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Each and every week we provide in depth research and data on some of the 2000 companies and 130 industries our analysts cover worldwide.

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Today we'll look at why Kraft Heinz new CEO is halting the process of splitting the company.

Scarlet Fu (3:09)

Plus a look at why T Mobile added fewer mobile phone subscribers last quarter.

Paul Sweeney (3:13)

But first, we begin with a deal in the energy space.

Scarlet Fu (3:16)

This week, Deepwater oil rig owner Transocean agreed to acquire rival Valeris in an all st deal valued at $5.8 billion.

Paul Sweeney (3:23)

The deal will create the world's largest offshore rig contractor by market value.

Scarlet Fu (3:27)

And this comes as offshore drilling has been booming, especially in deep waters. For more we were joined by Scott Levine, our senior energy services analyst.

Paul Sweeney (3:35)

We asked Scott to break down who these companies are and the reasons for the deal.

Scott Levine (3:39)

Two of the bigger names in offshore drilling, Transocean has the largest backlog, Valeris has largest fleet. Valeris name may not be that familiar to a lot of folks here. It was actually a combination of two companies called Ensco and Rowan a few years ago. But they are two of the biggest offshore drillers. And I think that this deal really has both offensive and defensive motivations. Offshore drilling is in a little bit of a recovery mode really. Kind of has been. Most of the drillers went bankrupt actually during the 2020, 21 downturn. Transocean was really one of the only companies that did not go bankrupt. Valeris did. And so Transocean's kind of been saddled with all this debt as a result of not having their balance sheet wiped during a bankruptcy. And so that's been a limiting factor on their growth for quite some time. And this deal, which is an all stock deal, will accelerate their deleveraging process and remove some of that burden from them and better enable them to capitalize on an upturn in off. And the second thing that's important to note here is that it brings a jackup fleet jet. So a jackup fleet jack ups are basically shallow water rigs, okay, as opposed to the deep water drill ships or floaters. And Transocean had exclusively been a floater fleet. Jack ups are more to the seabed, seabeds lower in shallow water. And Valeris is one of the biggest players There. And so this gives Transocean exposure to the jackup or shallow water market, which has really undergone an interesting phase in that it was a bit of a downturn the last couple years. The biggest jackup driller is Saudi Aramco. And a couple of years ago Saudi Aramco made significant cuts to their drilling program. They essentially, Saudi Arabia abandoned plans to increase their oil production capacity to 13 million barrels a day. And what we've seen since then is a lot of jack up rigs being laid off effectively in 2024 and 2025.

Scarlet Fu (5:56)

Right.

Scott Levine (5:57)

Indications suggest those rigs will return this year. So that market is bottomed and maybe on the cusp of an upswing. So this deal will give Transocean the ability to participate in that recovery.

Scarlet Fu (6:11)

So in terms of why now when it comes to the timing of this deal, the CEO of Transocean cited a multiyear drilling up cycle. Where are we in that cycle? Are we, you know, first inning? Are we.

Scott Levine (6:23)

It's kind of been an interesting up cycle. So we saw an inflection in 22 and 23 and 24 and 25. We've seen kind of a plateau to a slight pullback. Now I do believe we're in a recovery and have been and this has kind of been more of a mid cycle pause associated rather than a downturn in offshore drilling. So I do think the recovery is intact, but I think the cadence has certainly slowed and in fact deteriorated. And offshore drillers like energy service companies have been off to the races this year. I think the oil price has held in better than expected. Some of that is due to some of the tensions in the Middle East, Iran, et cetera, Venezuela as well. So the punchline really is that we're still in I think a mid cycle pause until maybe the second half of this year. And in terms of what inning we're in, I think we're probably like third, fourth inning, but it's been in kind of an unconventional recovery.

Paul Sweeney (7:27)

Will the regulators allow these two companies to get together?

Scott Levine (7:29)

Yeah, I think so. And it's a good question. The these are the two of the largest players that are out there. And rig's CEO expressed extreme confidence that that will be the case. It's a competitive market, there's a lot of fragment smaller players in the market and it's generally the quality of certain assets that determine which guys win which contracts. A lot of it depends on which rigs are capable of drilling for which projects. And so no, I do think that this should get a relatively quick approval certainly they're talking second half of this year. That's a much shorter timeline than the last major oilfield services merger, which was Schlumberger Champion X. That took over a year to a year and a half to approve and required significant divestitures. But offshore drilling is a is a different market.

Scarlet Fu (8:25)

Our thanks to Scott Levine, Bloomberg Intelligence, a senior energy services analyst staying with.

Paul Sweeney (8:30)

Energy on Bloomberg Intelligence. We often look at research from Bloomberg and E F, previously known as New Energy Finance.

Scarlet Fu (8:36)

So they're the team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings and agriculture sectors.

Paul Sweeney (8:45)

This week we took a look at Robo Taxis. For more on this and the state of the automated vehicle industry, I was joined by Andrew Grant, BNEF head of Intelligent Mobility. I first asked Andrew to tell us where we are with Robo Taxis and what we should watch out for in 2026.

Andrew Grant (9:01)

So at the end of 2025, there were about 8,000 working robotaxis globally. Some of those had safety drivers behind the wheel, some of them had safety drivers in the vehicle. But a significant number fully driverless and operating in various cities around the globe. I'd say about half of those 8,000 based in the US but we expect that number in total to more than double by the end of the year to around 18,000 robotaxis globally.

Paul Sweeney (9:28)

WHO are the players in this business? Names other than Tesla? Waymo. How do you think about the competitive environment out there?

Andrew Grant (9:37)

I mean, we spend a lot of time looking at the actual operations and number of vehicles deployed. So really you're looking at kind of four companies globally that have the biggest fleets of vehicles on the road. So Waymo, as you mentioned, Alphabet backed and has just raised a significant amount of money. But also you're looking at three Chinese companies with a big robotaxi fleet and growing. So Baidu's Apollo and then we ride and Pony AI, which are robotaxi specialists that are based out of China but looking to expand globally.

Paul Sweeney (10:07)

I think about just the battery electric vehicle market and I think with the exception of the US BYD and some of these other Chinese manufacturers, it just feels to me at this early stage might be able to take over the world of electronic vehicles. Is that a similar view for Robo Taxis?

Andrew Grant (10:24)

Yeah, I mean, it's interesting how different geographies are going to react and different regulators are going to react to foreign companies coming in and deploying their technology in those areas. We are really seeing kind of a race the moment for new territories. So you've obviously got the US based companies, the Chinese based companies that I just mentioned. And kind of in the middle you've got Europe, Middle East, Southeast Asia, where a lot of these companies are setting up routes and looking to deploy and kind of 2026 is the year where they're really looking to expand those services. So Uber has just announced in the earnings call last week that they'll be expanding to Houston, Hong Kong, Madrid, Zurich. There's a variety of really competitive battlegrounds across those of markets in the middle.

Paul Sweeney (11:11)

What's the safety record so far in this early testing stage?

Andrew Grant (11:18)

I mean it depends how you measure these safety standards. It's whether you're needing some type of intervention with the safety driver in the vehicle. On the whole, these vehicles are tending to kind of show safety records that are similar to what humans have have displayed and in some cases it's far surpassing that. But again, the measuring of these standards is kind of a tricky, nuanced subject that a lot of regulators are digging into at the moment. And it's really about companies working with regulators to try and figure out and kind of try to prove their safety record over time as they expand their services.

Paul Sweeney (11:54)

Talk to us about the these things are expensive to develop, maintain, deploy. Waymo just raised $16 billion at $126 billion valuation. Tesla's committed $20 billion in R& D this year. Where's the money coming from?

Andrew Grant (12:12)

I mean a variety of venture backed investors and kind of the big tech companies themselves. So you mentioned Waymo. A lot of that money is coming from its majority owner, Alphabet. And then Tesla is putting a lot of money into this. It's just about where they are putting their money. So Tesla is going with a strategy of deploying a much cheaper vehicle, but they're putting a lot of money into the data center to try and improve their self driving algorithms and their self driving system. Whereas Waymo has got a more expensive vehicle, kind of two to three times at a minimum, more expensive. So it's going to take a lot of money to kind of build out that robotaxi fleet and deploy it in the various parts of the globe where they, where they want to deploy. They've just announced that they'll, they plan to launch a service here in London in September.

Paul Sweeney (12:57)

Great. Some of those little streets. Good luck there. What's some of the gating issues here? Is it regulatory, is it capital, is it technology? What's the gating issue here for this industry?

Andrew Grant (13:08)

At the moment it's all of the above. And there's improvements that need to be made on all of those. But also just finding a business use case for these services as we've been talking about, it takes a lot of money to build them and deploy them. So finding a kind of meaningful market for them and completing kind of useful rides or meaningful rides rather than just kind of being a theme park attraction and driving small parts of the city, you actually want to kind of get those more lucrative ride hailing trips from say city center to airports. And that's been a bit tricky for some of these robotaxi companies to actually sort out. If you look at just about a week and a half ago Waymo announced that they would be opening up to San Francisco AI airport. But really what you're seeing from that is they are doing pickups and drop offs the car rental center, which is kind of a 15, 20 minute journey from there to the actual airport itself. So it's kind of compete with curbside drop offs from ride hailing vehicles. They still have a bit of way to go.

Scarlet Fu (14:09)

Our thanks to Andrew Grant, BNEF Head of Intelligent Mobility. Coming up, a look at why Coca Cola offered a more conservative full year sales outlook than expected.

Paul Sweeney (14:18)

You're listening to Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2000 companies and 130 industries.

Scarlet Fu (14:24)

You can access Bloomberg Intelligence via Bigo on the terminal. I'm Scarlet Fu.

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Scarlet Fu (17:31)

This is Bloomberg Intelligence with Scarlet Fu and Paul Sweeney on Bloomberg Radio.

Paul Sweeney (17:38)

We move now to some news at the food and beverage company Kraft Heinz.

Scarlet Fu (17:42)

So this week, Kraft Heinz's new CEO, Steve Kalain, halted the process of splitting the company.

Paul Sweeney (17:47)

Its decision, he said, was backed by the board of directors. Kalain will instead invest $600 million in developing new products, marketing them and lowering some prices.

Scarlet Fu (17:56)

The shift in strategy was the result of Kalain spending the last few weeks immersing himself in Kraft Heinz vast portfolio, including conversations with retailers and employees.

Paul Sweeney (18:04)

For more on all this, we're joined by Christina Petersen, Bloomberg News food industry reporter.

Scarlet Fu (18:08)

We began by asking Christina to explain Kalain's thinking with the pause.

Christina Petersen (18:12)

He's only been on the job since January 1st, so I think this came as a surprise to folks that the split was called off about five months after it was announced or paused. There is no end date to the pause, so we don't know if it will at some point resume. But the CEO Steve Kalane said that he came on the job knowing that there had been levels of underinvestment in Kraft Heinz's brands and decided that after reviewing all of them that there were brands that would respond to more investment. So they announced that they would be putting $600 million into things like R and D marketing and lowering some prices in hopes that that would bolster the entire company and that that would be in a better position, put them in a better position to evaluate whether they should move forward with the split.

Paul Sweeney (18:59)

So what are most investors want? Do they, you think they want the split up? Sometimes split ups work. A lot of times they don't. What if investors been saying over the.

Christina Petersen (19:09)

Past months there's clearly been some anxiety among investors since the news of the split was announced. I think that the new CEO was seen as there were hopes that he would do what he had done with the Kellogg company which split into two publicly traded entities and then were both, both of those companies were bought by privately held entities. So there was some speculation that the same thing would occur at Kraft Heinz. And Kaalaine said basically not yet.

Ken Shea (19:38)

Really.

Scarlet Fu (19:39)

There's another twist to all of this, which is that Kraft Heinz's biggest shareholder is Berkshire Hathaway. And Warren Buffett, who runs Berkshire Hathaway until he, he handed the reins to Greg Abel, said he was never a fan of that idea to split up the company. I mean he was kind of the mastermind behind Kraft Heinz becoming the behemoth it was and that didn't work out so well. But he made clear that the split was not a good thing in his mind. Do we think that has anything to do with this about face?

Christina Petersen (20:04)

I don't know. It is clear that he had publicly expressed disappointment in the split and his successor had said in a filing that Berkshire Hathaway was taking steps to sell its 28% stake in Kraft Heinz. So clearly they were nervous about this and not fans of the news.

Paul Sweeney (20:22)

So do we have any idea how long this pause will last? I mean, is he trying to turn stuff around, make it maybe better so if when they do split it up, it would be worth more? What do we know?

Christina Petersen (20:34)

They clearly are not going to make the decision this year. They talked about returning to growth in 2027. So it seems like this is a months away decision.

Paul Sweeney (20:43)

All the investment bankers who had that on their deal sheet for 2026, but.

Scarlet Fu (20:47)

They get paid in the meantime for the work that they've done right now.

Paul Sweeney (20:49)

You don't get paid to close.

Scarlet Fu (20:51)

Oh really? You can't build them along the way.

Paul Sweeney (20:53)

We're not lawyers, okay? We get paid, we take a cut of the.

Scarlet Fu (20:56)

I like how you still say we.

Paul Sweeney (20:57)

Yeah, yeah, exactly.

Scarlet Fu (20:58)

Because you feel for these guys.

Paul Sweeney (21:01)

What's the company want to do now is as a, you know, standalone company?

Christina Petersen (21:05)

Well, they've talked about releasing some healthier products. They are launching a Kraft Heinz Mac and Cheese Power Mac with protein and fiber.

Scarlet Fu (21:15)

I knew it. I knew it.

Christina Petersen (21:17)

And they will be lowering prices. They talked about the opening price points being important for low income families. So those are some of the areas that they're going to be focusing on. Some healthier options, more affordable price points.

Paul Sweeney (21:30)

Our thanks to Christina Petersen, Bloomberg News food industry reporter.

Scarlet Fu (21:34)

We move now to the beverage giant Coca Cola. This week Coca Cola reported weaker than expected quarterly sales.

Paul Sweeney (21:40)

Soda maker also offered a more conservative 2026 full year sales outlook than expected. Shares of Coca Cola fell after the news.

Scarlet Fu (21:47)

The outlook points to the challenges faced by the incoming CEO Henrique Braun as the company works to win over shoppers with its widening portfolio of beverages.

Paul Sweeney (21:55)

For more, we heard from Ken Che, Bloomberg Intelligence Senior Consumer Products Analyst. We first asked Ken to tell us what's concerning investors about Coca Cola.

Ken Shea (22:03)

I think what may be concerning the market a little bit about Coke is that the mix was not as favorable as it had been. Also, the company over the past couple of years had been relying heavily on price mix to boost the top line. It was a considerable slowing in the quarter. Having said that, there's always some noise in the fourth quarter. It's hard to draw too many conclusions from the fourth quarter. But I think the market is also being spooked a little bit by the guidance for next year which came in a bit, a little bit light. The company's long term algorithm is to generate about 4 to 6% organic revenue and from that it can generate high comparable EPS growth. And it did that in 2025, in 2026. So they're saying 4 to 5% top line and 4 to 5% EPS growth. And so that's EPS growth again, that's excluding currency effects is not only below their long term algorithm but also below consensus expectations. Going in.

Paul Sweeney (23:06)

What's the, you know, we always talk a lot of your companies, the consumer products companies and staples companies. You think about them as kind of a gdp, maybe a little bit GDP plus kind of growth here. Is there any secret sauce to the Coca Cola story or is that the way we should think about it?

Ken Shea (23:20)

Well, there's a lot of truth to that Paul, because Coke is in like 200 markets around the world. You know, I guess the way for growth is lunar at this point. I mean they're everywhere. But I think there's going to be a new CEO on March 31, Henrique Braun. He's a longtime veteran at Coca Cola. He was the coo, used to head up Latin American operations. I think there's a lot of confidence in his ability to take the reins here and I think what he's going to spell out in his vision next week at Cagney, that's when they usually.

Paul Sweeney (23:52)

Do it, that's where you'll be.

Ken Shea (23:55)

Yeah, well I think he's going to say that they need to step up their marketing and innovation here to boost that top line growth. And I think they're going to talk a lot about functionality, something that we talked about with PepsiCo. What I mean by functionality? Well, well consumers want more from their beverages than just taste good and hydrate them. They want to not only have zero sugar, but if they want to have more electrolytes in their water, it wants to have more protein in their drinks. Particularly the GLP1 crowd. They want to have fiber, which Coke offers in its prebiotic sodas like Simply Pop. So these are the kind of things they're going to talk about in terms of product innovation, I believe next week. In addition to that, I think the company is going to spend more on marketing, digital marketing to get the message out to new young consumers.

Scarlet Fu (24:45)

I guess the idea is to just have your drink replace your food. I guess Zero Sugar actually was a standout.

Ken Shea (24:53)

Right.

Scarlet Fu (24:53)

With Coca Cola Zero Sugar posting double digit volume growth in the quarter. When you say that they want to focus on the innovation and get the word out, what does that mean in terms of spending on marketing? What does that mean on, in terms of capital expenses?

Ken Shea (25:07)

Well, I think broadly speaking more social media advertising, I mean on a purview basis that's a lot more cost efficient than you know, traditional ways like television. Paul, you would know that, right? Analyst days so it's more of that. It's also working more closely with their bottlers in terms of co marketing ventures. That could be a wide range of things, not only digital marketing, but perhaps coming out new packaging, whether it's multi packs to attract, you know, an economical consumer to spending more on its fountain dispenser. You see a lot of, a lot of fast food restaurants where they can make their own sodas and so on. Spread that out more to have more consumer engagement. No matter where they are.

Paul Sweeney (25:51)

Yep.

Ken Shea (25:52)

So I see more of that.

Scarlet Fu (25:53)

Our thanks to Ken Shea, our senior consumer products analyst.

Paul Sweeney (25:56)

We move next to news on the toy and board game maker Hasbro.

Scarlet Fu (26:00)

This week, Hasbro reported that it more than doubled year over year revenue from its popular card game Magic the Gathering in the fourth quarter. Shares of Hasbro jumped after the news. So we brought in Lindsey Dutch, our consumer hardline senior analyst, and began by asking her to break down Hasbro's results.

Lindsey Dutch (26:15)

So the story for Hasbro is, you know, the results in 25, including the fourth quarter, is really being driven by their wizard of the coast digital gaming segment. That that segment has been growing rapidly. 45% on the year, 60%, I think, for Magic of the Gathering in the quarter. So just tremendous growth coming out of that brand, better than expected and that that unit is really going to carry the growth in 2026. That the outlook for the consumer products with their toy segment is still kind of weak. So it's really coming out of that digital gaming segment. But I think investors are pleased with the outlook there just because it's. They're lapping very difficult comps. So to see solid growth in 26 coming out of that was a good surprise.

Scarlet Fu (27:01)

Lindsey, what about tariffs? Is this something that Hasbro has figured out and it's no longer something that leaves its earnings to be kind of unreliable and they've kind of smoothed things.

Ken Shea (27:12)

Out.

Lindsey Dutch (27:14)

So it definitely affected the year. So about $40 million in the fourth quarter, a headwind for margin there, especially on that consumer products segment. So that margin did decline year over year, which was a disappointment. That's certainly going to be a headwind for profitability, at least in the first half, and comps will get easier in the second half. But Hasbro did note that, you know, much of the cost savings program that they're working on and other supply chain efficiencies, they were able to offset a significant, significant portion of that cost. So that is a good sign. But there's still a little bit of a headwind for the next two quarters.

Paul Sweeney (27:54)

I'm just looking at the FA function on the Bloomberg terminal gives me all the financial analysis and boy, the operating income profit for the Wizards of the coast and the digital segment is huge, whereas the profitability of their regular toy business, not so much. Is a company just throwing all the resources into their digital stuff. Is that the strategy?

Lindsey Dutch (28:14)

So they have definitely been pushing for several years now to become a bigger player in that digital world, but also really to become known for that. So I would Say, you know, one of Hasbro's big brands, Monopoly, that, that, that's what many people know that the company for is that traditional Monopoly board game. But they are, they are pushing into this world of digital games. You know, they want to be valued as such. And I will say, you know, they do have a digital version of Monopoly, Monopoly go. And that has done very, very well over the past couple of years. It continues to surprise, including in the fourth quarter. So they're definitely moving in that direction. But that toy segment, consumer products, you know, still is pretty large. It was still around 50% of revenue for 25. I do think that will, that mix will come down over time, but it's still a big piece of their business that they can't ignore.

Scarlet Fu (29:08)

Lindsey, I also noticed that in this latest earnings report they announced a $1 billion stock buyback authorization. I believe this is the first buyback since 2018. What does that signal to you?

Lindsey Dutch (29:20)

You know, I think that there Hasbro is still working through their capital allocation priorities. They are still focused on reducing leverage. You know, their dividend has been flat for quite some time. So I think they're looking at different avenues now that they're in a much better financial position than they had been maybe a year or two ago. So I think it's just a signal that, that that position is solidly better and they're looking to redeploy cash in different ways that they maybe couldn't have done a year or so ago.

Paul Sweeney (29:51)

Our thanks to Lindsay Dutch, Bloomberg Intelligence Consumer Hardlines Senior analyst.

Scarlet Fu (29:55)

Coming up, a look at why CVS Health is repeating its profit guidance for 2026.

Paul Sweeney (29:59)

You're listening to Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2000 companies and 130 industries.

Scarlet Fu (30:05)

You can access Bloomberg Intelligence through bigo on the terminal. I'm Scarlet Fu.

Paul Sweeney (30:09)

And I'm Paul Sweeney and this is Bloomberg. Support for the show comes from Public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts. Yep. High yield cash. Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public.

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The pulse of every community. They bring people together, create opportunities and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level that makes it possible for you to connect, learn from each other and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions as you navigate the complexities of running your business. They'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more@chase.com business chase for business make more of what's yours the Chase Mobile app is available for select mobile devices. Message and data rates may apply JPMorgan Chase Bank NA Member FDIC Copyright 2026 JPMorgan Chase Co. Finding the right promotional.

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Scarlet Fu (33:15)

This is Bloomberg Intelligence with Scarlet Fu and Paul Sweeney on Bloomberg Radio.

Paul Sweeney (33:22)

We move next to earnings from the telecommunications company T Mobile.

Scarlet Fu (33:25)

This week, the company reported quarterly revenue that beat estimates but had earnings that missed analyst projections. T Mobile also reported it added fewer mobile phone subscribers than analysts expected last quarter.

Paul Sweeney (33:36)

This comes as the company aims to distinguish itself from competitors in value and network quality with promotions like free Netflix subscriptions and Wingstop Chicken for More, we.

Scarlet Fu (33:46)

Brought in John Butler, our senior telecom analyst.

Paul Sweeney (33:48)

We first asked John to break down why this could be considered a disappointing quarter at T Mobile.

John Butler (33:53)

I think one of the things that really impacted them is we've seen Verizon, which now has a new CEO who's come in, he's very volume focused. So he's out there. They're promoting heavily, they're trying to win new subscribers. And I think it took a bit of a dent out of T Mobile's growth in the fourth quarter. I think one thing T Mobile did which was smart is they combined the 4Q report with a capital markets day update, they updated their 2027 guidance, and they increased their free cash flow outlook for 27 by 1.5 billion. And so when you saw them do that, you saw an inflection in investor sentiment almost instantly because, again, this has gone from a story of revenue growth. Now they're pivoting more to free cash flow growth. They're really pointing investors to that bottom line to get the focus off of revenue growth as things get more promotional and as industry growth slows.

Paul Sweeney (35:03)

So is this a new wave of just, I guess, across the board? If Verizon's getting a little bit more promotional, does T Mobile to att, do they have to respond or are there other things they can do?

John Butler (35:14)

So, great question, Paul. Right. We're in a mature industry backdrop now. Growth overall is slowing for everyone. T Mobile is not alone in pointing to free cash flow growth. You've got AT&T and Verizon doing the same thing. And so I think, again, with that new CEO in place, now you've got T Mobile sort of driving a growth story that centers on not only smart promotion, but also driving into adjacent markets like advertising and even credit cards.

Scarlet Fu (35:50)

Yeah, I'm a T Mobile subscriber and there's always a ton of emails from the company offering all kinds of different services and deals. And it really feels like they're just trying to envelop you into their ecosystem. John, I kind of call the effort to sell Internet access to ad broadband customers a side hustle for these telecoms companies. But this is how they can make sure that they continue to build out their customer base even as they try to fight for market share when it comes to mobile phone subscribers. How is that side hustle going for T Mobile?

John Butler (36:21)

So this side hustle, as you call it, and I think that's a good word for it, is still small right now. I think the real opportunity for them in the near term, Scarlett, lies in the Broadband business, they're pushing into fiber. Another side hustle. It's small, but I think over the next couple of years it could increasingly contribute to growth. And then at the core of the broadband business is their fixed wireless access business. So delivering broadband to the home over cellular spectrum, that's been very popular. And T Mobile remains a real leader there. It continues to be a growth engine for them. And so I think when you pair that with the ad business, the credit card business, and more importantly the fiber business, it all adds up to help sustain that, that free cash flow growth and call it the, the 5 to 6% range, maybe even more as we go forward over the next three years.

Paul Sweeney (37:24)

John, about 30 seconds dividend policy. T Mobile's got a 1.8% yield, Verizon 5.6% and AT&T 3.9%. So there's something for everybody in terms of investors. Does T Mobile, do they worry about their dividend yield?

John Butler (37:39)

Little less so than share buybacks. In fact, one of the things they did with Capital Markets Day was announced that they're buying back buyback 5 billion in shares over the course of the first quarter here, which is double the normal rate. So, you know, I think they're leaning more into that than dividend growth, although it's part of that share buyback program and it's going to continue to be as we go forward here.

Scarlet Fu (38:04)

Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analyst.

Paul Sweeney (38:07)

We move next to some news from the health care company CVS Health.

Scarlet Fu (38:10)

This week the company disappointed Wall street by repeating its profit guidance for the full year.

Paul Sweeney (38:15)

It's a move analysts are calling a letdown after a strong fourth quarter performance.

Scarlet Fu (38:19)

And it comes as CBS faces scrutiny from lawmakers and regulators in Washington who are concerned about the rising cost of health care.

Paul Sweeney (38:26)

For more, we were joined by Jonathan Palmer, Senior Equity Research Analyst at Bloomberg Intelligence.

Scarlet Fu (38:30)

We first asked Jonathan to give us his take on the latest results at CVS.

Jonathan Palmer (38:33)

I think what investors were really focused on was 2026. They had done an investor day in December and already weighed out 2026 guidance and they kept it the same. So that was a little bit of a sigh of relief for investors in managed care. Managed care has had a pretty challenging couple of years. Most recently, the center for Medicare and Medicaid came out with some advanced rates for Medicare payments in 2027. That caused all the stocks, whether it was UnitedHealth or Humana, to pull back pretty significantly. The important takeaway, I think, was that even though that happened and CVS is gonna advocate for better payment rates. Their goal of turning their health care benefits business around isn't really dependent on that and they're still going to hit their margin targets in the future.

Scarlet Fu (39:21)

Did they talk about what kind of risks are involved? I mean, obviously big policy risks remain a headwind here for not just cvs, but for the entire sector. But did they address how they're thinking through those challenges?

Jonathan Palmer (39:34)

Well, the, the industry has been in the crosshairs of Washington for forever and that hasn't really changed. I mean, interestingly enough, Senator Warren and one of the Republican senators actually just introduced another bill to break up these companies. So, you know, that's, I think, table stakes for them. You know, they're always in the crosshairs here. Whether we actually see some huge sea change out of Washington. I mean, I do, I think the odds are better than they were in the past. Yes. But I don't know that a lot of people or investors worry about that on the day to day. I think it's a pretty low percent chance that these companies get broken up anytime soon.

Paul Sweeney (40:11)

What's the call on the CVS and this peer group here? Healthcare, is it supply chain? Is that the sector or. It could be. Okay. Your industry, I have no idea.

Jonathan Palmer (40:21)

I think of it as healthcare services.

Paul Sweeney (40:22)

Okay, that's good.

Jonathan Palmer (40:23)

More broadly and so that encompasses everything from the managed care companies to hospitals, everything under, under the sun.

Paul Sweeney (40:29)

I watched the pits though, so I am getting smarter about the whole emergency room thing.

Jonathan Palmer (40:35)

I think the call here is we're very much in a holding pattern in this world of managed care. There's a lot of things swirling around in terms of these Medicare rates and star ratings and really like the nuances of how they run their businesses. And there's been a, there's been a real hard, how do I say, this era of, of compression and margin for those businesses and everybody's trying to build that back up and it's, you know, when you're contracting and you have members coming in and out of plans and you're dealing with the government, these things don't get fixed overnight. So I think a lot of people are waiting for more clarity on where things are going and can the improvements that a lot of these companies have talked about actually show up in the numbers?

Scarlet Fu (41:21)

Who would you say is CVS's main competitor? Because it's a vertically integrated health care company, it's no longer a drugstore. You know, managed care is a big part of its business. Once upon a time I might have said Walgreens, but that's not the case anymore.

Jonathan Palmer (41:34)

Yeah, I mean they're very clearly the best run pharmacy out there now that Walgreens has has succumbed to private equity and we've seen Rite Aid just go out of business. I mean the best peer comparison is UnitedHealthcare. But even then they're very different animals because UnitedHealthcare owns a lot of technology assets that CBS doesn't. They also own a ton of provider assets that CBS doesn't. But in the areas of managed care and the PBM they match up pretty well. And then there's Cigna in that business. Those two businesses as well.

Paul Sweeney (42:06)

Our thanks to Jonathan Palmer, Senior Equity Research Analyst at Bloomberg Intelligence.

Scarlet Fu (42:10)

We move next to news from the hospitality giant Hilton Worldwide.

Paul Sweeney (42:14)

This week Hilton reported fourth quarter earnings that beat analysts expectations.

Scarlet Fu (42:17)

The company's ability to add new hotels to its global network ended up driving growth.

Paul Sweeney (42:22)

For more on this we are joined by Brian Egger, Bloomberg Intelligence Senior gaming and launching analyst. We first asked Brian about what Hilton reported from an earnings perspective.

John Butler (42:29)

Yes, I mean what we saw in the quarter was kind of mixed in terms of us being down a little bit or maybe a little below revpar in the fourth quarter mostly because of the government shutdown. So a bit weaker inbound travel to the US A little bit weaker government travel. But the outlook for next year, I.

Scott Levine (42:46)

Should say this year 2026 is pretty good.

John Butler (42:49)

1 to 2% RevPAR growth.

Paul Sweeney (42:51)

That's revenue per available, per available room.

John Butler (42:53)

Yeah. And so leisure group, luxury, all kind of strong international, a little stronger than the US but although this is an aging upcycle in the lodging industry, it's still got some likes to it.

Scarlet Fu (43:06)

Now Hilton along with many of the other hotel companies like Marriott has a asset light business model which means that it's brand licensing. Right. They don't actually own and manage any of their own properties and that allows it to move more nimbly. The profit margins are much higher. What's the downside of that Brian?

John Butler (43:22)

So I mean there's some benefit to actually owning the real estate when you're really in an upcycle. But it's kind of fee based model is a very capital efficient way to expand and grow. You get your franchise fees and management fees. They've got a little bit of own hotel exposure as well. But most of the lodging companies separate from the REITs are actually asset light manager franchisers with some owned assets.

Paul Sweeney (43:45)

Yeah, I'm looking at, you know, you got a company with you know, 13 billion of revenue. Call it you know, 4 billion of EBITDA 100 million of Capex. Are you kidding me? That is awesome. So builds, who builds a, if Hilton wants to build a new hotel in south beach, they don't build it, somebody else builds it.

John Butler (44:03)

Yeah, so you're, you have like ownership entities obviously you've got the reit, Slate park hotels, resorts and others that own the real estate. So this is as you said, like an asset light, franchise management, tree driven business. With some owned hotels, there is some own exposure.

Paul Sweeney (44:18)

So what do they do with all the free cash flow they get? You know most of that EBITDA goes down to the free cash flow line.

John Butler (44:23)

They have been returning capital. Right. So they've got capital returns and you know there is real opportunity for growth within their business model. And a lot of that is international. A lot of conversions, a lot of conversions from other assets that fit very well under their brand flags. And they have also been launching some new brands as well, kind of that lifestyle category.

Scarlet Fu (44:42)

How many brands do they have right now?

Jonathan Palmer (44:44)

So where are they now?

John Butler (44:46)

I know Marriott's 31. I'm trying to remember what is right.

Paul Sweeney (44:48)

That's all those 31 is that just slice and dicing the market?

John Butler (44:52)

It is. I mean, yeah. I think overall if you slice the market segment wise, Hyatt and Marriott are more prominent in the luxury high standard. Hilton has some luxury, but it's also got a very solid mid scale limited service portfolio. And so what you tend to see is that in this environment, luxury upscale tends to outperforming and the limited services is somewhat weaker. Partly because that's where you've got the government travel, you've got the transient independent business travel, but stuff like leisure group luxury, particularly international markets, uae, Europe, non China, Asia, all have been really quite strong.

Scarlet Fu (45:32)

That was Brian Egger, Bloomberg Intelligence Senior gaming and lodging analyst.

Paul Sweeney (45:36)

That's this week's edition of Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2,000 companies and 130 industries.

Scarlet Fu (45:42)

And remember, you can access Bloomberg Intelligence via by go on the terminal. I'm Scarlet Fu.

Paul Sweeney (45:47)

And I'm Paul Sweeney. Stay with us. Today's top stories and global business headlines are coming up right now. This podcast is brought to you by Wise the smarter way to manage your money internationally. If you're getting a headache from juggling different currencies and different bank accounts in different countries, there's a better way to receive money in the currency you need without the slow transfer times or hidden fees. Meet Wise, the savvy way to handle your money internationally. Hold balances in up to 40 currencies with the mid market exchange rate on every conversion. Whether you're receiving payments from tenants abroad, earning as a digital nomad, or converting dividends from your international investment, the WISE Multi Currency account is for you. Be Smart Get Wise Download the Wise app today or visit wise.com Terms and Conditions apply. With VOLI from Ishares, you get access to both monthly income and growth potential.

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