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- [00:02]
Ann Berry
Hear that? That's me in Tokyo learning to make sushi from a master. How did I get here? I invested wisely. Now the only thing I worry about is using too much wasabi. Get where you're going with spy, the world's most traded etf. Getting there starts here with State Street Investment Management.
- [00:18]
State Street Investment Management Announcer
Before investing, consider the fund's investment objectives, risks, charges and expenses. Visit state street.comim for prospectus containing this and other information. Read it carefully. Spy subject to risks similar to those of stocks. All ETFs are subject to risk, including possible loss of principal Alps Distributors Inc. Distributor,
- [00:32]
Ann Berry
the masters AI and GLP1s. Only one giant can possibly reach across them all. We break down the latest from Amazon. Whether you're old fashioned in Manhattan or feeling a little sour, there's news for all whiskey fans. We pour over the new deal bubbling for Jack Daniel's Maker and Delta. Live from a week on trains, planes and automobiles, we unpack what's new in the push for premium travelers For Thursday, April nint ninth, it's Brew Markets Daily and I'm Ann Berry. More market details to come. But first, yes, I am still on the road. I am still living out of a suitcase and I'm now in San Francisco where I've actually spent the day with a manufacturing company that I'm very deeply involved with. And the reason I'm bringing this up is because I've been busy putting to work some of the Learnings from John McNeil's book the Algorithm. So just to look back, in recent weeks, I had the great privilege of sitting down with the former president of Tesla, that's John McNeil and the author. And his real focus in that book is teaching people how to simplify processes to get rid of the waste, waste of time, waste of energy, and waste of activities that customers don't really pay you for. So we'll repost the link to that episode, Little Secret. It was one of our absolute favorites so far on Brew Markets. There was consensus across the board here and it's just amazing to be here on the ground in California, which feels pertinent since that is of course the home of Tesla putting into practice in a manufacturing business some of the learnings and insights that John shared with us. So definitely going to be revisiting that, reporting back when I'm home in New York and back in studio on some of the key actions that were taken as a result of that. Well, in a moment we'll share the latest from Delta, including its unique hedge on fuel prices and look a little bit later on a merger love triangle that is brewing up in the beverage world. We'll have the latest on reports that the maker of Woodford Reserve has not one, but two spirit suitors. But first, a word from our sponsor, Charles Schwab. Trading at Schwab is powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders.
- [02:42]
John McNeil
Plus guided learning paths with content designed to fit your unique interests. There's no sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more@schwab.com trading well, one story that
- [02:56]
Ann Berry
is near and dear to my heart at the moment is the latest on what is going on with the airlines. And I have literally been living on planes. I flew from New York to London on one airline, then I flew from London to San Francisco. I'll be going from San Francisco to New York on yet another airline. So I feel as though I'm sampling all the offerings out there at the moment in both premium and in coach and across the different carriers. Well, earlier this week, Delta Air Lines was the first U.S. carrier to report its latest earnings and it served as a glimpse not just at the three months prior, but into the financial impact that unrest in the Middle east is having on travel companies, specifically as fuel prices remain elevated. Also, some updates on bag fees being charged by Delta and reaffirmation of its push into premium. But more on that in just a moment.
- [03:41]
John McNeil
So let's start with the earnings Delta ticker Dal on the New York Stock Exchange market cap of $44.5 billion. I found this interesting. It is the largest market cap by far for domestic airline carriers, United Airlines at 30 billion and American Airlines at a $7 billion market cap and Q1 results. Revenue of nearly $16 billion was up 13% year over year, beating estimates, and adjusted earnings per share of 64 cents also beat estimates. The company kept its current fiscal 2026 guidance and shares popped 6 and a half percent yesterday after the earnings report, along with a broader rise in travel stocks yesterday with the announcement of a ceasefire in the Gulf.
- [04:23]
Ann Berry
Well, do you remember John, because we talked about the airlines recently and one thing that really surprised us was the fact that Delta did come out and reaffirm pretty strong 2026 guidance. And that was even in the face of the fact that the war in Iran had broken out. We'd already seen the impact on the closure of airspace, which was of course impacting ticket sales, specifically on flights across the Gulf region. But this really pointed to a narrative that was coming out from Delta and from others that despite the turmoil that we're seeing globally and with geopolitical uncertainty, premium travelers kept wanting to get back on planes, whether for business travel, which has seen a recovery post Covid continuing on, or whether with premium travelers just saying, even with the cost going up, we want to take our vacations. So that sort of been the context for these latest results. Now, one thing that's worth looking at main ticket revenue at Delta in this latest set of results, up 1% year over year, but premium ticket revenue jumped much more, up 14% year over year. Now passenger revenue nearly 50, 50 in that split between main cabin and premium. Well, on the Wednesday earnings call, Delta CEO Ed Bastian addressed the climate for premium customers and corporate travelers, said that last year the company saw passengers, quote, frozen by the dramat nature of the tariff uncertainty, but that the premium consumer is, quote, becoming more immune to the headlines and not delaying their investment in the experience economy. He also went on to say that as difficult it is to see what's going on with the conflict in the Middle East, I'm not sure that our premium customers are being affected by that. Which John, was just such, such a fascinating statement to make such a concrete statement about the resilience of U.S. air travel and U.S. air travelers.
- [06:12]
John McNeil
Absolutely. And he's saying what he's seeing. And I just wanted to throw out another anecdote, which is just one anecdote I heard from a family member yesterday who travels to Asia frequently for work. And his company just balked at a $30,000 round trip flight that he wanted to book directly. And they said, you know, maybe you want to do a layover to try to avoid that $30,000 price tag. So that might be what the CEO of Delta is seeing. But you know, there's always nuance in these decisions that are being made for these high priced tickets. And because of course, of jet fuel prices that have surged in the war in the Middle east, which have tightened supplies of crude oil. And just to put some numbers around that, we keep talking about the fuel prices. Jet fuel prices have roughly doubled since late February. And in the most recent quarter, Delta reported its fuel expense rose $330 million from the previous year. And in the current quarter going forward, Delta projects its fuel expense to rise $2 billion from a year ago. Of course, these projections are evolving day to day with updates in the gu And I thought this was interesting. It's worth noting that Delta along with other airlines years ago abandoned the practice of using futures contracts to hedge against these price swings. I used to hear about that, you know, they'd buy three six, nine month contracts in fuel, but the major airlines not doing that any longer.
- [07:32]
Ann Berry
Well, there is a different way in which Delta has been looking to find ways to mitigate against fuel supply disruptions. And John, this is, this one's really fascinating. Nearly 15 years ago, Delta spent 150 million bucks buying its own oil refinery outside of Philadelphia. And so, I mean this is an extraordinary move to have made. And it's interesting. I remember not as long ago as 15 years ago, but about eight or nine years ago I was investing in natural resources and it wasn't quite this, but I was looking at companies that were doing things like taking used cooking oil or other sorts of potential feedstock and using that to try to create fuel that could be used by airlines. So just lots of creativity around trying to find ways to mitigate volatility and potential prices coming from oil and gas. Well, in addition to effectively lowering its jet fuel costs by several cents a gallon, Delta's refinery has also been making a profit selling fuel to outside parties. So really turning that into a profit center. That refinery brought in over $1.6 billion for Delta in its latest quarterly results, up 56% from the previous year. So it just goes to show that of these investments, you know, a 15 year old investment, either someone had great foresight or Delta just got incredibly lucky.
- [08:54]
John McNeil
And it's a little bit more nuanced than that because I nerded out today reading different analysts looking back over those last 15 years. So 15 years later, experts are not in agreement. It looks smart in the moment, obviously when fuel prices are up, Russia invaded Ukraine and we saw a spike in oil prices. But in COVID 19, when travel dropped and fuel demand was lowered, the refinery lost over $200 million that in 2020. And the refinery is 100 years old. And Delta has apparently put in $1.6 billion investment into keeping it running over the years. And one final note on fuel. Delta announced it's cutting back on midweek and overnight flights because those bring in less revenue while of course using the same amount of fuel.
- [09:38]
Ann Berry
Well, there is one way to recoup that fuel spend too, John, which is to raise fees. And that's just been a recurring topic. On Tuesday we did Delta followed the lead of United and JetBlue. So just earlier this week raising fees for the first and second checked bags by 10 bucks. So now if you're going to check luggage, folks, if your first bag's going to cost you $45, your second's going to cost you $55 and your third is going to cost you a whopping 200 bucks. A travel light. And I say this as somebody, I've made it my mission in life to never check bags. I've traveled for eight consecutive weeks with just my little carry on. It helps that I'm small, so my clothes are small, so I can fit a lot. But I got to tell you, 200 bucks, 300 bucks in total to check three bags, absolutely astronomical at this point, by the way. Delta not alone. Often these airlines don't do things alone. Incidentally, you usually do. See signaling, which is a term used to express when one person in an industry takes an action, it sort of signals to everyone else in the industry that it's now become acceptable to do the same thing. Well, American Airlines has announced higher bag fees as well. So has Southwest. Remember that bags fly free was Southwest slogan as till as recently as just last May. Now all jumping on that bandwagon, raising their prices for bag check pretty quickly. So amazing how fast those dominoes have fallen when it comes to the cost to the consumer of just flying with more stuff.
- [11:05]
John McNeil
I know, I keep thinking about Southwest. Like you said just a year ago, bags fly free black and now they're like actually bags are even more expensive now. Inevitable. And when I the first thing I think about when bag fees go up is that these co branded credit cards that the airlines offer often give you free bags and that's a real value to the frequent flyer. Because I was thinking, well if I'm going to go on America now it's $10 more, maybe it's worth over time getting that expensive annual fee. And, and you taught me this, how valuable those credit cards are to the airlines.
- [11:37]
Ann Berry
Yes.
- [11:37]
John McNeil
Looking at Delta's earnings report, revenue in the loyalty and related category, that's what it's called, that's principally the fees, was $1.2 billion last quarter. That's how much Delta brought in off of fees principally from those cards. And that was up 13% year over year. And so it's an interesting flywheel. They can raise the baggage fee, which they get money off of that and then that might direct more people into getting the card from which the airline gets fees.
- [12:03]
Ann Berry
Yeah, that's a great point. All of the interrelatedness of the different activities. Now these airlines really like so many other travel, finding sort of a hub and spoke way to latch onto that consumer and extract more and more lifetime value from them. Well, shares in Delta ticking up about 1% during the trading session today, up 50% year over year. So lots going on in the airline sectors and again one of my absolute favorites to cover. So I'm sure we'll be coming back to this one. Let's take a break and when we come back, let's take a spin through the headlines that have been moving the markets today.
- [12:34]
John McNeil
VanEck's got a question for the market.
- [12:36]
Ann Berry
Ask away.
- [12:37]
John McNeil
What if energy, gold and infrastructure, long ignored by many investors, are becoming increasingly important again?
- [12:42]
Ann Berry
Well, Vaneck says that the assets building the future aren't all in tech. Data centers need electricity, I needs copper and gold is signaling that the old rules about money, debt and currency could be shifting. This is something VanEck's real assets team has been highlighting for years.
- [12:55]
John McNeil
Rax the Vaneck Real Assets ETF can give investors active diversified exposure across all of it in one allocation. It's built for this environment. Vaneck notes that if you're building a portfolio for a new era and Real Assets racks offers diversified exposure in one place.
- [13:12]
Ann Berry
Learn more@vaneck.com Brewracks that's vaneck.com Brewax read
- [13:19]
John McNeil
fun disclosures in the podcast description K
- [13:22]
Rumi
Pop demon hunters, Haja Boys Breakfast Meal and Hunt Tricks Meal have just dropped at McDonald's. They're calling this a battle for the fans. What do you say to that, Rumi?
- [13:31]
Ann Berry
It's not a battle.
- [13:32]
Rumi
So glad the Saja Boys could take
- [13:34]
Ann Berry
breakfast and give our meal the rest of the day.
- [13:36]
It is an honor to share.
- [13:38]
Rumi
No, it's our honor.
- [13:40]
Ann Berry
It is our larger honor.
- [13:42]
No, really, stop.
- [13:44]
Rumi
You can really feel the respect in this battle. Pick a meal to pick a side
- [13:50]
John McNeil
a participating McDonald's while supplies last.
- [13:52]
Ann Berry
Well, it's 4pm on the East Coast. The market's wrapping up. We don't have a ticker tape, so instead let's throw it over to our human ticker, our producer John Stocks reversed
- [14:01]
John McNeil
earlier losses today after Israel agreed to direct negotiations with Lebanon, raising hopes for a more durable ceasefire. The S&P 500 finished up 6.10 of a percent as did the Dow and the NASDAQ finished up 8.10 of a percent for the day.
- [14:16]
Ann Berry
Well, in terms of some of the things that caught our eye, acquisition activity remains top of the list or front of mind because deal activity keeps on rolling on and we saw today shares of Brown Forman, that's the company behind Jack Daniels and other spirits gaining over 14% over the course of the trading session. And that's on reports that Brown Forman has been approached by spirits company Sazerac about a potential merger. And if you're getting deja vu, if this sounds familiar, it's because it kind of is. Because just last week we talked about Brown Foreman being in merger discussions with rival Pernod Ricard, whose portfolio includes Absolute Vodka and others. And the rationale there was for the combined company to diversify across kinds of alcohol beverages, as well as to diversify globally. Brown Forman notably being very heavy when it comes to the United States and the North American market. Well, if Brown Forman and Pernod Ricard were to combine, that deal would result in a company worth around $30 billion.
- [15:16]
John McNeil
And we keep seeing it. The alcoholic beverage market is in decline and these companies may see dealmaking as a path to boost growth or at least pare expenses. Or as we said, it's a doubling down of weakness. So we'll have to see that and we'll have to see how this one plays out. The founding families of all three outfits maintain stakes in their companies, with Sazerac being private and remaining entirely family owned. Plus, Sazerac, which owns Buffalo Trace and hundreds of other brands, is headquartered in Louisville, Kentucky. Just like Brown Forman, I really feel
- [15:45]
Ann Berry
like Kentucky is like the world capital of whiskey. When we cover some of these, it just comes up over and over again. So at some point we're going to have to do a team tasting. We need to go and check out the merchandise. I do see sort of a whiskey tasting in the future for the Brewmarket Daily team.
- [15:59]
John McNeil
And Ann, I can highly recommend that Jack Daniels tour. I was there once, I went to Kentucky and it is in a dry county. So you go on a tour, you see all of this bourbon, all this whiskey, and you can't taste any of it. But there's one fun moment on the tour where there is a statue of Jack Daniels on some pebbles. And they say if you want to take a photo of it, here is your only chance to have a shot of Jack Daniels on the rocks.
- [16:26]
Ann Berry
Oh, I love that. Well, actually, I'm going to do one better. Instead of having a team tasting, we need to do a team outing. We need to do a team trip to Louisville to go and recapture that moment, John, and then we can all share in that experience with you. How about that? Well, earlier this week I spoke about Jamie Dimon's letter to shareholders and posited that, at least in my mind, he is Warren Buffett's successor as the king of the annual shareholder Note. But other CEOs out there are still grabbing a lot of attention and this one certainly caught our eye. That is the latest annual shareholder letter from Amazon CEO Andy Jassy. And we saw that Amazon shares ticked up about 5% over the course of today after the letter came out. Well, there are a couple of core themes we thought it was worth unpacking. First of all, is Amazon defending its spending in the quote, once in a lifetime opportunity of AI. And just to put that in context, Amazon had said in February that it expects to spend roughly $200 billion on capital expenditures this year, with the majority of that going into AI infrastructure. And that total dollar amount by the way, up nearly 60% from last year, which in and of itself already encapsulated a lot of spending on AI infrastructure. So clearly a doubling down on this thesis. Jassy did go out of his way to say that building its own AI chips gives Amazon a significant cost advantage and says that doing so saves tens of billions of dollars in capex annually at scale. So interesting moment for me at least with my investor eyes on this, looking at signs of what the return on investment might be or the targets might be as Amazon and its peers double down on this AI spend. Jassy did say that despite the heavy near term investment, he is confident that AI will deliver strong margins and returns over time and again with that share price reaction. Looks as though investors actually like that message today, John.
- [18:22]
John McNeil
And also mentioned in the letter, expanding rural delivery, investing heavily in robotics and continuing to focus on same day delivery processes. And in that vein, the company said today that its pharmacy will offer eli Lilly's new GLP1 pill via same day delivery. That was fast. And one last note on Amazon, all day in the office I saw Toby from the morning show watching golf on his computer. Because it is Masters weekend and although the series is a tradition unlike any other, it's gotten an update this year. Amazon Prime Video has become the fourth media partner in the event's history, joining the ranks of cbs, USA Network and espn. Again that makes Amazon prime number four.
- [19:05]
Ann Berry
And finally, I don't know how I can follow that, but finally, Disney stock ticker dis finishing slightly higher today amid reports that the company plans to lay off as many as 1000 employees. Now many of those cuts are expected in Disney's recently consolidated marketing department. And there is, there have been other waves of layoffs at the media giant. We did see the previous CEO Bob Iger cut more than 8,000 jobs when he returned to the CEO seat in 2022. But this really comes hot off the back of a very tough week to the new CEO Josh d', Amaro, who took over last month to a whole slew of bad news, including the partnership with OpenAI around Sora going away. So just a lot going on there. Epic Arts was another issue, another problem child for his first couple of weeks in the seed. Well, according to sources who have been reporting in reports on this, plans for the impending layoffs began before the new CEO took over last month. But no doubt this was very much in play and something that was known to him before he took that seat. So opening couple of weeks and months from that new CEO, not easy either externally again in terms of those partnerships with the likes of OpenAI and Epic internally as well. Just not a great feeling to start your new CEO tenure by having to do this tough stuff with your employee base. Which is a final thought about tomorrow's show. We get a lot of fantastic questions from our listeners and they they ask us to cover certain stocks, they ask us for our opinions and sometimes they put in requests to do real deep dives into specific sectors. And quantum computing has really become a fan favorite. We get lots of requests to cover that in more detail. And so to do that, we've decided we're going to go straight to the source this week and we're welcoming a special guest, that's the CEO of Rigetti, to come on the show and talk about the latest in this frontier technology. So Dr. Subodh Kulkarni, CEO of Rigetti, one of those scientists who can break down the tech while also talking to the money. So join us tomorrow. Bring your friends, bring your family, bring your colleagues. Come and check out that conversation again with the CEO of Rigetti. That's it for today's Brew Markets Daily.
- [21:17]
John McNeil
Brew Markets Daily is hosted by Anne Barry and produced by John Curto, Takab Dilatif, Avani Laroya and Emily Milian. Our technical director is Lonnie Fiskis, Brittany Dottocco is our audio engineer. And the president of Morning Brew Inc. Is is Devin Emery.
- [21:29]
Ann Berry
Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow, same time, same place.