Bloomberg Audio Studios, Podcasts, radio news.
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
All Right, folks, this is certainly our world.
We are focusing so much on the politics, the geopolitical of our world right now, certainly the last few weeks. But we are also in the midst of earning season, and we're also in the midst of a market where you've got Wall Street getting a bit of a reality check after our disappointing start of that megacap earnings season, some concerns over the AI frenzy. Having said that while the major market averages, we are seeing a fair amount
of selling today. One name that's definitely standing out is Mattel Shares, a mateller up about nine and a half percent today after the toymaker reported second quarter just at earnings per share that came in ahead of Wall Street estimates. Analysts were also positive on the results, highlighting the company's gross margin performance, which Morgan Stanley said had remained impressive.
Second quarter revenue, it was declined to one point zero eight billiy did miss the one point one billion average of estimates compiled by Bloomberg by just a little bit. But we want to get into the quarter of the business. So much that's going on back with us. As Xinon cries, he's Mattel chairman and CEO. As a reminder, Mattel has the brands Barbie, Fisher Price, Hot Wheels, American Girl and
many more. And I feel like in this very heavy environment, Einon, we are grateful to talk about the business of toys. Having said that, we are so delighted to have you back. Welcome back, How are you?
Thank you, Carol, thank you, Tam.
Great to be here now.
I would say we would be remiss in this heavy environment that we want to just talk a little bit about the environment. You've been to the White House. We have talked politics with you. Before you are from Israel. We've talked with you many times side attack last October, Prime Minister Benjamin Netanyahoe before that joint session of the US Congress. As a CEO, how are you navigating all of this? How are you thinking about the GEO politics that continues to be a part of our world today.
Well, of course, this is an important part of our life these days, especially for me as an Israeli. I keep thinking about the hostages and pray for the release as soon as possible.
What about when it comes to today's speech by net and Yahoo? Is this something that's on your radar? It's the fourth time that he's addressed Congress, the first time that he's been in the United States since the war began. As somebody from the country, how is it on your radar?
Of course, it's on my radar. I haven't seen it, to be honest. I've been talking to our investors all morning following our earning. But it's something I tend towards later today, and so I'm sure we'll catch up with everything that we said in Congress today and the reactions in America, in Israel and around the world.
All Right, one more questions on politics, the US race, which you know has consumed our world, all of the country the last three weeks, the November outcome. Does it matter for you as someone who runs a company, a well known, publicly iconic brand, global company, does it matter who's in the White House? Come November for you.
Of course, we are following everything very closely the election process leading up to the November elections. But as a company, we have a long standing history of working with all government leaders around the world, not just in the US, and we are focused on executing our strategy and confident that we can work with everyone across the political spectrum.
How would your strategy in unchanged if we saw former President Trump return to the White House and continue to see perhaps an even harsher stance towards China increased tariffs for example, that he's talked about, how would that affect your business.
Well? As a company, our job is to design a flexible organization that can respond and react to market changes. And I'm not commenting specifically about terriffs or China, but in general, this is what we do as a company. We have a very strong supply chain, a very versatile business model, and we are designed to be able to respond to changes in the market in supply chain or
a consumer taste for that matter. And this is something that we've done a really good job at over the last few years to create a flexible and responsive organization that can can adjust and operate in different types of environments.
You know on what is flexible and responsive mean in terms of geography, where is your supply chain now in terms of in China versus other parts of the world, like how much of your products that are sold around the world are made in China versus other countries.
In China we make less than a half of our product today. The industry average is about eighty to eighty five percent, so we're indexed meaningfully less in the industry. And we continue to diversify manufacturing footprint. This is not necessarily in response to any political risk, but as a company,
our job is to create that flexibility. So we continue to diversify our manufacturing footprint, our own factories and some of the vendors that we work with across across different geographist to make sure that we have the right capabilities and still the ability to mobilize resources and adjust to opportunities as well as any changes in cost structure, in tariffs and capabilities that we are looking to continue to add to strengthen our capability our offering.
All right, so as promised, let's get to the quarter. Let's get to the business. So talk to us about the quarter that was in the outlook. Tell us about where you are feeling real strength, where you're feeling some challenges.
Well, this was a good second quarter and a good second half of first half of Mattel with significant growth, margin expansion, and improved profitability. We continue to strengthen our balance sheet and more than double free cash flow in the trailing twelve month. The industry performed better than anticipated, better than we anticipated, and Mattel gained share globally in
the second quarter and the first half. And you talked about it before, Carol and Tim, I believe we spoke about how we continue to position the company for growth. We expect to grow in the second half of the year and reiterated a fullier guidance for the company. Looking ahead, we expect to outpace the industry, continue to gain more share in twenty twenty four, and grow sales and earnings in twenty twenty five.
So talk to us about some of the different brands. Fisher Price launching something I grew up with, Big Time launching its new line Fisher Price would recently. How is that being received by retailers and by consumers and do you anticipate that this could be maybe a really top seller come the holidays.
Fisher Price is such an incredible brand. It will be celebrating its ninety fourth anniversary this year. Fisher Price grew eleven percent in the second quarter, reflecting the early success of our new strategy, which is working well. We expect Fisher Price to grow in the second half to grow for the full year, driven by a new line of the wood segment that you mentioned that we're now expanding globally, more core lines product that are growing, and new franchises
that we're adding to a little people collector. The brand is just is so much part of culture and has great trust by parents and families. We in terms of performance in the category, outperformed the industry gain share in the infant toddler in preschool category in the second quarter and the first half and was the number one with Mattel was the number one toy company globally in the category.
You know, and what about hot wheels? Gross billings growth and gross billings for hot wheels was relatively weak in the second quarter. Give us an idea of the catalyst. Tell the investing audience about the catalyst for a rebound for the holiday selling season and if there are any new products or advertising come in to help push it.
Hotwords is another incredible brand. Hot Wheels is on track, on track for its seventh consecutive record year, seventh consecutive record year. We couldn't be more excited and confident about where hotwitods is growing. It grew in the second in the second quarter five percent, with more activation planned for the second half. We're growing the adult collector line and
more adult product. We brought any distribution globally for Hotweels specifically as well as the rest of the portfolio, and we expect to accelerate growth in the RC and skate lines and of course have another season of Hot Wheels Let's Race on Netflix that is launching this fall. So great product activated by more content and just a great line by Hot Wheels on track for its seventh consecutive year of growth.
All right, so Hot Wheels for guys and gals or kids, boys and girls, but also Barbie for boys and girls whoever wants it. But let's talk Barbie, which is another one of the iconic brands, you know, and I'm certainly
of Mattel Barbie brand. I'm looking at the second quarter right, sales held back by a six percent decline in global buildings for the company's flagship flagship doll segment, which includes bar Be Toughier over your comparisons in the second half, did the movie, what are you continuing to see in terms of the impact that that has had on the Barbie line, and do you expect the brand to return to growth maybe next year.
Barbie is an incredible brand that never sits still, and the movie expanded the audience even more. As you would imagine, Barbie was the number one doll property globally and continued to gain share in the second quarter this year. We're celebrating Barbie's sixty fifth anniversary with multiple activations and a new brand campaign that we're launching in the fall. We're launching also new segments supported by more shelf space in the second half, so Barbie will have even more reach
in the marketplace. We're launching new offering for adult collectors as well as we did for Hot Wheels, and there will be more content on Netflix targeting the kid's audience. Barbie has consistently gained global share and continue to strengthen its position as the leader in the dolls category. And you know, Carol, Yeah, very few brands have the cultural relevance as Barbie, and we couldn't be more confident about
the incredible franchise. But this incredible franchise and where it will go from here, well.
I have to tell you on in the newsroom earlier this morning, a bunch of us, I will say, all women, Cec, myself and Elizabeth having a conversation. I was kind of very much into Barbie, but I also talked about American Girl, where my daughter was kind of all over it, and so was Cec and Elizabeth. Anyway, we talked for a
while about this. I am curious about American Girl where it still fits into your portfolio because it's interesting, it has evolved, and we kind of went back to the beginning of the brand when it before it was even owned.
By you guys, about that.
It really, you know, taught young individuals, young women, young girls about history, and you know they were very much tied to it. Now you've got a gap American Girl, You've got Disney collaborations. What's the thinking around American Girl.
American Girl is a valued asset within the Mattel portfolio with significant fan base and great product. American Girl grew for the second quarter in a row, and we saw how American Girl is outpressing the industry in the large old category and the overall dull category, especially in the eighteen inch dolls and was up double digit. We saw the flapship flagship stores up, especially the new store in
LA that was a high double digit. And we continued to optimize the rettled footprint to make sure that we are creating a holistic, omni channel experience for fans. And as you say, part of the success is how we evolved the brand and how we infuse brand purpose but
also cultural relevance. And this is part of our secret sauce on the Mattel Playbook and how we continue to stay relevant and take brands that are timeless and make them timely and reach and engage consumers today and touch fans everywhere, touch their heart and mind and do things that really matter in society and engage fans at an emotional level.
I have to ask you, I know there's been a Wall Street Barbie. I don't know that there's been an American Girl who works in investment banking. But having said that, a report on Monday that you guys have received a takeover approach from El Catterton, the private equity firm backed by LVMH. You've come out and said that you believe you the company can achieve a higher market value if
it continues as an independent company. Are you open first of all, have they approached you and are you open to doing a deal?
Well, as you would expect, we don't comment from the speculation.
It's just now in. It's just you and me, so.
Just between us, just between and the three of us. What I can say is that we're very confident in Motel strategy and our ability to create long term shareholder value as a stand alone company. This is what we're doing. You're seeing it in the quarter, you're seeing it at the start of this year, and you're seeing it since the start of the ten around in twenty eighteen. It's in the numbers. It's in our growth in top line
by a billion dollars. It's how we continued to improve our adjusted growth margin by almost one thousand basis points and guided to a higher number another one hundred to one hundred and fifty points this year. Adjusted IBIDAH grew seven and a half times since we started the ten around, and our free cash flow went from a negative three hundred and twenty five million dollars to more than seven hundred million dollars at the end of last year. And
of course we are now investment grade. It's a very weak puls So it's.
Not just about price, maybe a better price.
Well, it's about creating long term shareholder value and we are well positioned to build on our multi year trajectory and continue to execute our strategy and expect the share price to reflect this over time.
What would make you do a deal?
Well, broadly speaking, we are here to create long term shareholder value and we do it in every day. This is what we focused on and we consistently execute and deliver on the strategy. That's what we focused on, and we believe that we create that value, long term shareholder value as a standalone company.
So to that point, Lina Dunham, stepping away from the poly pocket movie, what are your plans for that brand and tell us what's the next you know, big screen and you know, I think you guys have a ton of projects in the works.
What can we look forward.
To as we're very excited by the progress we're seeing in our film strategy. Mattel Films. Of course, the Barbe movie is set the scene, but there's so much more and we currently have sixteen projects in the making. We recently announced a release date for Masters of the Universes would be June fifth of twenty twenty six. We announced a new director for Matchbox and a new movie for Months de High at Universal with the Kiva Goldsman, a
two time Oscar winning writer and producer. So there's a lot that is going on with everything at Mattel Films. The Polypocket project is progressing. Lily Collins is still attached and we're very excited about how this movie is shaping up, as well as the rest of the films. Late that again, it's all about It's all about collaborating with leading filmmakers to make standout quality movies based on our iconic brands that will resonate in culture and appeal to global audiences.
Eno and Ken wants to know, does he get a movie? Does he get a movie?
Well, of course, we continue to look for opportunities to engage bands every way we can, and one day maybe you will have a movie as well.
I'm open, I'm going to count on you.
Maybe you can help me with the hot wheels on your desk, but you gave it to you gave it to my son.
Little cameos in movies courtesy of Bloomberg Programming. You know, thank you as well. A lot on your plate, so appreciate all the time. You always give us a fine for us. Great to check in with you you on cries of course, folks. He is the CEO and chairman of Mittel, joining us. As we said, Mattel shares are up nine percent. They're up almost sixteen percent this week, fifteen percent pop on Monday, courtesy of some you know, maybe that chatter.
Deal chat chat. How does that sound?
You're listening to the Bloomberg Business Week podcast. Listen live each weekday. He's starting at two pm Eastern on Apple car Play and Android Auto with the Blomberg Business Ad. You can also listen live on Amazon Alexa from our flagship New York station jo Say Alexa playing Bloomberg eleven thirty.
Our next guest is the CEO of the largest company that you've probably never heard of and less you work in the industry. Burns and McDonald is an engineering, architecture, construction, and environmental and consulting firm that plays in just a ton of industries. We're talking aviation, infrastructure, healthcare, military construction, consumer product manufacturing, food and beverage production, oil, gas, chemicals, renewable energy, telecommunications, and more.
Kind of the economy in a snapshot, it's one hundred percent employee owned. They've got more than seventy offices in the US and around the world. Needless to say, Leslie Duke has a good idea and she's probably got a great idea of how economies tim around the world are doing.
Welcome Leslie Duke, CEO of Burns and McDonald based in Kansas City, but joining us here in our Bloomberg Interactive Brokers studio.
How are you very good.
Tim Thank you so much for having me.
It's good to be here with you both today and I look forward to visiting with I think some very interesting things going on in the energy and data center markets.
It's a really fascinating time.
Yeah, we talk a lot about energy and data centers because data centers are using so much energy. We're going to get to that in just a minute. But I want to start big picture because, as I mentioned, you guys play in everything, so you have a really good understanding of how economies around the world are doing at a high level. What are you seeing out there specifically in the US.
Sure, we're mostly domestically focused, so I think I have a pretty good pulse on the US marketplace. Things are busy in the infrastructure business. We're soliciting and receiving a lot of work. Still, I think there was a little bit of a slow down in the second quarter would be what I would feel. Maybe a little into first quarter, we're back to a nice rhythm of work coming through our doors.
Construction has been robust.
Throughout and a lot of people ask me about the election and how that's impacting our business, and we do think there's some finance that slowed down. People are kind of waiting on some things, but generally speaking, there's.
Still a lot to do.
So some of the funding that's come out of the government recently, the IJA and IRA funding has really fueled a lot of projects in our industry.
And so that's been good for business.
It has been great for business, and I think that it's also you know, we're a little bit of a counter economy business as it is, so we're resilient in that way. But I think that then there are these other business renewable energy, or data centers that are coming in at a time where other things may be slowing down. And when you have the diversity Burns and mac does, you are able to swing your workforce over and start to respond to things that are very very hot right now.
And we certainly are seeing that across the board when it comes to both.
When you do a project, though, I mean, how long does it go on for? So it kind of gives you a certain amount of lead time. Right when you say that, you guys are kind of counter you know, the economy in terms of what's going on the cycles.
Give us an idea, like remind us.
Sure, you know, it depends on the project. So there's some that are pretty quick hitters. Data for an, for example, is very fast moving. They can they can build a data center in less than two years now.
Because it's basically a box with a bunch of machines.
A box and a bunch of machines.
Now they get electricity, that's right, They need power in that electricity. Yeah, that's exactly right. And power is really I mean, we laugh a lot about it, but it is becoming extremely constrained because the need is growing. The hyper scale is real. So the scarcity of places in the United States that can actually attract hyper scale is shrinking, so it's harder and harder to find a place you can put a hyper scale data.
Is that constraining the development of data centers right now?
The build out it is.
Changing the way that they're looking at how they need to get ahead of it. So I think there's a much broader look at how to approach data and power, including owning it themselves. So data may not wait on an electric utility today, and they may start to own their own power island off grid, maybe use the grid for reliability and backup power.
But not primary generation.
So I think the data centers are being extremely creative right now what they're willing to consider in the way that they keep this business going. It's fast paced, it's not slowing down. It's highly competitive. They can't afford in some cases to wait for the utility processtive. The regulatory hurdles are real, and so those are things that are really headwinds to data if data doesn't take charge, and so then you've got utilities are like, hey, we don't want.
To lose that load.
We want to continue to attract businesses into our business, and so they're upping the ante. They're trying to bring power faster.
But is it helping them to build that renewable power faster because we have seen folks, whether I think it's an Amazon and some others like if they need they obviously need the data centers, and then they're linking up with those who have, you know, access to the renewable power side.
Sure, I think you know, we've never been busier and renewable, and so the renewable business is all utilities are pivoting to a greener future and a carbon free future. So that's been a part of our business here in recent years that has really motivated a lot.
Of business for us.
All of big data is interested in green energy. So when they are ahead of it and they have capacity in that, then it follows suit that data is going to be attracted to them. And then we do see a resurgence of natural gas coming in to do some backup power. Bridge fuel is what we tend to call it, where we know it's going to take longer to get some of the bigger clean fuel, the baseload generation that can be built to grind it until you get it right. So I think natural gas is the solution for that.
And I even think that you see data accepting.
That to some degree.
And it used to be kind of a polarizing political issue. Both sides of the aisle are saying, yes, we get it to stabilize and have reliable power. We've got to accept that natural gas is going to get us there. And some of the things like you know, modular reactors, small modular action.
We love.
SMR is a technology, but the runways long right it's going to take.
The problem is we haven't seen any of them built to fruition at this point.
That's right, it's a it's an unproven and and you know, even just take the regulatory process, well, how patient is data going to be? And so they have to have a solution today that can get them what they need as soon as they can get it. They need to have power to interconnect to, but they have the investment
dollars that could kick start that. And I think that we're finding some interesting conversations going on with the long term picture, because this is the beginning, I mean with with we're talking about AI, but it's e commerce, it's cloud computing, it's it's so many things, and so this is, this is a trajectory that they're they're in the long game for and so I think you're gonna see short game, long game, natural gas, short game, and then we'll see
what emerges in the long game for cleaner carbon free solutions.
I'm real excited about the possible.
Do you think that?
And you said, you know, support for a bridge fuel to get us to greener future is bipartisan. No question though that Republicans are more supportive of fossil fuels.
We saw that just last.
Week at the RNC and the conversation around that from the speeches. Are you concerned that if Republicans do retake the White House, green energy and investment in green energy will get pushed back, will slow down.
I'm not, you know, And do I think it could create a bit of a change. Sure, regulatory it always matters. But the truth is is that the consumers committed to it, and companies are committed to it.
Our utilities are committed to most.
Of name dates that they want to have their goals met by. They're all marching quickly towards those goals, striving to get there. Those things are resilient to the politics of the time. Time and so I do believe you're going to see it continue. And even during the Trump administration, we never saw larger growth in solar than we did during his term as president, and that's just because of this tenacious appetite for clean energy that the world has.
So I don't see that slowing down. And I think that there's a more pragmatic approach in some ways to renewable energies, in needing some backup, reliable power to make sure that you can continue to invest in renewables and it not become disruptive.
Because of your vantage point.
As Tim said, you know, largest company probably never heard of, but you probably should have heard it because of the different types of industries you play into. What about your business and what you are seeing do you think might surprise the Bloomberg audience.
I think probably how much of the value stream we're involved in.
Everybody knows us.
We're number one in power, we're number two in data as an engineer construction company, so everybody that does know Burns a Mac knows us there. But I would say most people would probably be surprised at how far upstream we go in the consultancy side of studying the power grids in the United States, really helping utilities and other
interconnect companies come into the right power purchase agreements. You know, we're very much in the permitting side of air and land permitting, so we really have a perspective that that really is ahead of what's coming in our consultancy group, we call it our eighteen ninety eight and co. That's the year we were found at, one hundred and twenty six years ago. But I think that's always a little surprising to people that haven't tapped into that brain of Burns and Max.
Not to be confused with an offshoot of the Kevin Costner.
Exactly, not very confusing the website.
Yeah, it's not, you know, the Dutton family. It's not an offshoot of the Dutton family. I do want to know about revenue, where the revenue comes from in terms of private industry customers coming after you, your customers who are in private sector versus municipalities, states and the federal government.
Sure, it's a great question.
I'll start with the last and say, you know, municipalities in the federal government, they've really you know, found funding in some of the recent government action, and so there's a pretty robust amount of government work coming out, so we see a lot going on there.
We see an.
Enormous amount of work in manufacturing.
That's a.
Broad bucket of business, but it gets real surgical when you start looking at it. It's reshoring of products that we learned we needed to build here in the US.
Is that continuing?
It is?
It is continuing.
We really you can see it in land prices in the right places. Logistic companies are really seeing, you know, land prices go up. So manufacturing is real. And then even like in our refining space, the focus on renewable fuels and you know feedstock that's renewable and so some of that is super interesting. I think people would be really thrilled at the work that's being done there and the amount of time and energy going into trying to reframe the game. And I think airlines are at the
tip of that. They really are very interested, very mindful of the environment around us, and they're trying to figure out how they can pivot to renewable fuels. So there's exciting things going on in any microcosm of our.
Markets.
But when you really look closer what's.
Driving it, it's not that dissimilar.
And so people are focused on trying to clean things up and get things regulated, and I believe in a carbon free future that is possible if we keep down this road.
And so I think it's exciting times.
Some would say we don't have a choice. It's are based on what's going on.
Hey, Leslie, just got about thirty seconds left here, because you have such a great window into so much of what's going on, and I know you say you're kind of counter to the economy or what's going on. Potentially any signs of slow down recession give us an idea we are bloomberg.
We always like you know, you.
Know, we we are not seeing significant slow down, and so you know, we I think if we see headwinds, it's in some of the procurement streams. Some of the global procurement that we do is seeing continued strife and difficulty. Electronics in particular, we are really struggling. And by the way, the world is electrical. I say, the world is run by electrical engineers. They just haven't figured it out yet. But everything is becoming electrified. And so you look at cars.
We talk about that all the time, but it's not just that it's automation in every walk of our lives, and those things are really struggling in a global economy, and the logistics of electronics is still something that we're struggling to meet demand, and it is the long lead items on all of our projects, regardless of industry and marketplace.
Leslie really appreciate you joining us. Leslie, CEO of Burns and McDonald based in Kansas City. Here in our Bloomberg Interactive at Brokers Studio.
I'm brother Marc, a journal How about you let me drive?
Oh no, no, no no, who's gone to drive?
Honey? Please, I'll do the riding gravel.
Let's wat I want to drive.
It's good question.
This is the drive to the globe.
Dot com think we'll buy around each other down on Bloomberg Radio.
All right, everybody TikTok as I like to say.
Is it TikTok?
It is all right, man, I'm not going on. As you know, there's about twelve minutes left in today's trading session. Charlie just breaking down the trade. We are hovering neuro lows of the session, so that means three point three percent lower on the Nasdaq, one hundred two point two percent lower on the S and P five hundred, one point two percent lower on the Dow Jones Industrial Average. Just rehear hashing those numbers because we haven't seen it's
kind of selling in some time. In fact, if you look at the Nasdaq one hundred, last time we saw we were down this much. This is I guess, the most in terms of a decline since October of twenty twenty two. So yeah, not quite two full years, but getting the close about.
One and a half or so.
S and P only up fourteen percent so far this year only.
And listen, mark go up, markets go down right, and some say buying opportunity or not? Or is it a reset like this is? But we're still kind of earlyish in earnings.
Yeah, I think it's fair to say. Let's see what Nevill Javari has to say. Zequity portfolio manager at all Spring Global Investments. They've got about five hundred and seventy billion dollars in assets under management. Usually he's hanging out just outside of Washington, DC, but he's joining nothing going on there. Don't go to Paris right now, and maybe you know, if you don't want to go to see the Olympics, and maybe stay out of Washington if you
want a game going. Yeah, there certainly is Neville good to have you with us. What do you make of what of the way that Carol described the environment is it? Is it a buying opportunity now? At the same time, we are just at the start of earning season, and boy that mag seven. The two stocks that reported yesterday, Alphabet and Tesla, certainly put in a different kind of tone in the market today.
Yeah, thanks for having me, Tim, Thanks for having me Carol. I think what you're seeing is a little continuation of what started in the postmarket last afternoon when both Tesla and Alphabet reported. I think there may have been a little bit of AI fatigue that's sort of playing out today. I think Alphabet's print and guide was pretty solid, really good numbers, margins were good, they raised guidance. It was
a solid print, There was a solid guide. I think the one thing that sort of concerned investors and led to the sell off was the fact that they talked about that the investments that they were making thus fall.
Yeah, the CAPEK spending in AI were not paying off, and that timeline is being pushed further to the right. You think that's more of a concern than the mess on YouTube at revenue. I think YouTube revenue well.
I think I think Alphabet's doing what Alphabet has done historically, right and search and ad, and then yet YouTube was weak. And then sort of the concern was the spending on the capex that was spent on AI, where you weren't having quite the return that boat management. And then investors looked at and said, yeah, maybe this has pushed out
a little bit to the right. And then you're seeing that play out today with some of the other hyperscalers, you're seeing it in big cap tech, and you're seeing it sort of play through in the market this afternoon.
So I mean, how are we supposed to as investors? I mean, this is something I feel like you and I talk a lot about. We're so quarter to quarter focus, you know. I feel like if you go back six months, eight months, you know, last year, if you weren't spending on AI, you were kind of smacked down because you might be behind the curve. So is it just a case of, you know, what's the right balance between spending
and payoff? Do we not get enough clarity about the spending that Google is doing when it's connected to AI, and whether or not. It's seeing that return on investment.
Yeah, I think.
I think if you look back, or you listen back to some of the transcripts and the earnings calls going back a year, if you threw the word AI in there, it almost helped your stock price rally. So I think now you've got.
Now that you've done it blockchain, remember that six or seven years ago.
You've gotten to a point where investors are starting to question how much of this is necessary, how's it playing out? And really what are the benefits? Can we absorb this in our business, use it, become more productive, become more efficient, And I think those questions are starting to bubble up a little bit more. And then what Google said, Alphabet said last afternoon sort of really set off a greater level of scrutiny in these investments around AI.
Okay, we love having you come on because you brought stocks, and just so everybody knows if you bring stocks, if you bring stocks, we love you. We like stocks more than socks. Okay, ups. Yeah, what a good day to talk about ups because yesterday it closed down twelve percent.
We're stock declining twenty five years.
You're still bullish though?
Yeah?
Oh we like it. I think it was an overreaction. There's plenty of good stuff there. They're investing in Network of the Future, They've made significant investments in their Frankfort
hub that's going to tie Europe to Asia. They monetize the brokerage business, they're reinstituting a share by back, and then you know, a lot of this is digesting the costs from the labor union agreement that they signed last year, so some of that will be behind them in the coming year and they're going to exit the year with ten plus percent margins on the domestic side. So there's
plenty of good stuff out there. I think investors would just focus on the fact that expenses were higher than where they should be.
The passion.
Is it shipping though or smaller and less profitable. Is that a worsome or is it just a some of it kirls.
Some of it just because what they said was there was a certain type of business owner that was moving from next day air to ground, and then there was a certain a certain profile that was moving from ground to short posts. So yeah, that's going.
To play out.
The contract that they signed with the USPS is going to be incrementally added to the events it is, and it's going to come online at the back half of the year and you're going to see those benefits before we let you go.
Gosh, I want to go to Hilton.
I want to go to Hilton. Yeah, we could do Union Pacific. They report tomorrow, but let's do Hilton. It's up nineteen percent so far this year. We don't hear from them until August. What's going on with Hilton.
Great franchise asset light model they've been bringing on. They have the whole spectrum from sort of the consumer to business low end to the luxury portfolio. Business travel has actually been a strong point for them. You have people going on business trips, staying overnight longer than they did so instead of a two night visit, it's now maybe.
Three or four. We're traveling. We are traveling a lot.
We are traveling more than we have in a while.
Yeah.
Yeah, it's interesting because so it doesn't matter if the revenge travel is over.
I don't think it's over.
You don't think it's think it's playing out.
The hybrid work week helps people work in three days, remote and being able to travel work.
For There are a lot of people on business tips. Taking like a significant other.
Really not us? Hell, hold on, hold on, we can do that.
What do they call that when people like.
They take you, but then you got to take your kids.
Here's a word for it, to take your heads. Nice to have you here.
Thank you so much for having me.
Appreciate it. We'll come back. Appreciate it all right.
Nevill Jabari.
He's an equity portfolio manager at all Spring Global Investments, five hundred and seventy billion dollars in assets under manager, joining us right here in our studio.
This is the Bloomberg Business Week Podcast, a little Apple, Spotify, and anywhere else you get your podcast. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeart Radio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal