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On today's Boomberg Intellligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week, we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries that our analysts cover worldwide. Today, we'll look at how a heavy promotional campaign at at and T impacted its quarterly earnings, plus breakdown how delayed
orders at US retailers impacted earnings for toymaker Mattel. But first We began with earnings from the streaming giant Netflix, Netflix chairs saw the most since April twenty twenty two, after its third quarter earnings missed analyst estimates.
This comes after Netflix had to pay about six hundred nineteen million dollars to settle multi year tax dispute with Brazilian authorities going back to twenty twenty two.
The results may renew concerns about the sustainability of growth going into twenty twenty six. So for more we brought in Geita Rung Nathan and Bloomberg Intelligence analysts on US media.
We first asked Etha for her take on Netflix results.
Nobody saw this coming in terms of this transaction tax. It's a little bit of a catch up charge that Netflix took in the third quarter, and there will be an ongoing charge as well, about forty million or soaper quarter, but again nothing that will materially impact results. What that tax charge did was that it definitely depressed the margin performance, and this is something that everybody's been super focused on operating margin numbers. Those came definitely much lighter than what
Netflix itself had rejected. But actually, if you just strip out that Brazil tax impact, they would have had record operating margins, so they guided for thirty one point five. They would have come in at close to almost thirty four percent if we didn't have that tax issue. I think fundamentals are definitely strong. But I think what is happening is apart from the tax issue, was that it
was just a very very ordinary quarter. You know, people were definitely expecting something, you know, a much bigger beat in terms of revenue, just given that, you know, the second half content slate has absolutely been a monster slate. I mean, we've seen some of their biggest hits ever in the third quarter. We expect to see more coming in four Q, but none of that was really reflected in the numbers, and I think that's why you're seeing so much of nervousness.
Okay, so ordinary results at Netflix is like the new bad. Going back to the results, Gita, what was new I thought in the earnings report was that they flagged the possibility of M and A, which is not something you hear from Netflix. Of course, there have been all these reports that Netflix is interested in buying assets for Warner Brothers Discovery. Do these latest results show that Netflix is now in a position where it has to make a purchase.
It's a defensive buyer as opposed to an offensive buyer.
I don't know whether it has to make a purchase. They definitely left the door open, which which suggests to us that they will take, you know, a long and hard look at the studio assets. Not the cable networks. They made that extremely clear on the call, but the studio. If you just think about it, Scarlett, I mean, this is definitely and I mean we spoke about this yesterday as well. This is a once in a generational opportunity for anybody who wants to own this kind of a studio.
I mean, this is a top tier studio with a lot of very very you know, beloved popular franchises across the world. We know that these titles resonate. I mean Netflix themselves has a lot of the Warner brother titles. They perform extremely well on the platform. So yes, it is a defensive move. But again, if Netflix doesn't, you know, go ahead and doesn't make that purchase, I don't necessarily think that they are going to be in a much
weaker position. It definitely complicates the strategy for them a little bit, just because you might have another player, like a paramount or a comcast that becomes much stronger, but they still have a considerable lead versus all of their peers. So I don't think it's do or die.
So what's the environment like out there in terms of creating content movies and TV shows? Is Netflix still like the first phone call you make if you're a producer or you're a writer. I've got this project. I'm going to go to Netflix and get it done. Is that because they had the biggest and maybe still have the biggest checkbook in Hollywood?
They do. They're spending close to about seventeen and a half to eighteen billion dollars on content every year. And you know, there's been a lot of concerns Paul in general about the rise of AI, especially now that you have Sora too, You have all of these new tools from Google, from Meta. You know, is that going to be a disruptive force for all of these streaming players and Netflix? And it looks like it actually won't. You know,
We've run some numbers internally. We think that it should help Netflix actually curb content costs by about five to ten percent. That's substantial cost savings, you know for all of these streaming players. Especially for Netflix, which typically has used AI really really well. You're absolutely right. You know, they've done a great job when it comes to content.
They're going to I think continue to do that. I mean, not only do we have the second half slate for this year which is extremely strong Scartledge just mentioned all of those titles, but actually looking forward to twenty twenty six again, you have a whole host of different titles coming on the platform, you know, including Emily in Paris.
You have Bridgerton, which has been one of their biggest series, and then you have the movie Narnia, which is supposed to be like this huge event for them coming a little bit later. So they have a steady, steady, steady pipeline of titles that should help them, you know, drive engagement and ultimately drive pricing.
Are they used to KEITHA. Rang Nathan Bloomberg, intelligence analysts on US Media.
We move next to the luxury space. This week, the luxury goods company Caring agreed to sell its beauty division to the cosmetics and beauty company Laurel in a four point seven billion dollar deal.
The transaction includes the sale of perfume maker House of Creed, which carrying a bought only two years ago, and this comes as Carrying's new CEO, Luca DeMeo, changes course in a bid to turn around the French luxury giant's fortunes for more guestos.
Lisa Matteo and I were joined by Andrea Felsted Bloomberg Opinion Calmness. We first asked Andrea to break down what exactly the Carring transaction shows.
Well, it's being dressed up as a partnership between Caring and Loial, but what it really is is effectively the sale of their beauty brands to.
Loreo.
They've got a new CEO, Luke to Mayo. He's come in at a time when the balance sheet is very stretched. His predecessor, who is now chairman, well bought a lot of things, including Creed, this very very upmarket few business as share in Valentino to try to make the group less dependent on Gucci, but that really increased debt. At the same time, Gucci's really slowed down and they're having to revive it. So they're saying it for four billion
euros in cash. That gets some money in to deal with the debt and gives the new CEO a bit more time to turn around Gucci.
Isn't this a complete turnaround? I mean, didn't the company want to bulk up the beauty and cosmetics division?
Exactly?
I mean they're saying, you know, this is built on the potential that they created.
I mean, to be fair, they bought Creed. They paid a lot for Creed three point five billion euros.
Try worked out to be about fourteen time sales, you know, an awful lot.
But what they did it had a supply chain.
They did that as a platform to build for beauty. And the argument is they have been able to do this deal because of that platform. That's probably kind of rather generous. Looked at my had a big decision to make when he got him. He either had to stick with beauty and invest in it. But with that day, it's gone in awe and the need to reinvigorate Gucci. It's got an awful lot more calls on its cash, so he just decided beauty wasn't a priority.
I consider myself a Gucci expert. I read the book, I saw the movie. On the movie, yes, exactly so, Andrew. I mean, it's obviously an iconic brand. What are the experts saying that needs to be done because it's such an important part for caring.
It is it really is.
It would at its peak, and in sort of twenty eighteen nineteen, around that time, it was sixty percent group sales. Now, you know, Kerring had an amazing rum with Gucci. They put in this quite unknown designer, Alessandro mckayley, and the prevailing look had been very minimalist, and he came in with these big logos, clashing print, granny sheek, and it was just a bread of breath of fresh air and
it changed prevailing fashion. But that was in sort two thousand and six, after the pandemic, when obviously nobody was feeling terribly good Sarring inflation. It just felt very out of sync with how people were feeling, and they tried to turn it round and have a much more minimal minimalist look, and it just wasn't Gucci. Gucci works best when it's very fashionable, when it's over the top. So they've brought in dumbnag Versalia, who was at Balenciaga, and
he is trying to, you know, really revive it. He's gone back to the Tom four Days when it was very successful. He's gone back to the Alessandro and Kaylee Days.
He did this crazy film in Fashion Week.
There was absolutely bonkers, but it got people talking about Gucci again. I was in New York a couple of weeks ago and I went to the store in Soho and there was a big installation of all his things and the capsule collection. It's trying to get people interested in Gucci again, and he's sort of going back to the future to try and revive its magic.
Though it's going to work, I'm not sure.
I thought he was the wrong person to be appointed, but so far he seems to be doing all the right things.
Andrew, can you tell us some of the challenges krig has been facing. I mean, there's that slump in Chinese demand, higher US tariffs as well.
What are they facing?
So what we what we've got at the moment is the one percent of still doing very well. But they're not buying Gucci. They're buying Hermes, they're buying Brunello, Cuccinelle, Laura Piano. They want these very expensive upmarket things. Now, the rest of the less rest of the luxury market, that aspirational customers coming under pressure, and she had a lot of those aspirational customers, particularly in the US. So you've got the sort of esthetic going out of fashion
and you've got these aspirational customers coming under pressure. It's really had a bit of a perfect storm and it needs to really revive Guccini and it had the Takeo Vannetta wasn't doing too bad and their designer went to Chanel. So you know, every brand is sort of you know, got its challenges.
Our thanks to Andrea Fause, said Bloomberg opinion columnist, coming up a look at why third quarter profit at evie Giant Tesla missed estimates on Wall Street.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing inp research and data on two thousand companies and one hundred and thirty industries.
You can access Bloomberg Intelligence via bi go on the terminal. I'm Scarlet Foo and.
I'm Paul Sweeney, and this is Bloomberg.
This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on Bloomberg Radio.
We'll move next to earning from the ev Giant Tesla. Tesla report at third quarter earnings that missed analysts expectations. This comes despite record electric vehicle sales.
It's a sign of the pressure automakers are facing from shifting federal policies and rising costs. Afterwards, CEO Elon Musk also spent the end of Tesla's earnings called pleading with investors to approve his one trillion dollar pay package and blasted your whold the advisory firms that have come out against that proposal.
For more. We were joined by Steve Man Bloomberg Intelligence, Global Autos and Industrials research Channels.
We first asked Eeve for his reaction to the recent Tessa news.
It was quite a surprise. Given the volume of production. You would think that, you know, the fixed costs absorption would be higher this quarter than in the past, but it didn't happen. Looks like appreciation costs increase for them. Looks like the tariff costs impact is greater than expected. And then even below the gross margin line, the R
and D costs went up quite a bit. You know, that could be viewed as a good thing, because that's you know, that's a sign they're pivoting to you know, the ROBOTAXI, the FSD and you know the optimist robots.
And Elon Musk, I guess towards the end of the call, made a plea for investors to a previous one trillion dollar pay package. Quote this is from Elon. There needs to be enough voting control to give a strong influence, but not so much that I can't be far if I go insane. Mister Musk said, how did that go over on the call here? And what's the thinking among the investor community about what maybe a one trillion dollar pay package?
Yeah, I'm not sure if money is important to him. He does have a lot already, so I do believe that it's more about the control of the company. Look, Tesla doesn't have the dual class shares like some of the tech companies have, so there is he he does have that fear of getting pushed out, and you know, he had that experience right with the open Ai. You know, he's one of the initial investors in open Ai and he got pushed out. So he does have the concern
it is his baby. Look, the stocks. You know, the other thing is that the stock hasn't reacted, you know, too negatively to the weak earnings that we saw in the last quarter. Right, there's there's a battle happening between the the bulls and the bears, the long the long guys versus the near term investors. And you know, there are a lot of people believe it, who believes that the you know, he can achieve you know, the getting the optimism robot up and running, uh, you know, getting
our physical AI going. So there's a lot of believers out there.
There's a lot of believers in you know, what the company actually reports, especially when it comes to his vehicle sales, almost doesn't matter based on this idea that Elon Musk will steered the company in the right direction eventually maybe because you know, the robotaxis, which are you know, in operation, but the self driving vehicles, the humanoid robots, those are going to take a couple of years to pan out. If that we don't have any details on it.
So in the.
Meantime, what is the growth driver for this company?
Well, you know, he definitely in the call, he you know, he didn't talk about cars a lot anymore other than robotax and FSD. He's very focused on physical AI. But at the end of the day, he needs this out cars. He needs to continue to sell cars to actually generate the cash to support his endeavors. Now he has launched cheaper vehicles. It would have been better if he is offering even a cheaper model, like something under thirty thousand
that you know we talked about in the past. He is expanding overseas, right he had, you know, record sales in countries like Japan and South Korea. Now he's going into India, big market, big market, So cars is still going to be important.
Our Thanks to Steve Man Bloomberg Intelligence Global Autos and Industrials Research.
Channelst we move next to earnings from the telecoms company AT and T.
This week, AT and T reported revenue that fell slightly short of analyst expectations in the third quarter. This was the result of a heavy promotion campaign to move new customers in a fiercely competitive mobile phone market.
A G and G CEO John Stanky also said the carrier is up against quote increased marketplace activity that shows no sign of slowing through the end of the year.
For more, we were joined by John Butler, Bloomberg Intelligence Senior Telecom We.
First began by asking John to talk about H and d's quarter that ended and just how competitive this wireless business is.
It's a very mature market right now, you've had a lot of movement and the management suite with new CEOs at Verizon and T Mobiles. So the fear is that promotional activity is going to pick up as these new CEOs try and make their mark, and I think we saw some evidence of that in three Q. You know, if you look at AT and t's numbers, they were truly mixed. I was really surprised at that. What we saw was revenue growth across the board just missed estimates slightly.
It was a little bit slower than everyone expected. Subscriber growth, though, was higher than expected, and that really to me that those are the kind of financial metrics you see in a highly promotional environment. Right you're promoting heavily, there's pressure
on pricing. Their average revenue per user actually fell in the quarter on the wireless front, but subscribers rose, and so you're out there trying to build up your roles, your subscriber roles, at the expense of revenue in the short term, on the promise that in the long term, if you can keep those subscribers, it pays back.
I always pay special attention to AT and t's results because I switched from AT and T after like I don't know, fifteen years because of the original iPhone to T Mobile because they had all these great deals, and I don't know, it seems more fun in general. The reason I bring this up is because now AT and T is actually the smallest of the big three wireless providers, behind Rise and behind T Mobile. Does being the underdog work for it?
It's a good question, Scarlett. What they're really doing is throwing their weight behind broadband John Stankey. He has really pursued the broadband market in a big way, and I think a lot of it has to do with the fact that the broadband market is growing faster than why wireless. It's still a mature market, it's still relatively saturated, but there's room for more growth there. AT and T is pursuing a fiber broadband strategy, and fiber is the single
best way to deliver Internet period, full stop. There's nothing better out there, and AT and T is a real leader there. So I think on the wireless run, I don't want to say they have their eye off that ball in any way whatsoever. They're going through a big modernization of the wireless network right now, standing up a lot of new spectrums, so you're going to see network quality increase significantly over time, and that will drive more net additions I think down the road. But if you
think about AT and T, don't just think wireless. I think it's important to pay attention to what's happening in that broadband business because that really is setting the foundation for their future growth.
So John, in the broadband business, are they competing against the cable companies because they've made that a key focus over the last decade or so.
Yeah, I mean, the broadband market's getting really interesting right now. What you've seen is the cable guys are losing a lot of share to fiber, and particularly to fixed wireless access, which is basically a wireless link of broadband into your home. That's been a runaway hit with consumers, really popular. AT and T was late to that game, but they're getting a lot of growth in FWA right now, as it's called.
So it's interesting to see the dynamic where the cable guys are losing share and the telcos are gaining share, and soon you're going to have starlink in on the market in a bigger way. They're right on the cosp of upgrading the capacity of their constellation and so they're going to go from a very high priced product, I think, to a much more reasonably priced broadband offering. Once they get more capacity up there, they're going to look to fill that and the way to do that is to
cut your prices. And so suddenly you're going to have another wireless option, which is going to be satellite. So the competitive dynamics there are getting interesting. But for AT and T and their dedication of fiber, I think they're extremely well positioned and not only hold their own but grow from here.
Our thanks to John Butler, Bloomberg Intelligence Senior Telecom analysts.
We move next to earnings from toymaker Mattel.
This week, Mattel reported third quarter sales and earnings that missed analyst expectations, and this comes as US retailers delayed orders due to uncertainty over President Donald Trump's tariff policies.
So we talked Lindsay Dutch, Bloomberg Intelligence Consumer hardline senior analysts for her take.
First asked Lindsay to comment on Mattel's delayed orders.
We heard earlier, actually in the second quarter earnings, that there were possibilities for delays and for the toymakers Walmart target. Those retailers tend to take their holiday orders by July, so there was already worry sort of heading into third quarter earnings, and of course it was a negative surprise
on the top and the bottom line. Those orders were delayed further than sort of everyone expected, and they're taking smaller quantities than usual, you know, onto their shelves ahead of the holiday season, which which was a real concern for Mattel's fourth quarter earnings, which would be coming up.
So, lindsay, what's Mattel and some of the other companies saying about, you know, when their products, you know, get stamped with a tariff, Like how much do they try to push back on the manufacture in whatever country comes from, say China, how much the importer made taken his or her p and l versus. You know, how are they saying that they're navigating that?
So from the cost side, the toymakers actually have been managing this pretty well. So Mattel is forecasting less than one hundred million dollars hit on the cost side on an annual basis. They're mitigating that in several different ways. They're cutting costs in other areas. They did adjust sourcing as much as they could, you know, selling more internationally versus the US, you know, shifting that mix a little bit.
And they did roll out some price increases in the second and the third quarter, which is ahead of holiday, so that should help protect on the profit on the margin side for that fourth quarter. It looks like those toy makers are bearing the brunt of that cost rather than sort of passing it through towards a retailer.
Lindsay, what are the trends impacting the toy business these days? I mean, I guess a lot of electronics, but what are some of the big trends that you're paying attention to.
So a big trend that we have seen growing momentum on is really the adult trend, which is adults eighteen plus playing with more toys, and Hasbro, Mattel, Lego they're all playing into this. So those big black box legos that are very high price points, you know, they've done very well the past couple of years. But Mattel is also leaning into that. A lot of their new products coming out, even with Barbie or hot Wheels, are really
collector's items. They're really aiming at that adult and honestly, the industry was up six percent in the first half of high single digit in the third quarter, and that's really being driven by this trend.
As we look ahead to the holiday season, I realized for companies themselves, they are already knee deep in it, but as consumers we're looking head to it. Are there any must have items that the toymakers are really counting on or these toy retailers are really counting on.
So I look through all the holiday lists and I was a little bit disappointed. I didn't see any Wow gifts or what I would call a Wow gift. One cool collab that Mattel has, but it's really for twenty twenty six. Pre Orders will be available in November as they are doing a collab with Netflix the Kpop Demon Hunter, So they are doing action figures and dolls for that series and that should be coming out next year and I do think that could be a big hit.
Our Thanks to Lindsay Dutch, Bloomberg Intelligence Consumer Hardlines senior analyst coming up a look at why the hospitality company Hilton Worldwide has raised his full year profit outlook.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries.
You can access Bloomberg Intelligence via bi go on the terminal. I'm Scarlet Foo and.
I'm Paul Sweeney, and this is Bloomberg.
This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on Bloomberg Radio.
We move next to the hospitality industry.
This week, Hilton Worldwide reported third quarter earnings that beat analyst estimates. Hilton also boosted the lower end of its full year outlook for expanding its hotel network.
For more on this, I was joined by Jody Lourie, Bloomberg Intelligence credit analyst. I first asked Jody what she heard from Hilton in its earnings release.
So I think, Paul, you know what's interesting is that Brian Egger, my equity counterpart, and I came up with the same conclusion in that they are a little bit too optimistic, it seems in general. I think what's so funny is when you compare and actually taking a step back, it's a little alarming when equity and credit analysts are right just as a decide note, but when you compare what their estimates were for RevPAR looking a year ago. You know, fourth quarter of last year, you were talking
two to three percent positive two to three percent. Now they're saying zero to one percent. Yet for some reason they're able to reach an eb DA that's almost similar to what they were projecting then. So it's a little bit of a head scratcher. I guess a lot of it's coming from the cost component of it. You know, if your your revenue per available room isn't necessarily growing, but then your EBDA is growing, you sort of say, okay, where is that coming from and what does that mean?
Overall? So what is the company saying about kind of theirs just the underlying book of business? How are their bookings looking, and what are they saying about I guess components of their customer base.
So if you break it out, the US is a clear sort of underperformer at the moment. In terms of travel, we're seeing some weakness, some more muted results on the leisure side of things. For group and business, which was supposed to be a tailwind this year, it's actually pulling back. It's a little bit decreased. Now they're saying that group going into next year is going to be positive. But it is interesting to hear that this component where they're hanging their hat on as the area of growth is
now not really performing. Now if you look across their brands, what stood out for me, especially for the third quarter, but also year to date, is that comparing their higher end brands versus a year ago, it was very strong in terms of growth from an occupancy standpoint, But then if you look at the lower end brands, they're actually
a lot weaker. So the farther down you go in terms of their quality of their brands, So if you're talking the Conrad brand, which is one of their more premier brands, Welder for Story, et cetera, those who have been doing pretty well compared to last year. If you go further down the line into some of their more economy scale brands, that's where it's weakest. And that speaks to that K shaped economy that everybody is talking about.
I noticed they get probably eighty percent of the revenue is US based here. What's their international strategy these days?
So internationally they seem to be growing a lot. They're they're focusing on new types of brands to get there. They definitely see certain pockets of international doing well. I'm in the Middle East and Africa actually did very well
this quarter, which was an interesting component to see. And I think that they're looking at Asia and they're sort of a little concerned to some extent, but they definitely it was an interesting sort of dichotomy between what's going on in the US and what's going on elsewhere.
In the world.
I think where we're sort of concerned is that they are still giving back to shareholders the same level that they were. You know, the three point three billion expected for this year they have leveraged that's roughly within their range of three three and a half times. But if you're talking about in twenty twenty six, that's very uncertain. You say, Okay, wouldn't you want to hold onto your cash maybe just a little bit more than you're giving out.
What are the Hiltons of the world doing in terms of capacities is the industry? Are they building new hotels, are they taking hotels off the market? Are they building higher end or lower end? Where's the kind of the capital for this.
Industry going For Hilton specifically, they're still very much growing. I mean, that was a lot of the conversation. You know, the management team was very optimistic about growth coming from
these new properties and also from new brands. I mean, they have a new lifestyle brand that they're introducing as part of their growth strategy, and I think they're trying to key into these younger consumers, getting them to go into these lifestyle brands and more of these quick service brands that might not necessarily be traditional hotels, maybe sort of tapping into what they're seeing in airbnbs and verbos
and other sort of alternatives to your traditional hotels. Now, what I will say, though, is something that was a little bit jarring to me as a credit analyst and as somebody who likes macroeconomics is they talked about how inflation is actually reducing and with it our rates, and I don't think that's quite the calculation I would do. But I also am sort of curious as to if the consumer is necessarily feeling that you layer that in.
They did mention a little bit about the government shutdown affecting volumes and affecting the outlook, but I do sort of wonder what that means for other companies in the space, For example, choice that really depends on government in terms of infrastructure spending and long term stays. At their properties throughout the country.
Our thanks to Jody Lourie Bloomberg Intelligence Credit Analysts, we move.
Next to the aerospace industry. This week we received third quarter earnings from General Electric Aerospace and RTX.
GE Aerospace reported results that beat analyst estimates, and the company also raised its full year outlook due to strong air travel demand.
Meantime, the aerospace and defense company RTX raced its four year profit outlook and reported earnings at top all street estimates. This came a sales and profit rose across rtx's commercial, aerospace and military hardware businesses.
So for more we were joined by George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense and Airlines analysts.
The first asked George for his take on results from GE Aerospace.
I think it's telling too that Larry Colp, the CEO of the combined companies, broke them apart and went with the aerospace business right that was the crown jewel. They're the largest maker of jet engines globally. I think they have probably the best technology for jet engines globally. And look, this was a really nice quarter. Margins were even stronger
than we expected. I think they may be close to plateauing though here there's just a heavy, heavy demand for aircraft maintenance, even higher than sort of the amount of the increase in airline traffic would indicate just a lot of pent up demand. And then coming out of the pandemic and some of the newer technology ends just aren't as robust, so a lot of people flying the old ones longer. And we heard a lot of good news about supply chain. Supply chain sound like it was delivering.
For Larry, it's been generally been a challenge. It was delivering, and he had parts to put on airplanes and those were high margin parts and each showed it in the financial statements.
Hey George, you mentioned maintenance and repairs. So does that help the company offset those higher costs when you have the rise in the new engine deliveries.
Yeah, So, like I said, I think we might be seeing a plateau here in the margins we're gonna get out of this company. So the air framers Boeing and Airbus have been slow in ramping up deliveries because they're
working through their supply chain challenges. So we really see Boeing an Airbus increasing deliveries of new aircraft all the way to the back end of the decade, and that increase in deliveries is gonna you know, we'll come with those new engines from GE and RTX for that matter, and those are diluted to margins, so you know, so they're kind of in this sweet spot where the original equipment, you know, shipments haven't taken off yet because Bowing and
Airbus are working on that supply chain and they're doing a lot of spare parts deliveries and that's really juicing profitability very strongly. So next year I think becomes more challenging on the whole profitability front.
All right, George, rt X, the old wraitheon. That's kind of how I know this company. Tell us like what's the business of RTX, what are their specialties and what did they report?
So they they make jet engines as well, right, competitor to GE. They make the Pratt Wie gear turbo fan. They have the Collins business, which is is all kinds of parts for aircraft. You know, it could be breaks, it could be landing gear. And then they've got the Raytheon business, which is the old Raytheon that you know, the defense contractor from up Boston area, and they make radar, they make missiles, they make air defense kind of equipment, and like all of the you know, all of those
businesses in that portfolio are really clicking right now. Look, defense is going to grow slower. It takes time. That backlog builds quickly, but it takes a lot longer to build some of those products because they're not you know, running down a line that are making you know, as many like you know, seven thirty sevens or a three twenties, you're doing five or six hundred a year. These are
a lot slower cadence. But we're seeing a lot of demand from customers around the world for missiles and for air defense, and so that backlog continues to build and they're building margin in that business. There's still a kind of eleven ish twelve ish percent margin that was quite good in that defense business. And then at the same time, like it has told you for Ge, the strength of demand for aircraft maintenance right now and the high margin
parts that go into it drove that Collins business. Their Collins business is a thirteen is fourteen percent ise operating margin business really seeing strong growth. Their engine business is not as strong as gees GE's returns in the twenty plus percent margins. Pratt and Whitney's kind of an eight to nine percent operating margin. They've had problems with their latest narrow body engines, so they're managing some of those issues.
They just don't the volume that GE has, but they continue to see margin growth in that business too as they deliver spare parts of some of the older Legacy V twenty five hundred engines we know them as that power old A three twenties. Really did a nice job in that business, and they raise guidance even more than GE. Going into the back into the last quarter of the year. I think they had some of that in their back pocket, but it looked pretty nice.
Hey, Jeorg before you go about a minute left. One of the they're one of the largest recipients of US federal contract funding. We're talking about RTX. Can you name some of the projects they're working on with the Trump administration? What are they working on?
Yeah, So, I mean they're gonna do things like Patriot missile systems. They're gonna do a bunch of sorry, Patriot air defense systems. They're gonna do a bunch of missile systems. Like GMT. All right, you can think of if you know, in air defense, you use they make raiders as well. You use a radar, you find a target, you you sort all the targets you got coming at you at it, and then you have to shoot a high value interceptor
at that target. And the reason that interceptor is so high value is it's got to go and hit a missile approaching you know, your position, your country, whatever, which means you put a lot of value out in that missile so it can go find another one and destroy it. So that's part of what they're building. They'll also probably be involved in the in the you know, the Global Dome or whatever, you know, the our version of iron.
Dome, Golden dome.
Yeah, so there's just a lot of demand for the products that they're to build.
Our thanks to George Ferguson Bloomberg Intelligence, Senior Aerospace, Defense and Airlines analyst.
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