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YouTube, Netflix, Comcast said to be interested in Warner Brothers. Who isn't interested in Warner Brothers Discovery Again, I spent most of my career putting that company together. Now they're taking it a part. Go figure. That's how the bankers and lawyers get paid. That's how it works, folks. Geith ron Gannathan Bloomberg Intelligence analyst. She covers all the media stuff. She's been covering media for gosh, north of fifteen years now, one of the best on the street. Githa, I'm gonna
put it to you. You got to get this deal done. I mean, what happens to Warner Brothers Discovery here.
Oh they're gonna get sold Paul one way or the other, and David Zaslav will make sure of that. So his whole move this morning. Yes, we got the red headline on Netflix and Comcast, but before that, basically what Warner Brothers management team did is they kind of launched this whole strategic review of the company, which was basically amounting to just putting on like a forced sale sign. So, you know, we know that they wanted to already split
their company into two parts. You have the low growth business, which was TV Networks. You have the other high growth streaming and studios. But really the problem for Warner Brothers Discovery was that they were you know, I guess the way that people were thinking about it was not everybody was kind of incentivized to put in a bid for the whole company other than Paramount. And this is really the way that they kind of drum up interest from everybody to kind of get that sale process going.
So where does Paramount stand? I mean, wasn't their offer too low? Were they going to come back? What are they doing now?
Yeah, So, you know, we had a Bloomberg report suggesting that Paramount made a twenty dollars per share offer, which was rejected. There were multiple reports this morning suggested that Paramount actually made several bits for Warner Brothers Discovery, all higher than that reported twenty dollars price, so probably somewhere even upwards of twenty five dollars, but again those were rejected.
So this is.
Basically, you know, really kind of forcing Paramount's hand to raise their price pretty significantly. We know it's been reported that you know, David's aslov is seeking something like forty dollars per share for all of the company, and so this is really his way, you know, kind of putting you know, basically inviting everybody out there to bid on all of the assets. Really kind of forcing Paramount to take that price up or the price point up for Warner Brothers pretty pretty dramatically.
All right, here's my prediction. You heard it here, folks, This will be the biggest M and A ticket certainly in the TMT space ever because they have so many companies that have to be bought sold here, so much financing, so much refinancing. Everybody's going to get paid here. The name that kind of came out of nowhere for some people GITHA is Comcast. But we know Bran, we know the team there. They are very comfortable during transformational deals here. What do you think Comcast strategy is?
So this actually, Paul, if you just kind of think about it even more than Netflix, and you know this really well the Warner Brothers Discovery really makes perfect sense for comcasts. I mean, they have linear TV assets, they have a streaming business with Peacock, they have a fabulous studio with Universal. They could do a lot, a lot with the Warner Brothers Discovery assets. And I think everybody's kind of looking at this as a once in a generation,
as a once in a lifetime opportunity. I mean, you let Warner Brothers Discovery go, there's really nothing else on the market that even compares, that even comes close to these assets. I mean you have top tier ip here, whether you're thinking about DC Comics or Harry Potter or Game of Thrones, So everybody knows they have to do something. I think it makes a lot of sense for comcasts. The only problem for them is really going to be
getting regulatory approval. We know that, you know, Brand Roberts has not exactly been in the good graces of either the FCC or the Trump administration, so that's going to be a difficult hurdle to cross. And then of course financing. I mean, this is going to be, as you just said, it's going to be the biggest deal probably for a long time to come in the media space. So we're looking at you know, tens of billions of dollars, if not maybe even hundreds.
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You know, all these companies reporting earnings, Lockheed Martin, just Rathon some really good numbers. GE Airspace rt X, which is j Ratheon, also reported some good numbers. Let's go to the analys who covers this stuff for Bloomberg Intelligence, George Ferguson. He's been covering these companies for decades and he has Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts,
George ste Ge Air. Here's a company that you know, we've all grown up with GE putting itself together than breaking itself apart into smaller companies. I think the market likes this. Ge Airspace business doesn't.
Yeah, so I think it's telling too that Larry Colep, the CEO of the combined companies, broke them apart and went with the aerospace business, right, that was the other the crown jewel. They're 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 engines 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 each showed it in the financial statements.
Hey, George, you mentioned maintenance and repairs. So does that help the company kind of offset those 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 Bowing 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 going to 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 Boeing 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 Wickie 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 wraitheon that you know, the defense contractor from up Boston area, and they make they make radars, they 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. The 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 where you're doing five or six hunderd 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. They're still in kind of eleven is 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 thoroughly drove
that Allen's business. Their collins business is a thirteen ish fourteen percent is 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 pat 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, jeorded before you go about a minute left on 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 gen T all right, you can think of if you know, in air defense, you use they make radars 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.
Yeah, So there's just a lot of demand for the products that they're going to build.
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An automaker, General Motors put out some really good numbers here and the stocks are reacting up double digits. You're Steve manjoins is Bloomberg Intelligence Global Autos and Industrials Research analyst. Steve. What are your takeaways from the results from our friends at General Motors?
Hey, Paul, I mean, the earnings report was just half of the story. The call was very, very positive, That's my takeaway. And the biggest takeaway from that call was really the mixshift towards more selling more bigger SUVs, the picka trucks. Those are usually the highest margin business for them.
Now they did get some really from the Trump Administration's tariffs on auto parts, right, wasn't that part of the discussions?
Yeah, terroriffs is one thing, but I think for twenty twenty six, the stars are really aligning for higher profit for General Motors. So you got lower terrorists but lower tariff costs for general motors and for the industry. Right, you have actually the elimination of admission penalties. So a lot of in the past automakers in the US had to pay a penalty for selling these gas guzzling SUVs and pickup trucks. Now they don't have to do that anymore.
So that's going to contribute to the bottom line, right, and then they're gonna they're also not going to sell as many evs. EV's are basically loss making for many of the automakers, So you know, you get all these contributors into the for the twenty twenty six earnings.
And Steve, maybe this is just me being a you know, a cynical Wall Street guy, but reading between the lines, I took away that message that they were backing up as much as they possibly could from evs, and if I'm an investor, that's a positive for me from a profitability standpoint. Might is that too much reading between the lines? Or do you think GM and maybe even Ford and Stalantes are backing away.
Absolutely not, they are backing away. GM just took a one point six billion dollar charge, most of it was to rationalize ev production capacity in the US. I think everybody is seeing that EV sales in the US in the next quarter, maybe two quarters. Well, we'll be down quite a bit after the poll heead demand. We'll see how what the penetration is beyond that. But you know, they're cutting capacity. They're going to have to revisit their portfolio.
Especially GM. They have launched more vehicles than you know, they're Detroit Rivals, so they're gonna have to look at that.
So, you know, evs for GM.
You know, they call it variable profit, but at the end of the day, the bottom line is still loss making for these vehicles. And you know when when when they sell less of them, uh, the mixshift improves. Uh, you know, you get and then now you're they're probably gonna even sell more uh, SUVs and and and pickup trucks. Those are typically the highest margin business vehicles for them.
So what exactly did Mary Bot have to say about the EV adoption? Does she give any specific numbers or or dates?
Extend any dates?
Now she wouldn't. She didn't give any dates, but it is still a priority quote unquote priority. She called it the north Star for General motors. She thinks that long term, uh, and she didn't really define what long term is is that there's going to be a continued shift uh into evs. And I think you know when you when you listen to some of the consumers in the marketplace, you know a lot of them who switched over to evs do
like them. I'm not sure if that the evs are are going to be there, you know, their only vehicle. I think it fits, especially in the US marketplace as a second vehicle, a commuter vehicle. So I think you know there will be there will be adoption of EV's. I think even before the seventy five hundred dollars credit was was was available, there was some you know, we did see a start of ev adoption.
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A big, big day for earnings. We had industrial companies out. We also had General Motors out. Get some consumer companies coming out with earnings today as well, Philip Mars, Coca Cola, and we'd go to Ken Che He covers all these consumer facing companies for Bloomberg in intelligence. Hey can let's start with Coca Cola. I am a Coca Cola person, but again it's been widely reported that if you put au PEPs in front of me, I'm just as happy. But I'll talk to about Coca Cola.
Ken.
What what did you hear from them? Sure?
All right, Paul so Cola Cola. Today they reported numbers that were slightly better than expected. The organic growth probably the biggest metric of all is about six percent operating margins wide and better than expected. EPs came in a little better. So that's why I'd probably why the shares are trading a little higher today. So it's good. They reiterated their expectations for the full year. They gave a
hint for next year. They said, basically, they see lots of opportunities in some product innovation, so look out for things like more rollout of the zero colin sprites, zero sugar, I should say, more fair life protein drinks, more enhanced and low sugar sports drinks, and enhanced waters. So these are really the franchise full beverage products that they're known for and so they're going to continue to innovate next year.
I should ask one quick thing. Another big news with Coke today is that they were successful in some of their refranchising. Basically, what that means is they're monetizing a lot of their bottling assets. They were instrumental in selling some seventy five percent of their Coca Cola Africa unit today. So anyway, what that does is streamlines and strengthens their global bottling network. And so I think that was another reason for investor encouragement today.
Yeah, that was some big news that came out earlier before the earnings came out. Now, if we talk about earnings, you said, the consumers are still buying the drinks, but they're buying them at higher prices too.
No, they are for the most part. And that's one of the things Coca Cola did mention today. He said, you know, I mean again, a company that's this global, you're going to have pockets of strength and weakness. And so they said, you know, in some areas are doing well, people are trading up and still favoring the premium products. Affordability, though, was a key issue in other big markets. So Mexico,
for instance, is having a tough time macroeconomics. And by the way, Mexico is also going to pass a big sugar tax beginning next year, so they're a little wary on that, and so they're going to be rolling out a lot of affordability, universal bottles, returnable bottles, smaller package of sizes. So the company, you know, it's been doing us a long time though, so they've been through, you know, some of these ebbs and flows of the markets.
It's well positioned, Philip marsh that this is the tobacco company. They had some numbers out today, stopped trading down a little bit here today.
Yeah, Paul Pilla Morris also hit their numbers. It was a really strong quarter EPs on a comparable base of seventeen percent, strong top line margin improvement. It was hard to find any fault with the actual numbers that came in. But I think what may we've got a little some people a little nervous was that they lowered their guidance for operating organic operating earnings and a lot of that
is just reinvestment in the business. One of the biggest products successes in recent years has been this zin oral nicotine product. It's a non tobacco pouch product. You put, you know, put in your mouth, you don't spit, get your nicked, your nicotine buzz that way. It's doing wonderful. The company said that now that has recently edits some manufacturing capacity and has some more supplies, it's going to look to expand the market. How do you expand the market.
You convince smokers to move to a non combustible variety, particularly in the US. So it's spent a quite a bit of money to do that. And so for those you know, with a short term mind, I guess they were a little nervous about, you know, that lowered guidance for operating earnings. But I think they're doing the smart thing longer term thout, If you're a long term investor, it's hard to find fault in that strategy.
How big is their smoke free business, it's now.
About forty one percent of their total business, and the way of ahead of their competitors. Why I say smoke free, you're talking about a combination of things, the so called heat and not burn icoas family of products that contains actually some nicotine in there that heats it, that doesn't burn it. You have the revive e vapor product like an eat cigarette, and then you also have these in
oral nicotine products. So it's combined. You have really three really strong franchises, and they're at the point now where they come on a combined basis, they're more profitable. I'm an operating margin standpoint. Then they're conventional cigarette business. So the faster this thing grows and it has a bigger proportion of their business, it's all good from a margin standpoint.
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