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Big Earnings again after the Clothes, we got Meta, we got Apple, and we got Amazon. And the way we do it at Bloomberg Intelligence. Looking at Amazon, we got to recognize that this is a huge retailer, of course global retailer, but it's also a huge technology company. It's really evolved and developed as technology over the last ten.
Years or so.
So the way we do it is we get bloom punamg Oil, she covers all the retailers for Bloomberg Intelligence, and we got anaag Rana who covers all the tech for Bloomberg Intelligence. We bring them together and we roundtable them, and that's how we can really get a holistic view what's happening at Amazon on rog Let's start with you here. What do you want to hear from Amazon tonight?
What do you need to hear?
What's the market need to hear about their cloud business?
Paul, the magic would tonight is cost optimization. Not seeing any more of it that customers have started to spend back. That is going to really be magic to my ears. I think we heard some of that from Microsoft, but not entirely. I think that is the direction that is going to set the direction for cloud names for over the next ninety days.
Can I ask the dem question in real terms?
What is cost optimization?
Like?
What does that actually mean? If I'm reading through the call?
So sorry about that? So that just basically means companies or corporations are not cutting costs in their cloud consumptions, that they've stabilized or started to spend back again. That is going to be the only thing that I care about.
See Anonog's whole career find technology. It's always a growth industry. They didn't never have down years. It's just a question of how much growth.
So the tech spending, apparently over the last couple.
Years the growth rate has slowed, and that's got these tech anals all anxious, and so they want to see a reacceleration of that text spanning.
That's my read.
Let's get to the important stuff. And you're talking about Amazon. That's like people buying stuff and the box is showing up at my door. Put them you cover the whole retail space. You've got the best view of this. How is retail spending out there and how is Amazon competing?
Amazon's taking share and retail spending overall is good, especially online, and when you shop online, Amazon is the clear winner there. So we're actually expecting good results for the fourth quarter.
We know holiday was strong and Amazon likely took share there, So from an online standpoint, we think they'll do well and the results will be driven once again by gains in their third party which is the sellers that sell on Amazon versus their own first party goods, will be the reason that they outperform.
To that point, aren't we sort of is an Amazon kind of looking into a world where they might now be responsible for those third party sales in terms of safety and quality, et cetera. And how dramatic could that be.
That could have an impact. You know, right now, Amazon is not responsible, So if you're the seller and are selling something on Amazon, it's not Amazon's responsibility to authenticate that good or even to maintain the control over that exchange of goods. But if that changes and Amazon is going to be accountable for that and seen as a distributor,
as what we're hearing. Then that could change things up, and it could make Amazon institute more best practices and also be held reliable, right because we know that there's a lot of stuff sold on Amazon that could be counterfeit and until today, Amazon has no responsibility over that and doesn't need to.
Hey on, Rod, give us a sense of just kind of the landscape of cloud computing. We got Microsoft, Amazon, Google, how does it play out? And then how does Amazon position itself?
Yeah, so you know in the cloud infrastructure world, which is basically the storage and the computing that you need to build any application, there are three big players. It is Amazon the number one with the biggest market share. Microsoft has done a phenomenal job over an las ten years to catch up and is the second biggest. So you know, structurally there are two big players, Amazon and Microsoft, and then Google's been catching up and Google's are very
viable contender to both of them. What's really happening right now, at least in the last twelve months, is Amazon does not have an AI play as such. Now that's really not true, but that's that's the narrative in the street that Microsoft has a close relationship with open Ai. They're pretty much kind of you know, up very close to open ai and open AI's back end is everything Microsoft Azure. So open ai makes more money. Microsoft really, you know, benefits from that, which is what we saw in their
results a couple of days ago. For the case of Amazon and Google, they really need to talk about what is going to be their strategy, and their strategy actually is very simple enterprises or cooperations. When they're going to go out and build those AI models, they're going to use one of those three you know, cloud vendors. I think it's going to for them. It's taking a little bit longer, maybe you know, a year down the road, six months down the road. And that's what everybody says that, oh,
Microsoft is head and Amazon. I think in the long run, all three will make a lot of money. It's a matter of when it starts.
And to your point, Paulo, as our cloud service sales gain thirty percent, Hello, what company wouldn't want that growth rate? But it was like just one percent more than street expected.
But those are some big numbers.
I gotta say, we got to turn to Apple because we just have a few minutes left. But I'm having a really hard time getting excited about Apple's quarter today. They're gonna make a lot of money, They're going to sell a lot of stuff. And then what anaag, what are you expecting?
This is probably the weakest have gone in in terms of sentiments in you know, for Apple, there isn't much going in their favor at this point, you know, regulations, weakness in China, them losing share in China. Like, it's just probably the lowest expectations I've seen going into a quarter for Apple. I'm not expecting any you know, major positive surprises. But I guess what, Sometimes that's when fun happens, is when you go in with with low expectations.
Hey put them as we step back here? What other I mean, how does Walmart compete against Amazon? Because it seemless like the Walmart dot com They've done a really really good job competing from my perspective, just as a user, What do you think?
I think Walmart has made some strides on its dot com presence. But you know, when you think about Walmart and you think about Amazon, and I think they can both gro share together. It's not that Amazon loses if Walmart wins. But remember that Walmart's business it's still fifty percent grocery, and grocery is a low signal digit business for Amazon. So there are almost two companies that may seem alike, but they're very different in their product offerings.
We think both can grow their online business. Both can drive double digit gains as the online vertical just grows as a channel, irrespectively of what happens to brick and mortars.
I love that we spent one question on Apple and then we're like, yeah, Okay, let's go back to Amazon, which I think says a lot about the honor our spody.
I think from what I understand talking to anarog and other tech folks, it's all China. If you get comfortable in China, you can get comfort to an Apple. If not, then you know, yeah.
And they're just like the sentiments just kind of me at the end of the day, So we go to Amazon. Though for a second, what is going to be the catalyst growth driver though on the retail side or is it all just going to be focused on that cloud.
I think a lot of focused on cloud, but keep in mind the retail side brings advertising revenue. The AD revenue growth is going to be a key focus area for Amazon, not just today but also for the foreseeable future as that drives very high profit margins close to fifty percent. So we think you want to see retail grow, right, because as you get those prime members shopping on Amazon, you also get more eyeballs and you get more ad revenue.
Yeah, that's right.
I mean this the digital advertising business for a long time was infected duopoly Google and Facebook.
And then Amazon came on and in.
A matter of I don't know what's it been, pun of five to six years, they've become a huge advertising platform.
They are they control about ten percent of digital media advertising, and they're at a run rate of fifty billion, and we think they can get to one hundred billion over the next several years.
Yeah, and that's literally from nowhere standing starts. So it's really amazing. All right, guys, thank you very much. We appreciate getting both of you together. Put them Goyle on Ragrana the both for Bloomberg Intelligence, covering both the retail side of that story, and as Putam says, that's important for a lot of reasons, including the fact that it's driving this advertising business for them.
Then, of course, on the technical.
Side, the cloud has really been the profit story for the company, and really probably the multiple story for the company.
You get a kind of a hig multiple on that cloud stuff.
Right, I mean, hence the whole If you only be by one percentage point for growth, you're kind of disappointed in terms of the valuation.
I wonder if you ever, I mean, just put on my banker hat on what's I wonder if everybody has the you know, the gumption to go to Amazon and say, hey, you want to split up these companies, just spin out the cloud business.
I mean, that would be kind of cool.
What would be the downside to them?
I don't I don't know.
I mean, you know, they kind of giving up a little bit ownership of it, you know, giving it some more ownership.
I don't know. It's interesting.
I think it'd be kind of cool because I would think that would get a monster monster gosh.
Yeah.
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Tomorrow and Another Job's Day they just kind of sneak up on you every once in a while.
So we've got non farm pay rolls.
The consensus is for an edition of one hundred and eighty five thousand jobs.
Pretty solid number.
That would be down from last month of two hundred and sixteen thousand jobs, but that's certainly something that the Federal Reserve is looking at.
So let's get a little bit of a preview there.
Julia Pollock joins let's She's the chief economist for zip Recruiter, joining us on zoom from Los Angeles.
Joey, thanks so much for joining us here. What are you looking for.
In the job's data tomorrow? What do you think the Fed's looking for in the job's data tomorrow?
Going to predict that job growth will continue to slow. The three month average right now is one hundred and sixty five thousand, and I think we could even fall below that, So I think the risk is very much to the downside.
Job growth has been slowing and narrowing.
Over the course of the year, and I think it will continue to do so as long as rates cold steady at these restrictive levels.
Well, I was gonna say yes, And also I feel like headline after headline, it's like job cuts, job cuts, job cuts. So from our perspective sitting here, it can feel super dramatic, is it, or are we just like normalizing at this point?
So, you know, it's always difficult to figure out the trend in layoffs is in January, and that's because December and January are layoff season. Twenty percent of all layoffs in the year take place in just those two months, So you know, it's kind of like predicting that the temperatures are going to get colder and colder and worse and worse and worse when you're sitting in January and you're sort of bossing, you know, September through January bridgers.
We don't know, right, they could get worse. So far, layoff numbers, as tracked by Challenger Gray are lower this January than they.
Were last January.
And we know we had this huge spike in layoffs in December and January last year, but also that over the course of the whole year, according to Bureau of Labor Statistics JOLT data, layoffs were unusually low. The layoff rate lately has been one point zero percent in twenty sixteen, twenty seventeen, twenty, eighteen nineteen and average one point two percent.
So it basically are having twenty percent fewer layoffs and firings now than is normal, even though it feels as though they're all the news.
So I see in your notes, Julia, ninety two percent of job games over the past six months through December were just three sectors healthcare, the government, and leisure and hospitality.
I did not know that.
That doesn't sound like a healthy statistic for the labor market.
No, it is actually quite unusual. And the previous month it was even worse.
It was ninety eight percent. So last month job growth roddened a little bit. But that is the next big thing.
I'm going to be looking at, not the sort of magnitude of job gains, but their breadth across the economy. If they're only happening in these non cyclical sectors, they're basically fueled by the government, healthcare and government.
That isn't a.
Good sign for the economy at all.
It would give us reason to understand why consumers, why job seekers, why workers are still feeling a little glum about the situation, even though we have these huge GDP numbers et cetera.
It's because the happiness is not sort of spread equally around.
Well, here's a dumb question.
Why is that a bad sign if it's mostly leisure, hospitality, government, and healthcare.
Well, because lots of people aren't working in those industries, right, There are lots of us who are in tech, or in law, or in consulting or finance.
It's you know, there's massive demand for nurses.
Healthcare is just hiring, hiring, hiring, leveraged, and that industry shifted to workers during the pandemic and they have not lost that leverage increase. But in the rest of the economy it's different. It's not so easy for everyone to kind of move into healthcare. So when certain industries contract and the number of jobs available just keeps falling, and it's not a matter of one company doing the layoffs, so you can just go to the next one, but the entire sector contracting.
Take journalism, for example.
The media of the press, Well, you can end up having people who are unemployed for quite a long time because it's very hard for them to make a shift.
Hey, Joey, I'm looking at the forecast for some of tomorrow's data on the Bloomberg Terminal average hourly earnings year four point one percent is the projection kind of flat with last period. That seems pretty good to me. What's the wage environment from your perspective.
That is pretty good, But most of the data does show a steady slowing in wage growth. We had EASYI data yesterday that showed we've had three straight.
Quarters of declines and wage growth. You know, the annualized rate of wage growth for the.
Quarter was just three point seven percent, which is actually very close to what the FED would expect, is consistent with two percent inflation, so I think we could actually see a slightly lower number, but you know, we'll see. And it's also I think important not just to fixate
on these year over year numbers. Right, wage growth was very very fast last year and the year before in nominal terms, inflation was higher for twenty five months, So actually, if you're looking at real earnings, weges have some catching up to do to make up for the nine percent inflation we saw.
Are we seeing labor hoarding? Julia?
You mentioned how I mean, I know it's seasonal, but the amount of layofs and normally see is below the norm Yeah, Are we seeing hoarding.
So there are several anecdotes in the FED Beaige Book of Companies saying, you know, yeah, business activity is what we have more employees on hand than needed have given card levels of business activity, but we're keeping them because we expect conditions to improve in the back half of the year.
I think that's sort of code speed for we're.
Expecting I've been to cut rates and invest in to boom again and people to build, buy houses and buy refrigerators of furniture, and so we're holding on to these employees because we were burned once before and we know how hard it is to get them back. So yes, I do think that that is occurring in many industries.
I can't imagine if I own a business hoarding employees, like who can afford that?
Well, that's kind of the point you have to wonder, too, like how long until they are forced to either does the data deteriorate that much or do they need to see if the FED hikes get pushed out, cuts get pushed out even more?
Like what's the tipping point for that one?
Don't I know?
And you know, Julie, I have another thing that I just can't get my head on what's this this jolts thing. It's still like nine million job openings?
Where is everybody? Where are people working?
That number is usually five or six million, and now we're at nine. It was as high as twelve million. Are people just hanging around Starbucks all day?
So I don't put that much stock in that number.
There is a c your upward time trend in the job opening series that is not evident in any other lave market data. So job openings have kind of become decoupled from hires, from quits, from the things that they typically are correlated with. And I think if you remove that time trend.
Job openings are actually all the way back to normal.
Our data, you know, it's on online job hostings and by our accounts of de duplicated online job postings, we are all the way back to pre pandemic levels, to twenty nineteen levels, and to.
That point, Paul, you know, when I was in Florence, Italy, you know, yeah stuff, I was talking a lot of these guys who are doing you know, innovative stuff within energy technology and stuff like that, and they're trying to build all these new facilities. They're the ones who are gonna be using a lot of that IRA money. They're like, we do not have the workforce so at all, Like there's no special training program, this is all new technology. They just don't have the people and they're not going
to get them anytime soon. And I do wonder how that winds up distorting. I agree, that's a lot of the data too, yep, right, And so we do.
Have very low, very low unemployment.
Right.
The last year was like the sixth best year on record since nineteen forty when it comes to the unemployment rate after the early fifties and the late sixties, So very very low unemployment. Twenty four months of sub four percent unemployment. So it is still hard for employers to find workers.
And so I don't think.
It's that unrealistic or unreasonable to hang on to the work because.
You've got, for dear life.
Where are we in terms of productivity here? I was amazed when the pandemic hit and shut down and lockdowns and all that kind of stuff that people were still able to do their jobs pretty much from remotely.
And it's just kind of amazed me. Where are we in the productivity discussion?
You know that.
Productivity data series is a weird one.
It's shot up during the pandemic when there were massive layoffs, and those layoffs are typically concentrated among employees who are not, you know, day to day involved in generating widgets. Then measured productivity tumbles as all of those support staff, the HR people, the marketing people came back. Then it started taking up from a point above the pre pandemic trend.
And so it does look as though the investments that happened during the pandemic and a zero interest rate environment, when everyone was shifting to the computers, to doing everything on the internet, to digitalizing every industry, those investments have actually improved productivity, and we're seeing your great productivity numbers continue now.
I feel more productive, don't I look more productive?
Well, I mean you are literally standing in this position for five hours, So just from that alone, the answer is yes. All right, Julia, thanks THO. We really appreciate it. Julia Paula. She joins it from ZipRecruiter. She is the chief economist. I do think though, that longer term the labor shortage in different industries is going to be really hard, and I don't know what the longer term.
Fix that is. You have to convince kids to go to trade school.
That's exactly what I was going to say, create the incentives for the folks to go to trade schools because and we hear and we heard it just recently from George Ferguson talking about his industry, the aerospace industry.
One of the reasons Boeing and.
The FAA are having a hard time kind of getting their act together is they lost a lot of workers in the pandemic. And these are just people that hammer nails. These are people that are doing pretty specialized, you know, jobs there, and you got to get them back, you got to retrain them.
It's taking harder. I didn't think that would still be an issue, but it is.
And we're here from industry after industry, your industry in the energy space.
Wonder like, at some point does that wind it becoming longer term inflationary.
Yeah. Absolutely. I mean a lot of folks saying, forego college, forego.
The debt, debt's assourciate of the college, go to a trade school, a lot of which can be subsidized and supported. Man, you can make a good living in a lot of these industries out there. So we'll have to see how that place out. But good we'll see the jobs numbers tomorrow. We'll get a lot more info on the United States labor market, and of course Bloomberg will have full coverage on that, because that's what we do.
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Nice and manufacturing data came in better than expected. Let's break it down with Tim Fury. He's at the conference board. He knows all this stuff. Jim, thanks so much for joining us here again. Forty nine point one still in contraction move, but a big improvement there from consensus and from last period.
Yeah. Well hi wow, Hi Paul, Hi Alex. So Yeah, forty nine to one was a surprise. I mean we're heading an ins direction for sure.
Last time we had a conversation, I've been saying I thought we'd hit fifty by March.
This got there a little bit sooner.
But you know, I look at it from three standpoints, inputs, outputs, and demand.
Yeah, the input stories, it just gets better.
They're starting to stiffen up, we're investing in working and working capital represented by inventory is not contracting as much. On the output side, production is stable in January. We've heard of the December to fifty point four.
That's really good.
That's no sign of concern or dramatic growth even at this point. Employment side, we continue to take people out of the organizations which we had said that we would starting back in May, and it continues. So the real story here is on the demand of fifty two point five and new orders that kind of came out of almost nowhere. But look at that in context with the customer inventory number. So we're saying the customer inventories are way too low now and at the same time we're
saying that the new order level is stepping up. So I think those are absolutely related.
You know, our panelists companies customers have gone back to them and they've.
Probably revised their forecasts for twenty twenty four and now things runderway.
So Tim, hey, it's great to see you.
By the way, I have to say, this is a great set of data here, super surprising on different levels. When we talk about the inventory, do you think that the orders are being used for en demand or do you think the orders will be replenishing that inventory, and what does that inventory wind up looking like versus say, before a cod.
Yeah, I think it's I think it's a remedia products and raw material.
So you know, we've been really tight, tight, tight with investments in this area. We spent well, we've spent what eleven months contracting our manufacturing inventory. That really is reflected the fact that we've been managing cash really close.
In twenty twenty three, we closed the year, We closed the end of the year very lean.
Nobody was really carrying any inventory that they that they didn't have to. They cleaned the place out, So now there's a bit of a restocking going on. I think it's more about intermediate stuff alex and you know, middle run steel and aluminum.
Of truckloads and things like that.
But I think it's a positive sign that companies are willing to reinvestigate and working capital. I think that inventory number will get over fifty by the time we hit March. I'm still on that March thing. I think March is like the magic number. But I've been saying since since August September that we were in the trough. But this could be a sign that we're finally starting to come out, and I think it's about you know, the demand had to come back. There's some signs of demand here. We
do have some headwinds in February. February should have a lot more new orders coming in, so we're gonna need that to maintain that fifty two to fifty three new order level. But you know, everything kind of aligns. The other thing that's come up this morning is prices. You know, prices are growing, so you know, we have the energy markets offsetting growth in the commodity markets. Those commodity markets are probably just gonna get stronger. Plastics, aluminum steel prices
are not going to probably come down there. Lead times have been really stubborn, so you know, I think that the energy markets events will probably give some probably give way in the summertime as as demand increases it for you know, for summer travel.
But I don't see prices really going down anymore, and I don't see them going up much. You know, it's gonna be I think.
We're gonna see some slow demand kind of creep in here. It's gonna be like a slow take off of a cargo plane rather than.
The fighter jet. But we're gonna be kind of we're starting to grow again.
Nonetheless, and I think I feel even more confident that March is the right month to see that really show up.
What are the companies that you survey, what are they Are they baking in a recession for twenty twenty four? Do they just think, yeah, growth is slowing, but we're still going to grow this year.
Well, we lived all through twenty twenty three not knowing what the future look like, so there was a huge constraint on capex investment.
We undershot our targets.
You know, we thought we're going to spend twelve percent on capex last year, we spent like one percent. All of that is now carried over into twenty twenty four. I think there's some general optimism now. The softening is still continuing on new orders. The fact that the FED is that hey, we're at the top of the rate cycle is really positive. They don't really so much need to know when the first cut comes in. That's not
a direct relationship really on manufacturing. The fact that they've telegraphed that we're at the top of the rate cycle was really positive for us. So you know, things are being realigned I think, you know, Panneless companies are probably putting a stretch plan together for their business plan based on a more accommodated market in twenty twenty four.
We said in our forecast at twenty four would better than twenty three.
We said that first quarter twenty four will be similar to the last quarter of twenty three, just slightly better, but the last six months of twenty four will be much better.
So I think we're on that trajectory. This is a This is probably a month, month and a half before I thought it would show up, but it's it's welcome.
Nonetheless, he sounds so jazzed.
Tim.
Going back to the prices paid for a second, you mentioned commodities. Is that a supplier a demand story at this point, you.
Know, the utilization is fairly high, but you know, you think you see a lot more plant capacity going into the system, and I think that's going to happen. Probably a lot of this stuff is long lead. It takes three years to you know, put a steel plant in, you know, aluminum smelter, plastics, chemical plant. It takes about three years to do that. You know, I don't think we're going to see any relief on the capacity side to the second half.
Of the year, and that's what you're onto.
My biggest concern here and that is that we may see a resurgence of material price inflation at higher levels than we expected, sooner than we expected. As demand comes back and when you don't have production capacity expanding fast enough. We think we're gonna go up about seven percent I think on production capacity in twenty twenty four. The question is when do you want to do it too early? No, not really, you want to do it too late. Well,
that's going to cause price growth everywhere. So the timing of that, that's where you kind of tie in back to when of the rate cuts come into place that might spurred you know, more demand.
We may or may not have the capacity in place of key prices down. I think the biggest issue in twenty four is maintaining an acceptable price level.
Tim You're based in Miami.
Right in I'm in Jupiter, Florida.
Yeah, I've got a huge problem with that. There's no manufacturing in Jupiter, Florida. You should be in like Peoria. What are you doing in Florida?
Connecticut, isn't it. I'm in the heart of manufacturing technology in Connecticut. Now you're gott to give you some early all right, very good.
That's where manufacturing started in America, right now, Connecticut, yep.
Absolutely, our Tim Fury, good stuff. Appreciate it.
Tim Fury, Chairman of the Men Manufacturing Business Survey, Institute for Supply Management, Wisconsin, Jupiter, Florida.
Man, it doesn't get much better than that.
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So let's talk about things that are working and not working. Let's go to Rockwell Automation. So that company is a really great indicator of sort of end user demand. It provides control devices and software for industrial automation. Now reported earnings yesterday, and it tumbled the most intraday since twenty twenty two because its fiscal first quarter profit did actually miss estimates. The stock now up by almost three percent today. We are now joined by the CEO, Blake Morett. We're
really great to get this perspective. Hey, Blake, what do you think the market took away yesterday from your earnings?
Well, I think they did hear the message of continued underlying demand remaining strong. But we had a shipment miss in the quarter. A lot of that was execution, and we look at that as timing for shipments that will come back in the year. You know, we had a very strong growth last year of seventeen percent top line
twenty eight percent adjusted EPs. This is a bit of a reset year as we get done shipping off that older backlog that piled up as a result of supply chain shortages and go back to booking and billing incoming new orders. And so we're seeing lower growth in the year with some growing pains, but the underlying demand remains pretty strong.
That's kind of where I want to go, Blake, What are your tell us and our listeners and our viewers like, who your customers are and what are your customers telling you these days?
We may be the most pervasive technology in American manufacturing, so every thing from automotive and battery manufacturing to warehouse automation, food and beverage, life sciences, energy, both traditional fossil fuel as well as renewables, across that whole spectrum. Our technology, our hardware, and our software and our services are pretty prevalent.
So when do you know, Blake, if it's still the supply chain issues that you're still working through versus just weaker demand, Like, do you even know when that moment shifts?
Well, So we had an encouraging quarter in the demand side in that in Q one, so the quarter ended in December. We did see double digit sequential growth and orders off of the trough in our fiscal year, our fiscal Q four last year, and those orders increases have
continued into January, so that's a very positive sign. Now, a lot of our distributors, and most of our business does go through electrical distributors, they had higher inventory than they wanted and we expect in the coming couple of months that that inventory gets to more of a normal level so that their orders to us reflect the strong underlying demand from machine builders and end users.
Blake, how much lead time do you have in your business? What's your order book and kind of how much how much lead time do you really have?
So the product business, which is the majority of our business, those lead times are typically days and weeks in a normal period and part of our challenge in Q one was returning all of our products to those fast lead times. But in a normal environment, we get an order and it either gets shipped that day off our distributors shelf, or we're able to make it and ship it within days or a few weeks for those products.
Are you an early cycle economic read?
Is that fair to say?
You know, we certainly have exposure early in the cycle, but the so called late cycle is also an important part of our business. Whether you're talking about the traditional process industries or life sciences, we've got pretty broad exposure early,
mid and late cycle. Although I have to say with the supply chain backlog that we had in twenty twenty two and twenty three, with the distributor overstock that we're working through now, it's hard to pin a particular point in the traditional cycle on this time well.
Also because you're exposed to sort of all the structural changes too, like infrastructure act A, Chips ACT, the IRA, So that's a structural shift even though you're still cyclical. I can imagine that being quite confusing. So based on where you are and all the different cycles, how are we doing, Like how's the global economy?
Doing, you know, particularly in our home market in the US, where we have the largest market share, we see continued strong underlying demand. So we're expecting our orders to be up, you know, low single digits, and we've guided to one point up in terms of organic shipments. But that underlying demand I think remained strong. And one of the key indicators for me is continued low unemployment rates in our most important markets.
So, Blake, I'm looking at the PGeo function on the Bloomberg termol and I could see just by geography looking at your revenue against sixty percent roughly of your revenue as North America. So give us a sense of kind of North America versus rest of the world. What do you guys seeing North.
America is the strongest market. China has significant problems right now, and Europe still dealing with some of their structural issues. Out of the business we get in Europe is actually for export back to North America from the machine builders over there. But we expect for this year North America is going to be the strongest market and that's good for us because we've got home field advantage.
It feels like a US exceptionalism conversation, right like yet again, So if we just go macro them for a minute, if the FED cuts rates in May, what does that do, Like if you're already seeing us hold up pretty well, does that accelerate the economy from where you stound?
I think that could help some of the largest CAPEX projects, which you know we get some business from. But we're not as much of a capex play as some other names, and that we're pretty balanced between CAPEX as well as op X in terms of improvements additional efficiency in existing facilities as well. So I don't know that interest rates
are our biggest indicator. As I said, for the economy, I look at unemployment, and you know, I look at the amount of automation investment, both for new green fields as well as adding efficiency and resilience and existing facilities.
Blake, just explain to us kind of what your competitive marketplace looks like. Where are you, guys versus your competitors? Who do you compete against? And how's that changing?
So our big competitors are mostly the European conglomerates. Really, it's Seamen, Schneider abb in certain narrow parts of the market, Honeywell and Emerson Here in the US, where really, you know, we distinguish ourselves by having a very balanced exposure from discrete applications like automotive, to hybrid applications like food and beverage and life sciences, to continuous process applications like energy and mining and so on.
Hey blake to that point, Honeywell's not having a good day after reported earnings.
One of the worst worming stocks in the S and P.
Semens Energy, part of Semen had just been really hurt by offshore wind here in the US, I should say not owned by Siemens, but Semens owns a stake in Semens Energy. How what's your view on the energy green transition build out right now? You're losing money, you making money, What does your order.
Book look like?
It's still early innings, but we're seeing good business as a result of energy transition, and I would bucket it in three different ways. I'd look at first, the decarbonization of the traditional oil and gas company, so carbon capture projects. We've talked about the work we're doing with Occidental in their direct or capture projects, the one point five initiative, it's renewables, and again we've talked publicly about what we're doing with companies like First Solar in creating you know,
PV panels. And then it's the thing that we've been doing for our entire history, and that's driving efficiency across all manufacturing, and those are all good applications for us. You know, there's some relatively nascent areas like hydrogen that are sources of optimism, but you know, I would put them in those three main areas.
Hey, Blake, I'm looking at the an R function on the Bloomberg terminal. It shows me that there are eleven Wall Street analyst buys on your stock, twelve holds and five cells, so pretty mixed across the board. What's the message that you bring to your investors into the marketplace that.
The underlying demand remains strong, that we really have a unique position among all of those competitors and among the niche competitors. I like the hand we have, and as you know, manufacturing picks up and resets from the period of supply chain shortages. We're in a great spot to accelerate our profitable growth before.
We end here.
I don't know ninety seconds left. You mentioned jobs quite a few times. We have the jobs data tomorrow, we financial jobless claims rising the most in November today. What is your assessment of the labor market hard to get you're going to keep labor paying more?
What do you see?
You know, I think in manufacturing workforce there's still a lot of unfilled jobs, and we think that, you know, having a skilled workforce is absolutely essential for manufacturers to compete, but it's augmented with the kind of technology that we offer. So it's really that winning hand of having an enabled and engaged workforce, and we do a lot to help with workforce development, and it's also given them so called superpowers with the technology that we offer.
Superpowers sounds great.
Do you find here in the US? Can you find people for your type type of work?
You know, certain jobs it takes longer than in others. We're actually helping with workforce development programs that we offer in house and then provide labor particularly focused towards technician level jobs for manufacturers in America through our Academy of Advanced Manufacturing.
Interesting, all right, Blake, We really appreciate your time here. I know you're busy with the earnings and running a business.
Blake.
Morrett Rockwell Automation, he's the CEO over there. R okay is the ticker for the stock.
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Keitha Rongenathen She is one of the top media analysts on Wall Street, and I found out just today that she also covers Peloton. I'm not sure how that happened, but she's a great anlyst. So she joins us here, Githa, are you a Peloton user?
Him not?
Paul, Oh my god. See this is kind of this is the issue, man, So you can come riding with me anytime.
All right, Keith, what's going on in with this company here? Is it just a demand thing, a lack of demand?
Yeah?
I mean this is this is really a complete train wreck, Paul. I think investors are really losing patients right now. And actually, if you saw their fiscal second quarter, the quarter that they just reported, the numbers were actually fine. More or less. They reported subscriber growth, which which is a good thing because Previous to that, they were losing subscribers because they had a product recall for some of their bike products.
They had to completely suspend the production of their treadmill tread Plus, and then they've kind of restarted the sales on that as well. So it was it was, it was definitely a decent quarter, I think. But but what really has caused so much of frustration I think right now for investors is that there is absolutely no catalyst on the horizons, so the pain points continue to remain
pain points. There is no positive revenue growth. In fact, they are projecting a decline in revenue, and as you pointed out, this is completely due to the lack of demand. And along with that you have this persistent inventory problem which is causing a huge, huge pressure on the free cash flow of the company, and they continue to burn cash and they're not going to be cash flow positive till till the end of fiscal twenty twenty four.
So, Githa, I'm going to go with something that Paul said, which I found is super interesting earlier.
That you have super loyal users.
Why not try and just get more money out of them rather than try and all of a sudden have mass penetration.
And they've tried to do that, Alex.
So so what's the problem their credit?
Yes, I mean they really face a very very so they don't have enough of a subscriber base, right, so it's about three million subscribers, and yes, they're already charging them a good hefty amount. I mean, you're paying for hardware that is pretty pricey, you know, whether it's the
tread plows or whether it's even even a bike. A new bike costs about fourteen hundred and fifteen hundred dollars, so you know it is a pricey product, and then you have to pay a monthly fee, right so you are paying about forty five dollars per month, which is that all access subscription fee. They are trying new things though they did realize that, you know, they might need to to your point, Alex, they did realize that they might want to go out and you know, appeal to
a wider base. And so they're trying something called the fitness as a service or a rental program, which is actually taken off. So there is obviously there are obviously takers out there. It's just not enough to move the needle unfortunately for them.
All Right, enough peloton talk. Let's get to the juicy stuff. Let's get to the big media companies that you cover. Githa, I guess the most topical name these days is Paramount, the former Viacom. Byron Allen, a media mogul of some sort, has made a fourteen billion dollar offer. When you talk to your vestor clients, is this credible? Is this something that could actually happen?
I don't think so, Paul, I mean Byron I Allen has been bidding for for everything in the media space over the past few months, and he has like this long list of empty bids. Really, you know that the bid on its own is not bad at all. It was a fifty percent premium to Paramount's trading price, so it definitely makes sense, and it's I think it's good for investors. The problem is there's absolutely no visibility into how he's going to get that money, so financing is
going to be a huge problem. And then of course you have the issue of Paramount's debt or about nearly sixteen billion dollars in debt, and there's you know, there's like eleven billion dollars in senior notes, which will trigger some change of control. Provisions and has to be refinanced immediately. So there's there's just a lot of different obstacles there, and so I'm not really sure investors are thinking that this bid is going to go through.
Does Paramount Plus need a buyout? Like I feel like these rumors do swirl around a lot, like who actually needs to.
Be bought here?
Paramount does need a bit?
They do?
They really do? Okay, so Bills would would do it?
Then you listened to a lot of reasons why Byron Allen won't, but who can.
So we've had actually multiple suitors kind of circling these assets. We have David Ellison, who is the son of you know, the mega billionaire Larry Ellison, who has Guy Dance Media. He's very interested in getting Paramount Studio. Again, this is an iconic Hollywood studio, has some great ip uh you know, we have uh, you know, Warner Brothers. Discovery was also supposedly interested. You have a Polo which was also potentially interested.
Of course, none of them have necessarily come out with a bid, and so Byron Allen kind of doing what he did yesterday really forces other suitors to or other serious suitors to kind of come out and show their cards.
All right, So let's go to Warner Brothers Discovery David Zaslov. There's a company with a lot of debt too. I mean, what's the future, what's the outlook for that company?
I mean, I think, Paul, ultimately down the road, it has to be some form of consolidation. I mean, there is no way that so many of these smaller players, whether it's Warner Brothers, Discovery, whether it's Paramount, whether it's you know, Comcast with NBC, can necessarily function on their own, especially with their streaming businesses. So I'm sure at some point they're going to have to look at ways to
kind of consolidate. I'm not necessarily sure it's going to happen right away, just kind of given the regulatory environment and kind of given that whole problem with debt and very high leverage, but it will eventually need to happen, all right.
Paul, Does this make you feel like you wish you were still a banker?
Yes, because my phone calls would be a private equity. We've got private equity right here, go out there. They still have good cash flow, they can service the debt, and you can sell pieces parts at certain times, and that's how you do it. I don't think it's any strategics, but that's just me. How goes Keitha Rongingohan. Thanks so much for joining us at Githa. She is the senior Media Analyst of Bloomberg Intelligence, based in Princeton, chelseoh Cars Teleton.
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