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Holes their shares surge as much as one hundred and five percent in early trading. Now there's shares, well, they're about thirty six percent. It's just a record move. A lot of mentions by retail traders on social media. Let's bring in someone who knows a little bit more about this. Let's bring in Mary Ross Gilbert. She's Bloomberg Intelligence senior equity analyst covering all things retail. So Mary, can you tell us is this a meme stock?
Well, it's acting like a memestock, that's for sure, Lisa. And as you pointed out, it was on social media, it looked like midday yesterday there was a post saying showing a Bloomberg chart and showing the short interest and if you look at the number of shares or the shares borrowed versus the total float, it was about forty
nine percent, which is pretty high. And it's near a historic high at least over the last couple of years, and so the post sort of circled that and then it identified and noted, hey, how can you be short this stock and sleep well at night? And then apparently that kind of triggered other posts throughout I guess into the evening yesterday, and so of course in pre market, you know, we saw the share surge, as you pointed out, over two hundred over one hundred percent, and you know
yesterday the stock was up about eight percent. We saw retail stocks on the move yesterday as well, and so it could be you know, as one of your earlier commendators commendators discussed, you know, with such a strong market overall, this is a sector that has been beaten down largely with tariffs and then of course with execution issues. When we're talking about.
Coals, Mary, has a company said anything either at last evening or today in response to the stock movement?
Absolutely not, there is There are no releases from the company.
So I mean, is this something? I mean, what are you hearing from you know, the clients that you talked to, institutional investors that you talked to, how are they are they selling into this? What are they doing.
Yeah, I'm not hearing anyone discussing exactly what their activity is, but you can imagine that there's probably a fair amount of hedge funds involved. And so when you think about it, the company is highly levered. They have bonds, and hedge funds typically will take a position, let's say, in certain bonds, and then they'll go short the stock. So I think we do have some some of that activity and that's
how they're positioned. And of course, you know there could have been a short squeeze that was triggered with this activity. This is usually what we'll see in a situation like this, So I think that's kind of what we're seeing in the activity and the shares.
And Mary before all of this news came out, How was the stock doing before?
How is Cole's performing before all this?
Oh it's been atrocious. I mean, this spot is so you can look at three years, two years, five years, year to date, and the stock has been off significantly and that's due to falling revenues. I mean, if you look at the revenues over the last few years, it's down over two billion dollars. And really, when you look at the core business it's down even more. And that's even with adding you know, one point eight billion in revenues from so fora So it shows that there is
trouble in the core business. And of course they've rotated through several CEOs and they're on an interim CEO as they hunt for a permanent their fifth CEO and just over two years.
Oh boy, geez all right, Mary, that's that explains it all. Mary Roskilbert, thank you so much for joining us. Mary Roskilbert. There's the retailers for Bloomberg Intelligence. She's based out there in our Los Angeles euro.
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General Motors. That's where we went to get to it took a big hit from President Trump's tariffs. Are you ready for this, Paul Okay? One point one billion dollar profit hit. So what kind of impact is that going to have for the company. Well, we want to hear from the expert about all this, So let's find out, and let's go to David Wells. He's Bloomberg Detroit bureau chief. He's joining us live from Detroit. So, David, were you
surprised with that figure one point one billion dollars? I mean, we heard from Stalantis too, kind of saying something similar yesterday.
No, not surprised at all. GM said they were going to take a four to five billion dollar hit, or that they had forty five billion dollars in exposure this year to tariffs and then they would only be able to offset about thirty percent of it, and the measures they're using talk set that you really won't see to the second half. I thought there would be a pretty
big hit to it. I don't think the street was surprised either, because the forecast for GM's earnings were for a pretty big drop off of the second quarter of last year. Already, GM did better than that because they did have some things, better profits in China than we saw a year ago and better sales in the US
that helped them. But overall, a pretty tough quarter, and it really shows that the car companies are going to have a tough time getting anything close to pre tariff profits going forward, because there's just no easy way to get around them.
So I mean, is what we're to take away from the Stalantis numbers yesterday and the GM numbers today is that the autumn manufacturers, for whatever reason, maybe they're just not able to or they chose not to pass along the bulk of their cost increases to consumers. Is at a policy or is that just an economic reality?
It's an economic reality. And look Stoantis has a lot of other issues. You know, they're going to do some pretty heavy restructuring, which they talked about yesterday. But look, we're at a period right now. We're interest rates are at pretty high levels. You have historically not record but pretty close to record new vehicle prices in the US right now, average monthly payment well over seven hundred hours
a month. We have a record number of people I think paying more than one thousand dollars a month for their monthly payment. Cars are expensive, so you know, you can go out there and say, hey, I'm going to pass this tariff cost on to consumers or even some of it, but if consumers don't pay it, then you just lose the sales. And you haven't seen huge price increases, You've seen small and you've seen companies sneak in, you know, some bigger fees for transporting the vehicle for example, things
like that. But it's just not they just don't really have the ability to push in big price increases to you know, to pass on. In GM's case, a billion dollars worth of tariffs in a quarter.
And it's not just terrors. What else affected profits for GM? I mean, how's their inventory for electric vehicles?
They built that up in the quarter, and since the vehicles lose money, they have to count for that. That that them I think it was six hundred million dollars in the quarter they had three hundred million. Because they've had a big engine recalls, they've had higher warranty costs. It wasn't just because of that recall. They've had other
issues and they're working on that. Some of it. Some of these quality issues you're seeing that are costing companies more in warranty and recall type costs are all the
software that goes into electric vehicles. These are kind of first times out with new software, new infotainment systems, power management systems in these vehicles, and it's just tough for them to go out there and not be buggy, right, you know, think about how many times there's something on your smartphone that you know needs an update, and fixing that with the cars is often more expensive. So some
of it was related to that. And actually, you know, they saw pricing go down with some of their fleet customers. There's a lot of competition out there for the for the corporate and fleet business, and they actually saw some downward price pressure there too, and that cost them a couple one hundred million dollars. So a lot of things in the quarter that pushed profits down. But tariffs are the real story.
Here, David. You're out there in Detroit. You live and breathe this stuff every day. What's the feeling in Detroit as it relates to this evolution to evs? And how will the tariff and the tariff impact on profitability? Is that going to slow this down even more? Do you think?
I do?
I think everything that Trump administration is doing is really going to slow the ev transition. First of all, you know, the obvious one is there. It comes September, they're going to be getting rid of the seventy five hundred dollars tax break for qualifying electric vehicles. But you know, with tariffs, you've got battery components, electronic components, wiring harnesses. There's more wiring in an EV than in a conventional vehicle. All that stuff adds to the cost of vehicles that already
lose money. Some of them are actually built overseas. In the case of Hyundai, they make some of theirs overseas. GM makes a couple of it's evs in Mexico. They do qualify for US MCA, but there are still some parts component tariffs that they can be hit with on some of these vehicles.
And so.
You add costs to vehicles that are already pretty expensive, and you can't pass it on. If you do, even fewer people will buy them. Companies may have less incentive to build and sell them if they lose even more money on these, So that's going to hurt as well. And then, of course Trump's rhetoric for people who are politically right of center and pretty far right is that you know, evs are a dumb purchase and they don't work for you, and I think that hurts sales as well.
So all of this is just not good for the momentum that EV's had in the US before Trump got in office.
Yeah, So, David, last month, the company said it would shift some production to the US from Mexico. So what other changes can we expect to see from the company, like in the last minute or so we have left.
Yeah, I think you'll see them try to bring more parts, more of the parts they buy into the US, so they'll be encouraging their suppliers to do what they're doing. Will just move some production to the United States, and that'll take time, and you know, you may see them make some more production related news. What they've done is
pretty big, So I'm not anticipating any big announcements. But you know, as they look at this and they find other ways to do it, you might see more vehicles, more parts built here in the US.
Thank you so much, David Wells, Bloomberg, Detroit ber Chief talking about GM earnings and so much more.
I think GM right here. If you go GM Equity, FA just brings up the financial statements. Their net income margin is five percent. Ok, that's it. They got like no margin, no profit margin. Anything goes wrong for these auto companies and they get screwed.
You always say I never understand the auto company.
I don't want to, just don't get it. And oh, by the way, my top line splat. I mean, you know, I just it's a high margin. You will make up a volume. I guess it's one of those business So it's just a tough, tough business. And then you throw on top of the TIFFs and then oh, by the way, I have to change my entire industry that I built up over the last hundred years to go electric. Yeah, I'm invest in that. Yeah, I don't know.
We got a shift production us to Mexico. It's never ending from them.
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And we're listening to Bloomberg Intelligence. I'm Lisa Matteo alongside Paul Sweeney, and we are in the thick of earning season right among those companies today, one of them, Coca Cola, beat on second quarter sales growth, profit. But it's another headline that's getting some attention. They are launching a new
coke product that's made with cane sugar. So here to tell us more about it is Candida Jay is Bloomberg Intelligence, Senior consumer products Analysts, Kenneth, thanks for joining us here from Princeton. How much of an impact did the President have on this decision from Coke?
Yeah, Hi, Lisa. Well, it's hard to say, but it certainly is in sync with what Coca Cola has been doing for a long time, and that is keeping its pulse on what the consumer wants to do. It has a lot of assets at its disposal, and a cane sugar product is not novel to Coca Cola. I mean, it's produced it in the US largely more more outside of the US, but in the US on a selected basis, So it's really just going to expand that. It may have been prompted to a degree by the President's tweets
or whatever, but it's certainly in sync. Like I said, you know, there's a there's an audience out there that prefers sugar based as opposed to high fructose cornci based full calorie sodas, and they're going to play into that. Most likely, it's going to be a brand Coke extension, and it's going to be sell at a premium price in selected markets to give it an aura of exclusivity. I'm guessing to command those prices and so just theys
a little more excitement. It's it's one of many things Coke is doing now on the innovation front.
So from Coca Cola's economic perspective, do they care which ingredient they use?
Well, it depends, Paul, it depends if they can capture the premium price they're going to you know, price it at Kine. Shugar costs more than high frucos corns here. You know, a corn is a heavily, heavily subsidized crop in the US. They built their supply chain around HFCs because of that, and most consumers early, you know, they don't really notice the difference. Some do, but buy and large.
You know, they've grown that franchise very well. But I guess you know some tourists that go to Mexico and they taste the sugar cane sugar coke down the air and they say, you know what, this is really good, and they want to capture the same experience in the US.
I'm going to Chipotle today and they do offer the Mexican zoda there.
Can I give you the history of high fructose corn syrup. It was in the nineteen seventies, with high inflation and high sugar prices. President Nixon said, do something about this, and this guy said, well, we can make a sugary tasting stuff from corn from American farmers and US high fructose corn syrup, which most doctors say is like poison to your system. There we go, thank.
Don taker with the value added there. Let me ask, let me shift gears here. What is a ZIN patch?
A Zin patch? Do you want to patch it? I think they made a pouch pouch. Zin pouch is a pouch, you know, it's it's an oral tobacco product. Actually, Zin doesn't even contain tobacco. It's a synthetic product. Its lads with nicotine that is a facsimile for tobacco, which a lot of people will say causes harm, and a lot
of people are right. So this is a product that you know, people can get their nicotine buzz in a you know, hands off kind of way, doesn't emit smoke, doesn't offend your neighbor that you're working with, and it's done really really well. So those are really the Zin pouches that are doing really well.
Yeah, yeah, I thought it was Zinfindel. The line that's no kidding, No, I that pouch so but I mean it's it's big enough a business can that Philip mars would would call it out.
Oh yeah, it is in it's about eight percent of the sales, I believe at this point. But it's growing, you know, a twenty thirty percent rate, as opposed cigarettes which are flat, if not down. But you know, Icoas is their smoke free device segment, which is doing very well. But if the low large numbers at some point, that's going to slow and Zen is filling the gap. They keep the overall volumes in a positive trend. They price these things very high. There's not a lot of competition
in this space. So you know, one of the things investors would say about the world of tobacco, because it's so consolidated, they can pass on a very high pricing and that's what really drives a top line and you know the cash flows and so on. And Zen plays very, very very well into that model.
And how does it fair as far as we're hear about e cigarettes vaping things like that, how has Philip Marris been doing competing with this category.
So they have a product called viv which is their e vapor product as opposed to what they call heat not burn, which has actual tobacco in it, and they would say as a more appealing alternative for smokers who are trying to quit. It's a lower margin product. It's kind of seen by Philip Morris as a kind of
an entry level product. If for those who are trying to move away from combustible cigarettes, they can turn to e cigarettes a low cost method, and their hope is that, you know, even though it's a low margin product, their hope is that they can get that consumer maybe some at some point to trade up to their heat not burn product, which is, you know, a more profitable product for them.
All right, good stuff. I mean I learned about the zin pouch today. How about it's not Zinfindel. Okay, all right, very good, so good stuff there, Ken Shay, thanks so much. Ken covers all those consumer products at companies for Bloomberg Intelligence. Appreciate getting a few minutes of this time.
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Lis MITTEO, Paul Sweety, We're live here on Bloomberg Interactive Broker Studio. Let's talk about Lockheed Martin. Put out some numbers disappointing here, took some losses here. Let's break it down with will Lee Aerospace and Defense channels for Bloomberg Intelligence. Well, Lockheed Martin, I mean, they just do everything. What happened in the quarter.
Yeah, So, I mean if you look at the quarter of the performance was modeled by this hefty one point six billion dollars chart on program losses and then another one hundred sixty nine million of other charges. There was the end gap right off. I think that was around like sixty sixty six.
Let's go back to the big one one point six billion, So what's that for?
So out that one point six nine hundred and fifty million is for for a classified aeronautics.
Program, so they can't tell us.
They can't tell us what it is.
But if it's something that big and it's been going on, and in fourth quarter they also recorded another four hundred and forty million dollars or four hundred and seventy seven stop.
Doing that program, then I don't know what they could tell you, but then they have to kill you.
Well, given that it's a huge program and they're taking over a billion dollars of charges, what could possibly be so important so big and most likely is the A name six generation ISR. What's IRR Intelligence surveillance reconstants, So think of as the replacement for the SR seventy SRC.
Now we're talking SR seventy one to Okay, So.
If you think about in that respect, Bowen has the F forty seven, that's the sixth generator, sixth generation of fighter jet. That's going to be the biggest sixth generation program. Navy wants their own sixth generation, the FAXX. I think
that Northrope has the inside tractor. When that given that Dood doesn't want to make the same mistake that I made with F thirty five, given lot UH with F three five F twenty two, given Lockie both control of the fifth generation fighters, so they break up into multiple defense contractors and have more resilient industrial base. So in that with that mindset, Bowen has F forty seven UH, Northrope pass the FAXX, and Lockie could potentially have the sixth generation reconnaissance aircraft.
So what all those numbers that my son would be having a field day with this conversation right now. He is so into this is this typical of defense contracting environment? I mean growth is marginal there, you were mentoring a number of numbers before.
Is this typical? I mean to this large extent, this is sort of unusual. I mean they've locky teased that they were going to they were looking at additional charges after the quarter. They didn't mention or indicate how large that magnitude was. So this sort of caught the street
by surprise the size of it. But I mean, I think it just shows that this is a key program that's that's going to keep going for But even if you just strip out all the charges from the quarter and you look at the underlying performance, the performance actually
was not bad. In second quarter, Aeron ONLYYX grew seven percent on high F thirty five volumes and the F thirty five, and they also took up the the prop a cumulative profit booking rates on the F thirty five in the quarter, and the Missile and fire control segment it grew eleven percent on strong demand on tactical and
strike missiles. So you're talking about the jazzm the JASM air to service missile, the Lorasm anti ship missiles, and the gimblers that are used on the High Mars those are those are rockets that we've been sending over to Ukraine are.
So I'm looking at the comps. They're all trading up on the year. Defense contractors stocks are doing great this year, with the exception of Lockey Martin it's down eleven percent year to date. What helpout that well?
I mean, the biggest headwind is the F thirty five you have F thirty five is the news you have talks of why do we need to have F thirty five? In the fiscal twenty six budget requests the Air Force. The Air Force cut the number of F thirty fives to twenty four and that's down from forty four, So across the board, I think that's the biggest headwind on Lockie and the fact that you're not seeing you're not seeing that more. You're you're seeing flat revenues and no
real margin improvement. So I think those are the two big headwinds.
Yeah, can you get into that a little bit more like RTX Corp North or Grumman, Like, what are they doing better? That that that lockade isn't well.
I mean our stuff with north by their lever to the b TOY one program and the Sentinel. So with the b TY one, you're here in talks of the Air Force looking to accelerate production and more quantities. And that program right now is in this e M D phase Engine Engineering Manufacturing development. So think of as sort of this is still in the development low rate production phase, but then it's going to transition to a production phase, and when it goes to a production phase, you can
see potentially higher quantities. At Northrop talk to that on their earnings called this morning saying that we're in discussions with the Air Force and if we increase the production rate, we might have to take additional we might have to make additional investments, which means I had went to to earnings.
But at the same time they could potentially realize profit on these low rate initial production lots and not to exceed subsequent follower production, whereas before they were expecting no profits on the l RIP phase and some profit on the next NTE phase.
All Right, it just seems like it's good to be in the defense business. It seems like, you know, we spend money on the defense ear in and you're at Lockey. Martin had a tough day today. It is down six percent. LMT is the ticker will Thanks so much for joining us A will Lee Aerospace Defense sanels for Bloomberg Intelligence breaking down the LMT data here.
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