I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like how would you spend your time? I think that's a better way to think about the end of life stage versus quote unquote retirement. AI is entering its most consequential phase where scale, safety and sovereignty will determine who leads and who lags. Join Bloomberg Tech in London on November 2nd and 3rd as global leaders across business, finance and policy examine the defining trade-offs shaping the future of AI. Thank you to our presenting sponsor, Salesforce, and supporting sponsors, IDA Ireland and Schneider Electric. Learn more at bloomberglive.com slash techlondon. Bloomberg Audio Studios. Podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. We've got earnings coming left and right. Boeing just reported and George Ferguson is our senior aerospace defense and airlines analyst. He joins us now from Princeton. George, the headline here that Bloomberg News has highlighted is that Boeing generated better than expected cash flow in the second quarter. and it still aims to generate $1 to $3 billion in free cash flow this year. It sounds like that is the metric that matters the most to investors right now, isn't it? It is, right. So I think that first, it's always super important to generate cash. You can tell if companies are cheating or not, depending on whether or not they're generating cash. They could show earnings and no cash, and then you're like, it doesn't matter. But the second thing for Boeing is they want to pay down some of this debt they have in the balance sheet over time. right they need to get themselves into better rating sort of territory and so that cash generation will go to at some point helping to liquidate some of that debt and then tightening up the balance sheet george where's uh boeing these days on delivery of those 737 max you've you've told us in the past that that's really the cash generator for this company and where are they these days and And where do you expect them to get to? Yeah, so Kelly Ortberg confirmed that they're at 47 a month about now. We're seeing a little bit less come out the door of the factory, but they measure these at different points in the production schedule. But they're 47, going to 52 early next year. Another important component of that cash flow story, right? The beauty of this business is it does finance itself as you increase build rate. And so as you increase build rate, airplanes start to get ready to cut metal in airplanes. You go out and ask the customer to start bringing the deposits. And they bring deposits as the airplane moves down the production process to essentially fund the build of the airplane. So when you're increasing build rates, customers are increasing the send of money into the company. And that's what we saw driving cash flow today. When you slow down build rates, unexpectedly, customers stop sending that money in, and you suddenly have to finance it somewhere else. So, again, this cash generation, a nice positive because customers are submitting cash because airplanes are about to be cut or in the process. And as you boost that build rate, you bring more of that in, which means it should persist if things go well. Let's talk about JetBlue because that company reported earnings as well. And it looks like it posted a loss in the quarter, but it was narrower than what analysts had anticipated. JetBlue, I don't want to call it an also-ran, but it's not doing as well as Delta and United with their premium offerings. But it's been trying to make up for that lost ground. How's it doing in that effort? Yeah, I mean, yields came in a bit better than we thought. I think they were high single digits getting close to 10%. I think that's pretty good. But it's pretty challenging right now. I think for a company like JetBlue, the good portion of their business right now is going to be the premium business. And any loyalty money they can make, it's never going to be as much as Delta and United. And so they kind of operate from a disadvantage to that standpoint. Again, they do have a bunch of premium seats inside those airplanes, especially Transcon. They have a pretty loyal following. But that back of the airplane basic economy seat, I think, is the challenge seat right now for getting the right price for it. And so, and there's a bit of a scramble, I think, going on now between them and Frontier to try to grab those customers that Spirit Airlines left behind. Now, again, that's not a high-end customer. But it looked a bit better to us during the quarter than we had originally expected as well. So it does okay. Again, we're still, you know, this is still a very challenging environment for them, but looked a bit better than we expected. George, I'm so glad you bring up Spirit because JetBlue has one-quarter approval to acquire Spirit's LaGuardia slots. It still requires the FAA approval, but it's trying to pick up some of the benefits of, you know, a competitor going away. Does that change the game for JetBlue to get these precious slots at LaGuardia Airport? Well I mean I don know that it changes the game but it LaGuardia slots are high value slots you know given the proximity to New York City This is a core market for JetBlue You like to not only take those slots but keep competitors out of there to you know fight for those tickets or those customers So to me, it'd be a good sign if they can get a hold of them and probably well on their way if they've already got one approval. George, I'm not sure if you're aware, but I know you'll value this. I recently became a one million mile flyer for United Airlines. Are you impressed? Very nice, yes. I don't think I'm there yet. Yeah, that's what happens when you spend, you know, 40 years shilling. I was going to say decades. Shilling for money all across the global Wall Street here. That's kind of my life. What did they give you? What did they give you? Oh, I had the pilot come up to me before we took off, sat down next to me. We had a nice little conversation. He got him. He got a little medallion. Did you get little wings to put on your jacket? No, but I did get the medallion, which is very. Okay, medallion's cool. Yeah, it's very cool. So I got a little plaque and all that kind of stuff. So I'm special, George. I'm jealous now. In case you didn't know that. Stay with us. More from Bloomberg Intelligence coming up after this. I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like how would you spend your time? And that's exactly what a lot of my clients talk about. And the term they'll use is a work optional lifestyle. I agree. Like the next gen, millennials and below are not thinking about retirement. We're thinking about let's find something that we enjoy, that we can have financial independence. I think that's a better way to think about the end of life stage versus quote unquote retirement. trading down about 4% or 5% here. Thomas Black joins us. He's a columnist for Bloomberg Opinion, covers logistics, manufacturing, and aerospace, calling in via that Zoom thing from Dallas, Texas. Thomas, I see the stock trading off a little bit here. What did the company's results say about their business? It's still a tough market. They are cutting costs and trying to increase more profitable packages. by calling out some of the Amazon business that they had relied on. And this is all to make up for the most expensive workforce in the industry. So that's the path they're on. And they've already done most of their initiatives, and now they need to let them play out and see if they're going to work their way through to higher operating margins. Talk about their relationship with Amazon. I know they're in the process of unwinding that relationship with delivering Amazon.com packages. What's the strategy behind that policy? The strategy is to not deliver so many of the low-cost packages that Amazon likes to dump on other entities, right? Either the Postal Service or UPS or other folks. These are a lot of times lightweight packages that go short distances, and UPS doesn't make much money, and it has a high-cost labor force, again. So it's trying to get away from that. It's not a complete walk away from Amazon. It's more of a glide down, as CEO Carol Tomei likes to say. They've glided that down to about 9% of their total sales going to Amazon. It used to be about 13% at the height of the pandemic. So they're not going to break from Amazon completely. They just want the higher profit packages from them. So, you know, it's interesting when I think about it, FedEx or UPS, I think about a big fixed cost businesses, you know, the warehouses, the planes, all that kind of stuff. And I would think you'd want to punt as much volume through there as possible. But I guess, you know, UPS is saying we need to focus on kind of the unit profitability a little bit more. That's correct. And they're also looking to automate more. They've shut down a lot of facilities. In the end, by the end of this year, it'll be 150 facilities that they're shutting down. These are older ones that don't have as much automation. So they're moving toward more automation and packages that cost more. That's mostly in healthcare, small businesses. Some businesses, they're getting away really from the e-commerce packages, which have become commoditized. Interesting. You mentioned kind of just technologies you have to kind of weave in, and I'm sure I wonder how the company weaves in AI into their operations. What are they saying about that? Yeah, they have a pretty powerful network now because they've introduced RFID, which sounds like an old technology. But it actually has gotten so cheap and so small that they can print RFID labels. So these labels that go on the packages can be picked up without having to physically scan them. So that's a pretty powerful tool. And then you marry all that data flowing in automatically into the system, and that's where AI takes that data and breaks it down and works its magic. What's the company saying these days about maybe its growth strategy? We've heard over the last couple of years kind of how they want to focus on unit profitability, but at some point they need to talk about how they believe they're gonna grow their top line. Right, they're going all in on healthcare. That a big one This is where you get into some of the specialized deliveries with cold chain where things have to remain cold and sometimes at very very low temperatures throughout the whole network And UPS has been building on that. FedEx has also entered into this. And small businesses, these are the folks that don't have enough volume to really get those big discounts. So they tend to be more profitable customers. and of course the B2B, the business-to-business deliveries. Those are bread-and-butter deliveries that they won't walk away from. What they are walking away from are some of those e-commerce deliveries, especially the residential ones where you don't have a lot of packages going to one stop. That density where you can deliver more packages at one stop is a key to boosting margins. And the residential deliveries, they're never going to be as profitable as business deliveries. So talk to us about just the geographic growth. Do they call out, you know, I know they're primarily in the U.S., but they have a pretty decent international exposure as well. Do they call out any area as a potential opportunity or potential problem area? Yes, they talked about international quite a bit. I think they have some opportunities to do what they did in the U.S. in international, which is to maybe call out some of those low profit packages and concentrate on the higher dollar ones, if you will, and also to automate more and become more efficient. They also talked about some of their trade lanes becoming more normalized. They said that they had growth in their China-to-U.S. trade lane for the first time in many quarters. And they're working through the elimination of the de minimis packages. I don't know if you remember that whole flap, but that was a lot of volume that was coming through UPS and at a pretty good price, too. That went away very suddenly, and they're starting to lap that, so it's looking a little bit better on the numbers. Stay with us. More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's switch gears and get back to the market and earnings. We've been talking about Coca-Cola all morning. They put up some better than expected results, perhaps helped by the World Cup. Let's check out Ken Shea. He's a Bloomberg Intelligence Senior Consumer Products Analyst. Ken, break down Coca-Cola's numbers. They seem pretty good. Stock's up 6% to a 52-week high today. Yeah, hi, Paul. They certainly were good. You know, we're talking about a mature consumer products company. We're not talking a tech stock here now, Paul. So, you know, 7% sales growth beat the 5% estimates. You know, comparable EPS up 11. These are good numbers. You know, consensus was a little bit below that. And a lot of it's because consumer sentiment in a lot of big markets, including the U.S., continued to be subdued. And so there was some hesitation going in, although we kind of knew World Cup was going to give them a lift, and it did, a really nice lift. So it was a high-quality performance. It was very much volume-driven, wasn't so dependent on price as it had been in the past few quarters, and balance sheet got stronger. It was just hard to find any fault in this quarter. I'm curious about the portfolio of drinks that Coca-Cola now has because it's not just Coca-Cola, or the slim version of it that Paul likes so much, but there's also sugar-free soda, sports drinks, water, because this younger generation seems to, you know, not like the sugary soft drinks as much as others in the past. What is the fastest-growing part of that beverage portfolio, Ken? That's a good question, Scarlett. You know, Coke would say that, you know, part of the benefits of the FIFA World Cup sponsorship is that it gets them close to the consumer, and it hears about trends in real time, gives them a pulse of what's going on in the market. And so what they said today is, look in the second half for Coke Zero Zero to get a higher level of promotion. What is that? Well, their very successful Coke Zero, reformulated, is going to have a no-caffeine version. That's not exactly novel to the soft drink industry, but it's been probably under-marketed, under-promoted. For people like me, I can't drink caffeine in the afternoon or I can't sleep. This is going to be kind of front and center for them in the second half. But to your point, Scarlett, functionality, getting more from your beverage than just hydration is still very key in terms of consumer demand. They want more protein. Fairlife is a leader. It was up 18% sales in the quarter. Really strong numbers. Advanced hydration, that's Powerade. That's getting more marketing muscle now in the second half. So look out for more of that. And I'm sure the company has more innovation up its sleeve, didn't want to share today. But at least those three products, we can look for a higher level promotion in the second half. So, Ken, do investors and analysts, do they even look at market share anymore, Coke versus Pepsi, or is that just a thing of the past? Oh, they certainly do. And we get it here at Bloomberg Intelligence by virtue of Circona. Now, you've got to remember, well, Circona, it's really predominantly a U.S. tracking. And Pepsi would argue, you know, we're more than just soft drinks. PepsiCo, I think, has probably a wider portfolio of different categories than Coca-Cola does. Coke's still 75% sparkling, 75% brand Coca-Cola. But they branching out beyond that But Pepsi would say hey be fair we more than just cola But Coke is gaining share in virtually all of its categories Ken, we mentioned how the World Cup definitely played a role here, but how does a company like Coca-Cola build on that momentum generated by the World Cup, which is a one-time event as far as earnings impact is concerned? It is a one-time event, but Coke went out of its way to say this morning, And look, you know, the consumer engagement that we got from the World Cup, you know, they had a lot of activities beyond that. Innovative packaging. They had games and events outside the stadium going on. They had digital interactivity. They had a lot going on that they feel that there's going to be, you know, benefits resonating beyond just the immediate. So we'll look for that. But like I said, you know, Coke's engaged with its consumers, and I think that pays dividends. Stay with us. More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. It is Scarlett Field and Paul Sweeney live here in our Bloomberg Interactive Broker Studio, streaming live on YouTube as well. We have some earnings coming out of the payments and fintech space today. And break it down, we're going to go to Dixia Guerra. She's a senior fintech and payments analyst for Bloomberg Intelligence. She's out there in San Francisco. Dixia, let's first talk about PayPal. I know they reported some numbers that beat estimates. We can talk about that. Talk to us about the strategic opportunities potentially for this company. because I'm not sure if it's in play or not in play, but people are interested in it. Talk to us about PayPal. Yeah. Hi, Paul. Great to be here with you as always. I think the results beat was interesting. Nine percent adjusted EPS beat shows that the business is executing better than was feared in this tough environment. Volume was strong. Transaction margins were decent. Branded checkout growth also stabilized around 2%. and the companies reaffirmed its 1.5 billion savings target and they've said about 400 million run rate savings by the end of the year so things seem to be on track but I think the key issue that remains with PayPal is the core profit driver which is the branded PayPal button that has seen single digit growth and the context around that is digital wallets like Apple Pay like ShopPay card autofills are all capturing checkout mindshare so I think the focus needs to shift whatever management does those bad like those old days of milking the branded button are never going to come back so they need to find alternative ways to monetize the network and that said the biggest catalyst for the stock right now is the stripe and ad in bid they've made a 53 billion dollar joint offer to acquire paypal the board officially hasn't responded to but one way or the other it forces the market to value this company appropriately now do you expect the board to have any issues with this deal? So here's the deal, right, Scarlett? Why does Stripe want PayPal? Stripe dominates the developer-first merchant-side payment infrastructure, but what it lacks is a two-sided consumer network. So the asset that PayPal has, which is its 400 million consumer wallets, the Venmo and distribution that it has, and now the stablecoin and agentic AI rails, all of these are valuable assets, and management is in so many ways communicating that. So the board has shown that this low wall offer isn't where they see the company's true potential. If you pay attention to the words in Enrique's commentary today, the message is clear. They're open to a deal, but it needs to reflect the true franchise value. And management said that they feel confident about the turnaround execution with Fastlane or with margin expansion. And they think that'll yield higher long-term shareholder value. and they are willing to do the hard work or at least go down trying. So these comments are likely reflecting in the share price more than the earnings itself today. How credible is this buyer? Can you tell us about who this buyer is and who this bidder is and kind of how credible they are? So Stripe is a very large competitor and a direct competitor for PayPal. They're a private company, which is why strategically this asset makes sense for Stripe to kind of acquire. It's just that the offer was a lowball offer. This asset gives Stripe direct consumer relationships. So they do the merchant side of the processing. They have all the AI native companies. They have a wonderful new modern tech stack. But the PayPal's two-sided network where they have all the consumers and the merchants, that's something that Stripe would, that's Stripe's envy. That's what they want. a consumer wallet, something like a Venmo, which has become a verb instead of a company asset. Right. So when I say, OK, let me Venmo you, you understand what I'm talking about. So that's something that Stripe would like to acquire. the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
