials than actual shots.
13:24
Speaker 4: They're providing a valve for relation. It's something that they've
13:26
Speaker 4: talked about, you know, for a while now on their calls.
13:29
Speaker 9: Now.
13:29
Speaker 4: The reason why these are easier to produce is, you know,
13:32
Speaker 4: the fill and finished capacity, so the capacity needed to
13:34
Speaker 4: actually put the drug in the pens and the capacity
13:37
Speaker 4: needed to manufacture at the pens of the subcutaneous ejection.
13:41
Speaker 4: So overall, I think, you know, the move is you
13:42
Speaker 4: know positive for Lily clearly broadens access or patients access
13:48
Speaker 4: you know, to zet bound and also from you know,
13:52
Speaker 4: compounding pharmacy standpoint. The fact that they improved supply means
13:57
Speaker 4: it could you know, possibly combat you know, competition from
14:01
Speaker 4: you know, companies such as him, Hymns and Hers.
14:04
Speaker 8: Yeah, Lily not so subtly saying that they want to
14:06
Speaker 8: aim to protect patients from quote counterfeit, fake unsafe for
14:09
Speaker 8: untested knockoffs. So how does that impact kind of the
14:14
Speaker 8: business and demand If we're seeing a cheaper version being
14:17
Speaker 8: sold and maybe trying to court some of those Hymns
14:20
Speaker 8: and Hers GLP one users, how does that impact kind
14:23
Speaker 8: of the total addressable market and expectations for sales of
14:26
Speaker 8: zepp out.
14:27
Speaker 4: Well, I think if there's you know, if there's a
14:29
Speaker 4: branded vowel formulation out there and there's obviously guarantees around
14:35
Speaker 4: kind of purity, et cetera, I think that's going to
14:37
Speaker 4: be the preferred choice. The fact that you're introducing these
14:41
Speaker 4: valves into the market, would suggest that, you know, some
14:44
Speaker 4: of that supply burden and supply shortage which is needed
14:49
Speaker 4: for a compounding pharmacy to produce a drug that is
14:51
Speaker 4: on pattern, you know, some of that will be alleviated there.
14:55
Speaker 4: So that's kind of why we think it's positive for Lily.
14:58
Speaker 4: As to whether you know, come to like him and
15:00
Speaker 4: hers will continue producing you know, their versions of the
15:05
Speaker 4: GEO beyond ones, I mean, that remains to be seen.
15:08
Speaker 4: But I imagine if they do, you know, Lily would
15:11
Speaker 4: you know, probably challenge.
15:12
Speaker 3: It when people then do their own shots, like administer it,
15:17
Speaker 3: Like is there a risk in that? Like, well, what
15:19
Speaker 3: what kind of uptake are we expecting from that? Because
15:21
Speaker 3: I would be scared to do it. But maybe that's
15:23
Speaker 3: just me.
15:24
Speaker 4: I mean, I think judging by you know, what we
15:27
Speaker 4: saw for uptake of these compounded drugs, there's clearly a
15:30
Speaker 4: appetite for injectable injections. Now, you know, we look to
15:34
Speaker 4: the diabetes market. You know, some of the incidents used
15:37
Speaker 4: to be injections, So I mean, I think it's not
15:41
Speaker 4: I mean, there's clearly kind of an increased kind of
15:44
Speaker 4: dosing burden associated within these injections, so they're probably not
15:48
Speaker 4: going to be suitable for all, but you know, I
15:50
Speaker 4: think there is going to be an appetite for it.
15:53
Speaker 8: What does this mean for the competitive landscape? So you
15:56
Speaker 8: have Lily, you have Novo. To your point, you have
15:59
Speaker 8: hymns and hers like, is this going to create a
16:02
Speaker 8: pricing war? Am I reading too much into that now?
16:05
Speaker 4: I mean when we look at the I mean, the
16:07
Speaker 4: headlines had fifty percent you know, discount, but we need
16:11
Speaker 4: to remember that, you know, on a net price basis,
16:14
Speaker 4: so you know, after taking account all the rebates and discounts,
16:17
Speaker 4: you know, the pricing is probably you know, fairly similar
16:21
Speaker 4: to the current net prices that we're seeing now at
16:24
Speaker 4: the moment. You know, it's an underpenetrated market. You know,
16:28
Speaker 4: there's massive demand out there, there's tight supply, So I
16:32
Speaker 4: don't think it's gonna you know, change too much in
16:34
Speaker 4: terms of the dynamics between you know, Novo and Lily.
16:37
Speaker 4: I think I think prescribing decisions are you know, less
16:41
Speaker 4: about kind of the profiles of the drug at the
16:44
Speaker 4: moment and more about you know, what is ensured, what
16:46
Speaker 4: can people get their hands on? So near term, I
16:49
Speaker 4: don't see you know that that changing from a lily perspective.
16:54
Speaker 4: You know, as they ramp up supply over the over
16:56
Speaker 4: the midterm of their you know, their pens. You could
16:59
Speaker 4: put GC patients switching from the injectable onto the pen
17:04
Speaker 4: as in when that supply comes on board.
17:06
Speaker 6: All right.
17:07
Speaker 2: Thanks to Michael Schap, Bloomberg Intelligence Senior Parma biotech analyst.
17:10
Speaker 5: We move next to one of the world's busiest seaports
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Speaker 5: and a leading gateway for international trade in North America,
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Speaker 5: the Port of Los Angeles.
17:18
Speaker 2: This week, co hosts Alex Steele and I were joined
17:20
Speaker 2: by Geen Soroka, Executive Director of the Port of Los Angeles.
17:23
Speaker 2: We discussed his forecast for cargo volumes, the shipping industry,
17:26
Speaker 2: and investing in ports moving forward, and we began by
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Speaker 2: asking Gene what the traffic is at the Port of LA.
17:32
Speaker 10: We're up eighteen percent year on year off of very
17:35
Speaker 10: modest comps, but we just crossed the five hundred thousand
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Speaker 10: container unit mark last month and it's only the fourth
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Speaker 10: time in our history we've had more than half a
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Speaker 10: million imports coming through Los Angeles. Big number for US,
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Speaker 10: and it continues the trend that we've seen thus far
17:52
Speaker 10: this year. In addition, exports are now up fourteen consecutive
17:56
Speaker 10: months year on year, So the volume as a whole
17:59
Speaker 10: is really great, based mainly on a strong economy and
18:03
Speaker 10: then some geopolitical issues around around the world that I'm
18:07
Speaker 10: sure we'll talk about.
18:08
Speaker 3: Yeah, So, Gin, I'm curious how much are your customers
18:11
Speaker 3: talking about the geopolitics abroad but also here in the
18:15
Speaker 3: US Anecdotally, I keep hearing that certain companies are just
18:19
Speaker 3: holding back on investments until we get clarity on who's
18:22
Speaker 3: going to be in the White House. Are you seeing
18:24
Speaker 3: any of that.
18:26
Speaker 10: In just about every conversation, alex It is an election
18:29
Speaker 10: year and folks are looking to see and try to
18:32
Speaker 10: hedge as to what type of policies will be in
18:35
Speaker 10: place after inauguration.
18:36
Speaker 11: You've got a protracted labor.
18:38
Speaker 10: Negotiation on the East Coast with the Dock Workers and
18:41
Speaker 10: Employers Association that's coming up for expiry at the end
18:44
Speaker 10: of September. The Panama Canal drought issues have been in
18:48
Speaker 10: the news for well over a year and a half,
18:50
Speaker 10: and the ongoing security concerns in the Red Sea have
18:53
Speaker 10: stymied crossings at the Suez Canal for more than a
18:57
Speaker 10: year as well. All of that put together fractionally, you
19:01
Speaker 10: see cargo coming to the West coast of the United
19:03
Speaker 10: States and specifically Los Angeles in addition to the strength
19:07
Speaker 10: of that economy.
19:07
Speaker 11: That shows where the numbers are going.
19:09
Speaker 2: Heyjean, just last week Bloomberg News published a really in
19:13
Speaker 2: depth big Take story. Now look at your world ports
19:16
Speaker 2: around seaports around the world and how some governments are
19:19
Speaker 2: using them as really strategic tools here because they're becoming
19:23
Speaker 2: so important for global trade. Just for the US, do
19:26
Speaker 2: you feel like our ports are where they need to
19:29
Speaker 2: be in terms of investments capacity or does the US,
19:34
Speaker 2: whether it's a public private partnership, need to invest more.
19:39
Speaker 10: We absolutely need to invest more. But beginning with the
19:43
Speaker 10: Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and
19:47
Speaker 10: now applications that are in front of the Environmental Protection Agency,
19:51
Speaker 10: we've seen a focus on ports over the last three
19:53
Speaker 10: and a half years here in the United States we
19:56
Speaker 10: haven't seen in a generation. We'd like to have this
20:00
Speaker 10: type of federal investment budgeted annually. And I also know
20:04
Speaker 10: that the work here in California under Governor Gavin Newsom
20:07
Speaker 10: has the same bent paying attention to these ports, investing
20:11
Speaker 10: not only in the infrastructure, but digitalization as well as
20:15
Speaker 10: clean and green technologies. This has to continue. But I
20:19
Speaker 10: like the trajectory that we're on right now.
20:22
Speaker 3: Going back to what you were mentioning about customers talking
20:24
Speaker 3: about election uncertainty, what's your best guess as to what
20:28
Speaker 3: happens after that. I'm trying to get a handle on, Like, Okay,
20:31
Speaker 3: now I know who wins the White House. Are we
20:32
Speaker 3: going to see a flood of money coming in like
20:34
Speaker 3: a flood of buying or is it just going to
20:37
Speaker 3: be incremental?
20:39
Speaker 11: Well, Alex take away the politics.
20:42
Speaker 10: The presumptive Republican nominee and now Republican nominee has said
20:46
Speaker 10: he wants to put a ten percent tariff on all
20:48
Speaker 10: three trillion dollars worth of imports that come to the
20:52
Speaker 10: United States, sixty percent on those emanating from China, and
20:56
Speaker 10: potentially sixty percent on automobiles and other products coming out
21:00
Speaker 10: in Mexico. That would change the landscape here at the
21:02
Speaker 10: Port of Los Angeles forever, and it would create inflation.
21:07
Speaker 11: On the Democratic side.
21:08
Speaker 10: What we've seen is a continuation of this teriff regime
21:12
Speaker 10: and get tough on China policy, but in very small
21:16
Speaker 10: targeted ways. What happens to investment after this has to
21:21
Speaker 10: revolve around international and trade policy. What are we going
21:25
Speaker 10: to do to stimulate not only the continuation of that
21:28
Speaker 10: government investment federal and state level, but how we can
21:31
Speaker 10: give confidence to the private sector to invest behind us.
21:35
Speaker 2: Gee, nobody has a better view of China than you.
21:38
Speaker 2: Guys in the Port of Los Angeles. Are the boats
21:41
Speaker 2: still coming? Are they loaded as much? Because there's real
21:44
Speaker 2: concern about the Chinese economy.
21:48
Speaker 10: Yeah, a couple things, Paul. When we concluded calendar year
21:51
Speaker 10: twenty twenty two, fifty seven percent of our business portfolio
21:56
Speaker 10: here in Los Angeles was China cargo, imports and exports.
22:00
Speaker 10: Right now it's about forty three percent. Yet we're still growing.
22:05
Speaker 10: We've been nimble enough here in Los Angeles to attract
22:07
Speaker 10: the cargo in Southeast and South Asia. There are more
22:10
Speaker 10: NonStop services being put in place by the shipping lines.
22:15
Speaker 11: Speed has always been.
22:17
Speaker 10: Our selling point with cargo coming from Asia and distributing
22:21
Speaker 10: throughout the country. We keep these NonStop services in place,
22:24
Speaker 10: that speed variable remains in our favor.
22:28
Speaker 3: What's your biggest problem right now, Gene, Like, what keeps
22:30
Speaker 3: you up at night?
22:31
Speaker 10: Well, looking across the board, making sure we keep our
22:34
Speaker 10: costs in place. And we do that with a relatively
22:37
Speaker 10: expensive landscape on how we move cargo. But more volume
22:41
Speaker 10: means our unit cost becomes much more competitive, and we're
22:44
Speaker 10: trending in that direction nicely. We've got a very complex
22:47
Speaker 10: labor landscape. Our dock workers have a contract for another
22:50
Speaker 10: five years, but it's the trucker's warehouses folks in it
22:54
Speaker 10: and manufacturing. We've got to keep trained up and moving
22:58
Speaker 10: with this economy. And then lastly along the regulatory environment.
23:01
Speaker 10: Got to make sure the clean air is a priority,
23:03
Speaker 10: but making sure that we're balanced, because every four containers
23:07
Speaker 10: here in Los Angeles creates a job.
23:10
Speaker 2: Interesting, So, Gin, you mentioned some of your partners there,
23:13
Speaker 2: whether that or at the docks, the warehouses, the transportation,
23:17
Speaker 2: the rails and trucks. How is that supply chain, how
23:20
Speaker 2: is that the logistic chain performing in your area these days?
23:25
Speaker 10: I look at the vital statistics every morning, and after
23:28
Speaker 10: just checking in with you all, I saw that they're
23:30
Speaker 10: at or better than where they were pre COVID, with
23:33
Speaker 10: one exception. Are on dock rail cargo sitting a little
23:37
Speaker 10: bit longer than I would like. We're working very closely
23:39
Speaker 10: with both the Union Pacific Railroad and BNSF to make
23:43
Speaker 10: sure we have railcars, engine power, and crewing to match
23:46
Speaker 10: this surgeon cargo that we have coming.
23:48
Speaker 11: Now.
23:49
Speaker 10: Nothing sinister is happening on the ground. Just need to
23:52
Speaker 10: keep that velocity going so the next ships, of which
23:55
Speaker 10: we have fifty six on the way from Asia, can
23:57
Speaker 10: be worked expeditiously by our long shore remembers and they
24:00
Speaker 10: gotten off into the American economy. And that's with all
24:04
Speaker 10: this data, Paul, we see these micro in many spikes
24:08
Speaker 10: or changes in the supply chain data, so we can
24:10
Speaker 10: act much quicker than we ever have before.
24:13
Speaker 5: Our thanks to Gene Soroka, executive director of the Port
24:15
Speaker 5: of Los Angeles. Coming up on the program, we'll discuss
24:18
Speaker 5: how the impact of a declining recount in the US
24:21
Speaker 5: is impacting oil production.
24:23
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing indepth
24:26
Speaker 2: research and data on two thousand companies and one hundred
24:28
Speaker 2: and thirty industries that can access Bloomberg Intelligence via BIGE
24:32
Speaker 2: on the terminal. I'm Paul Sweeney and.
24:33
Speaker 5: I'm Emily Grafeo.
24:34
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24:40
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24:44
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24:48
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24:54
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24:58
Speaker 5: I'm Paul Sweeney and I'm Grafo filling in for Alex Steele.
25:02
Speaker 2: We move next to retail and the health of the consumer.
25:04
Speaker 5: This week, we got earnings from retailers Coles, Abercrombie and
25:08
Speaker 5: Fitch and Nordstrom, among others.
25:10
Speaker 2: For more, guest hosts Michael Reagan and I were joined
25:12
Speaker 2: by Mary Ross Gilbert Bloomberg Intelligence Senior Equity Animals. Covering retail,
25:16
Speaker 2: we first asked Mary for her take on the most
25:18
Speaker 2: recent results.
25:19
Speaker 9: I would say mixed results coming out of retailers. So
25:22
Speaker 9: for example, on Coals, they missed on the sales line,
25:26
Speaker 9: so the comp sales came in down about five percent
25:30
Speaker 9: and analysts were expecting down two and a half percent.
25:33
Speaker 9: But the good news was that they beat on the
25:35
Speaker 9: bottom line and they raised their earnings guidance for the year,
25:39
Speaker 9: so they're now expecting something closer to two dollars whereas
25:42
Speaker 9: before they are expecting something less than a dollar eighty previously.
25:47
Speaker 9: So while that is good news, they do need to
25:50
Speaker 9: get the top line right sided. And with Tom Kingsbury
25:54
Speaker 9: as the CEO, and he has an amazing track record.
25:58
Speaker 9: He's the one who took Burlington from sort of a
26:02
Speaker 9: mall based type discount retailer to an off price, fast
26:07
Speaker 9: growing company, so there's a lot of faith in him.
26:11
Speaker 9: He's bringing in a new categories that so Fara business
26:14
Speaker 9: did well. It was up load teens on a comp
26:16
Speaker 9: basis with total beauty sales up forty five percent. But
26:21
Speaker 9: now we need conversion and yes there's headwinds from the consumer.
26:25
Speaker 9: So then if you take it over to Abercrombie on
26:27
Speaker 9: the other side of the picture, their customer base for
26:31
Speaker 9: both brands, Hollister and the Abercromby and Pitch brands, their
26:34
Speaker 9: household income is one hundred to one hundred and fifty thousand,
26:37
Speaker 9: not like Cohal's where you're under seventy five in household income,
26:40
Speaker 9: and so you really have to be very discerning. So
26:44
Speaker 9: an Abercromby is executing very very well and that explains
26:49
Speaker 9: why they had double digit increases in comp sales. The
26:52
Speaker 9: Abercrombie brand was up twenty one percent on a comp basis,
26:56
Speaker 9: and you had a fifteen percent increase on Hollister and
26:59
Speaker 9: that on top of double digit increases a year ago.
27:02
Speaker 9: So that's a company that's executing very well with just
27:06
Speaker 9: great results. And then Nordstrom is sort of in that
27:08
Speaker 9: similar category. The sales were a little lighter than consensus estimated,
27:13
Speaker 9: but they had strong full price sales. That's very encouraging
27:19
Speaker 9: and the fact that the business is actually generating positive
27:22
Speaker 9: sales something that we're not seeing really in department stores.
27:26
Speaker 12: You know, Mary, if I listen to everything you're saying
27:28
Speaker 12: from sort of a macro economics lens, I wonder if
27:32
Speaker 12: there's like a big theme to be taken away here,
27:35
Speaker 12: you know, excluding sort of the execution hits and misses
27:39
Speaker 12: from each company. But it sounds to me like, you know,
27:41
Speaker 12: those lower income consumers are struggling a little bit, the
27:45
Speaker 12: higher income consumers are still spending. I mean, is it
27:48
Speaker 12: is that simple takeaway? Is that too simplified or is
27:51
Speaker 12: that really kind of the story that we're is emerging
27:53
Speaker 12: from the earning season for retailers.
27:56
Speaker 9: Yeah, I think that's fair. And even you know, as
27:59
Speaker 9: we get up in to the higher income. They're also
28:02
Speaker 9: trying to save money too. I think that you saw
28:04
Speaker 9: that in the news out last week with walmartin Target,
28:07
Speaker 9: and so a lot of them are taking advantage of
28:09
Speaker 9: the better prices there, but that also keeps them in
28:12
Speaker 9: a good position to continue spending elsewhere, you know, so
28:17
Speaker 9: for things that are more desirable. So yes, I think
28:20
Speaker 9: clearly the lower income, lower middle income consumer and even
28:24
Speaker 9: middle income consumer is just having a hard time dealing
28:28
Speaker 9: with high food and energy prices and that's showing up
28:33
Speaker 9: in their very discerning spending. That's exactly what you're seeing, you.
28:37
Speaker 12: Know, Mary, I sent my youngest two kids off to
28:39
Speaker 12: the school back to school already, we started early in
28:42
Speaker 12: the touch in but it got me thinking about that
28:44
Speaker 12: whole that really important back to school shopping season, especially
28:47
Speaker 12: for you know, your Abercrombie's of the world. What's the
28:50
Speaker 12: outlook there, I mean, if you could put, you know,
28:52
Speaker 12: break out your crystal ball and tell us what the
28:55
Speaker 12: next quarter numbers are going to look like, do you think,
28:57
Speaker 12: you know, is there going to be some weakness because
28:59
Speaker 12: of all these shoes you're describing.
29:01
Speaker 9: Yeah, so it's a good question, I think, once again, well,
29:04
Speaker 9: we'll probably have some mixed results. But Abercromby is seeing
29:08
Speaker 9: very good reaction to some of the initial categories that
29:12
Speaker 9: they have. So for example, in Hollister, they've got their
29:15
Speaker 9: collegiate line that they've launched and it's more extended. It
29:19
Speaker 9: covers about thirty two universities. If you look at on
29:22
Speaker 9: the Abercrome beside, they have the NFL line by Abercrombie
29:27
Speaker 9: and they've had that this is the third year running now,
29:29
Speaker 9: but each year they extend it further and further because
29:32
Speaker 9: the demand is so strong and that's sort of part
29:35
Speaker 9: of their strategy. So we are seeing I think good
29:38
Speaker 9: results there now as we start to get more media
29:41
Speaker 9: coverage of the election uncertainty we have seen in past
29:45
Speaker 9: times around this election cycle where there is that uncertainty,
29:48
Speaker 9: it can sometimes have an impact on consumer spending, but generally,
29:53
Speaker 9: I think it's really going to come down to those
29:56
Speaker 9: that are executing and those that are skewing to more
30:02
Speaker 9: of a premium consumer or ones with greater discretionary income.
30:07
Speaker 5: Our thanks to Mary Ross Gilbert Bloomberg Intelligence senior equity
30:10
Speaker 5: analyst covering retail, we have.
30:12
Speaker 2: Something here at Bloomberg called Bloomberg New Energy Finance.
30:15
Speaker 5: The idea behind it is to provide data on commodities, power, transport, industries, buildings,
30:21
Speaker 5: and agriculture.
30:22
Speaker 2: Bn EF also talks about how businesses and governments can
30:25
Speaker 2: finance and navigate change as we transition to a green
30:28
Speaker 2: energy future.
30:28
Speaker 5: This week, we looked at US oil supply. There is
30:31
Speaker 5: a falling redcount and the question is whether we'll see
30:33
Speaker 5: falling oil production moving forward.
30:36
Speaker 2: For more, co host Alex Steele and I were joined
30:38
Speaker 2: by thy Lu bn EF global oil supply specialist. We
30:42
Speaker 2: first asked Ty to talk to us about the impact
30:45
Speaker 2: of a declining recount.
30:46
Speaker 13: I think the declining ricont in the US that we've
30:50
Speaker 13: seen it's not going to have that much that big
30:52
Speaker 13: over for the impact as it seems as much as
30:54
Speaker 13: the headline numbers suggests. And part of the reasons is because,
30:58
Speaker 13: like if shoot a catch the premium where we have
31:01
Speaker 13: like the biggest all production region in the US the
31:05
Speaker 13: world completions, it's only done about four and a half
31:08
Speaker 13: percent compared to the recount which is done about fifteen percent.
31:12
Speaker 13: And so and on top of that you have a
31:14
Speaker 13: lot of efficiency gains in the sector, so you are
31:17
Speaker 13: able to complete a lot more wells with much fewer
31:20
Speaker 13: freight crews across the industry. So I think the recont
31:23
Speaker 13: number could be a little bit misceding if you're focusing
31:26
Speaker 13: too much on that.
31:27
Speaker 2: So I'm SPA just just looking at your report here
31:30
Speaker 2: and seeing how production in the US continues to increase,
31:33
Speaker 2: but maybe at a slower rate.
31:36
Speaker 11: I don't know.
31:37
Speaker 2: I got WTI Coroyal seventy seven bucks. Why don't I
31:40
Speaker 2: drill some more? I can make money. I mean, it
31:41
Speaker 2: only costs those guys forty fifty bucks to get it
31:43
Speaker 2: out of the ground, right.
31:44
Speaker 13: Yeah, yeah, for sure.
31:45
Speaker 4: Yeah.
31:45
Speaker 13: So when we look at the bricks evens, especially in
31:48
Speaker 13: the Perman it's probably around in the low to mid
31:50
Speaker 13: forties for their Miden basin, and then for the Delrow
31:53
Speaker 13: basin it's probably even lower than that because they produce
31:55
Speaker 13: a lot more gas. But part of the reason is
31:57
Speaker 13: because the US all patch has really pivoted and transform
32:01
Speaker 13: itself in the past couple of years now. Before the pandemic,
32:06
Speaker 13: oil producers were very much focused on production growth. But
32:09
Speaker 13: after the pandemic, the industry has changed and now they're
32:12
Speaker 13: focusing on financial returns. In order to improve the financial returns,
32:17
Speaker 13: they have to become more efficient. So in the past
32:19
Speaker 13: few years you have seen a lot of cost cutting initiatives,
32:23
Speaker 13: a lot of optimizations on logistics and supply chains, a
32:26
Speaker 13: lot of investments in infrastructures. So the entire industry has
32:30
Speaker 13: become a lot more efficient in the past couple of years.
32:33
Speaker 13: And on top of that, they have also become a
32:35
Speaker 13: lot more resilient. And what that means is that nowadays
32:40
Speaker 13: the USR industry can produce a lot more oil with
32:43
Speaker 13: much lower capital investments compared to like just five years ago.
32:47
Speaker 5: Also, what are the.
32:48
Speaker 3: Cool things that oil companies are doing to extract more
32:51
Speaker 3: oil out of rock at the end of the day.
32:54
Speaker 3: I mean, I went to a conference but a year ago,
32:56
Speaker 3: and everyone was like, ooh, three mile laterals. And what
32:58
Speaker 3: that means is you basically drill pipe down and then
33:00
Speaker 3: you drill it across the rock basically lateral, and you
33:05
Speaker 3: fracture it. And the longer you go, in theory, the
33:08
Speaker 3: more rock you'll be able to access, and then in theory,
33:11
Speaker 3: the more oil you'll get out of that rock.
33:13
Speaker 11: Wow, is that too nerdy?
33:16
Speaker 12: No?
33:16
Speaker 3: Okay?
33:17
Speaker 7: Cool?
33:17
Speaker 2: I wonder that frackening is short for fracturing.
33:20
Speaker 4: Yes, I didn't know that good job.
33:22
Speaker 3: We learned things here at Boomberg Intelligence. So based on that,
33:26
Speaker 3: what are the cool technologies that are coming up that's
33:28
Speaker 3: going to enable even more oil to come out of
33:30
Speaker 3: the rock.
33:31
Speaker 13: Yeah, So during these longerleros is definitely like a big
33:34
Speaker 13: part of these efficiency gags because you're reducing a lot
33:38
Speaker 13: of the service costs when you're teing longer letros, And
33:41
Speaker 13: like you said, Alex, you're making a lot more contact
33:43
Speaker 13: with the sauce rock, so you can pull out a
33:46
Speaker 13: lot more resources from the same well. Had some of these,
33:50
Speaker 13: like I guess better practices would be having a lot
33:53
Speaker 13: more building out the water handling infrastructure. Some of them
33:58
Speaker 13: will be optimizing your fractic size, some of them would
34:00
Speaker 13: be let me see what else I'm optimizing your spacing
34:04
Speaker 13: between the wells. So a lot of these, like see
34:06
Speaker 13: many small things on individually. When they act together, they
34:10
Speaker 13: can have a big impact, especially over time. For example,
34:13
Speaker 13: one of the big producers in the perman I was
34:16
Speaker 13: looking at the data and they were able to reduce
34:18
Speaker 13: them courts per the well cause Perletto foot by about
34:22
Speaker 13: thirty percent between twenty yes between twenty nineteen and twenty
34:27
Speaker 13: twenty four, So there's a huge gains in terms of percentage.
34:31
Speaker 2: All right, So I thought, if you go into like
34:34
Speaker 2: you find some shale somewhere, don't you don't you do
34:37
Speaker 2: your good wells, your easy wells first, and then shouldn't
34:40
Speaker 2: the productivity decline over time?
34:42
Speaker 13: Yeah, that's exactly pretty mure. We've seen, like like you said,
34:46
Speaker 13: in the US, the OI and gas companies. So what they
34:48
Speaker 13: do is they drew the best say which first, because
34:50
Speaker 13: they want to realize that that person while you have
34:53
Speaker 13: better weals. And when we look at the data for
34:56
Speaker 13: the past five years, what we're seeing is that all
35:00
Speaker 13: production on a well level basis has been declining every
35:03
Speaker 13: year for the past three four years, pretty much across
35:05
Speaker 13: the board. But what's interesting is that in twenty twenty four,
35:09
Speaker 13: the data that are coming in so far is they're
35:11
Speaker 13: looking different. Oil production on a well level basis is
35:14
Speaker 13: actually better for the weals the camera line in twenty
35:17
Speaker 13: twenty four compared to those last year. So what that
35:20
Speaker 13: means is that technology improvements could be turning back to tide.
35:23
Speaker 13: For this production declined on a well level basis.
35:26
Speaker 3: Which is why it's so cool when we talk about
35:29
Speaker 3: laterals now we're talking about three miles. That's a lot,
35:33
Speaker 3: and a lot can go wrong in three miles. Now,
35:36
Speaker 3: just about five years ago, the talk was like, oh, well,
35:38
Speaker 3: if you frag here, then you're gonna hurt the rock
35:41
Speaker 3: over here, and then it's gonna mess up the oil
35:43
Speaker 3: distribution and all that kind of stuff. What are the
35:45
Speaker 3: problems that are emerging the longer out we go in
35:48
Speaker 3: these rocks.
35:49
Speaker 13: I think one of the biggest risk rere factors, Like,
35:51
Speaker 13: like you said, if something goes wrong on alex, you
35:54
Speaker 13: lose production from three mileth worths worth of flat or
35:58
Speaker 13: so that's going to be a big opertun need opportunity
36:01
Speaker 13: costs for you. But at the same time, if things
36:03
Speaker 13: go right, you can save potentially save a lot of money.
36:07
Speaker 13: I think not only during longer ledterals. Some of these
36:10
Speaker 13: companies they're actually making U turns under the ground so
36:14
Speaker 13: they can yeah, they can stay within the acreage and
36:17
Speaker 13: so they can make more contact with the source rock.
36:19
Speaker 3: So if you do that, do they you turn into
36:21
Speaker 3: another layer of the rock or do you turn in
36:23
Speaker 3: the same layer the.
36:24
Speaker 13: You turn in the same layer.
36:25
Speaker 3: Oh my god, that feels like a lot can go
36:27
Speaker 3: wrong there.
36:28
Speaker 13: Yeah, Well, what companies are doing that. I remember Metady
36:32
Speaker 13: Resources in the permit is doing our U turns on
36:34
Speaker 13: the ledterals, and there are a couple other ones. I
36:36
Speaker 13: don't become on top of my head.
36:38
Speaker 11: Oh man, or is this nerdy enough for you?
36:40
Speaker 6: Yeah?
36:40
Speaker 11: That's really cool.
36:41
Speaker 2: Well, here's my dumb question today. Never other than shale
36:45
Speaker 2: oil oil coming from shale, do we still drill old
36:47
Speaker 2: fashioned rigs and produce oil that way?
36:49
Speaker 13: We do? We do?
36:50
Speaker 3: We do.
36:50
Speaker 13: We still do that quite a bit. But if you're
36:52
Speaker 13: talking about on shore, the productivities of this world is
36:56
Speaker 13: probably like ten percent or maybe twenty percent of these
37:00
Speaker 13: horizontal wells, So the impact is probably it's definitely a
37:03
Speaker 13: lot smaller than the horizontal ones.
37:05
Speaker 5: Our thanks to taylou Bnf, global oil supply Specialist.
37:09
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