← Brew Markets
Loading summary
Transcript39 lines
- [00:02]
State Street Investment Management Spokesperson
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 Disclaimer Voice
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.
- [00:33]
Ann Berry
Disney, PayPal, Target, Wal Mart they all have new CEOs this week and we survey who was ushered into the top spots and who was pushed out. Granger, the century old industrial giant, just hit a 52 week high. We drill into its quarterly earnings to see what greased the skids. And just how many public company CEO roles can one person hold at the same time, we peel back the question ahead of one big, hotly anticipated IPO for Tuesday, February 3rd, it's Brew Markets Daily and I'm Ann Berry. More market details to come. But first, one of my favorite movie scenes is in Sweet Home Alabama where the father of Reese Witherspoon's character, who is in love with two men at the same time, tells her, quote, you can't ride two horses with one ass. But in business it turns out, sometimes you can. Can. Not often and almost never when those horses are publicly traded. But Jack Dorsey did it. And Carlos Ghosn did it. That's it. A CEO of multiple public companies at the same time, a teeny, tiny elite group that Elon Musk may soon belong to. Well, the Tesla CEO is also CEO of SpaceX, which is in the midst of the biggest merger of all time, marrying the spacecraft and satellite communications giant with Musk's artificial intelligence startup xai, which makes the Grok Chatbo, and hitting a combined value in this merger of a record breaking $1.25 trillion. While this mega merger comes ahead of the expected IPO of SpaceX, and the Financial Times reported last month that four banks, Goldman Sachs, JP Morgan, bank of America and Morgan Stanley have even been lined up to lead the IPO already. Now the chatter has been that the debut would be valued at about $1.5 trillion, at which point SpaceX would look to raise a historical 50 billion in cash. Well, the enlarged business will certainly need it, and that's because XAI is reportedly burning through a billion dollars of cash a month. So here's the question that we asked ourselves. Can Elon Musk be CEO of two public companies at the same time once SpaceX IPOs? Well, he's been at the helm of multiple private companies, of course, while running Tesla. We know that. But the governance limitations and demands of public company leadership are are frankly, different beasts. So to answer this question, we dug into a couple of precedents and wanted to share them with you. First off, Jack Dorsey, co founder of Twitter and of Block. Let's start there. He was CEO of both of those companies from 2016ish to 2021, and it was interesting to look at what the investor reaction was to him having that combined seat. It was often mixed and sometimes pretty critical, focusing heavily on his divided attention and his perceived absentee leadership style. And he was praised for innov at Block. But many shareholders, including the activist firm Elliott Management, pressured Dorsey to step down From Twitter in 2020 as a result of its slow growth at that point. Then there's Carlos Ghosn, who had shorter, overlapping tenures, but he still spent several years from 2016 to 2018 as CEO of the Car makers Renault and Nissan simultaneously. Added to that, he was also chairman somerset de facto CEO of Mitsubishi Motors, which was publicly traded just like the other two. Now, this all came to an end around November of 2018, when he was arrested by Tokyo prosecutors after Nissan alleged that he'd underreported nearly $80 million in compensation and misused company assets. So can Elon pull it off and join this teeny tiny club of multiple public companies simultaneously CEO seats when he becomes perhaps the CEO of both Tesla and SpaceX? Or will that be SpaceX AI when both are public? Well, the divided attention argument will almost certainly come up, especially after Tesla awarded him a record shattering $1 trillion pay package. And more profoundly than in the case of, say, Block versus Twitter, investors will wrestle with conflicts of interest arguments. Tesla is, after all, pitching itself as a physical AI company more now than being an auto one. And while its $2 billion investment in Xai may create some alignment, the question will hover as to which entity Musk will devote more of his chops to. Somehow, though one person's view, if Dorsey managed to pull off the dual seat for about six years, I have a feeling Musk is even better positioned to pull a rabbit out of the hat and do it too. And by the way, I would not rule out ultimately SpaceX AI merging with Tesla. We'll keep on watching. Coming up, hard hats, mop buckets and industrial lube grainger aims to sell it all. But are investors buying in? We take a look at today's earnings. Plus, once again, Disney announces Bob Iger's successor. Once again, he's from the parks division. We've got the latest in the leadership race at the Mouse House. But first a word from our sponsor, iherb. John, aren't you tired of the mysteries and the middlemen?
- [05:51]
John
Well, that depends what you mean because I'm reading this really good detective novel and there's both of those.
- [05:55]
Ann Berry
I mean when it comes to your supplements.
- [05:57]
John
Okay. In that case, yes.
- [05:58]
Ann Berry
That's why IHERB buys direct from manufacturers and trusted distributors to ensure authenticity. No third party resellers allowed. You can find nearly 2000 brands and tens of thousands of products to choose from on ihub.com what you won't find, hidden membership fees. They make wellness accessible globally, shipping to over 180 countries while accepting 80 plus currencies and more than 40 payment methods.
- [06:20]
John
Plus their eye tested products are continuously tested for purity and quality standards. Stock up on supplements from a Trustworthy source with iHerb. Visit iHerb.com that's iHerb.com well, earnings continue to flood in.
- [06:35]
Ann Berry
We've got a wave of tech focused companies reporting some so far more coming this week. But today we wanted to focus a little bit more on the physical world, perhaps the non tech physical world and take a look at the quarterly results of a long established US Company, Grainger, in a sector I have a bit of a soft spot for. Well, Grainger was founded 99 years ago in Chicago as a distributor for electric motors and it's grown from a small catalog business into a global Fortune 500 MRO supplies company. Just to de jargon that for a moment and break down, the acronym MRO stands for maintenance, repair and operating and it now goes way beyond electric motors. Think of all essential behind the scenes items like lubricants, spare parts for lots of different kinds of equipment, batteries, safety gear. So that's hard hats and goggles and even cleaning and janitorial supplies. Granger's goal is to sell them all to be a one stop shop. But more on that catalog in just a moment. But John, give us some details first on the company's quarterly earnings to set the stage for this one.
- [07:38]
John
Founded nearly 100 years ago by William W. Granger. So thus ticker GWW on the New York Stock Exchange market cap of $55 billion. Shares trading at over $1,100 up nearly 6% on the day, up 10% year over year. And the quarterly revenue results. Revenue of $4.4 billion was up 4.5% year over year. Earnings per share of $9.44 beat estimates by a penny. And for the year, Grainger returned $1.5 billion to shareholders through dividends and share repurchases. And you mentioned the catalog business. And I've seen that Grainger catalog everywhere I've ever worked and it still exists. The 2026 edition of Quote, the Big Book clocks in at over 3,000 pages.
- [08:23]
Ann Berry
Yeah, it's an absolute doorstop at this one. Sort of a monster if you see a physical, physical copy of it. And of course the website is just a treasure trove of everything. All these you could possibly imagine. Well, Granger has got two principal business units. The catalog is part of the traditional B2B industrial supp business, which the company calls High Touch Solutions. So that's, you know, think about it. Providing to other hardware stores and to contractors. Sales and High touch were up 2.2% year over year. Pretty decent, you know, sort of clocking in a little bit under the inflation rate, but nevertheless, you know, decent to see some growth there. And Grainger is expanding its B2B supply chain footprint, something you've seen folks like Home Depot do, by the way. Currently it's building out new distribution centers in the northwest us, in Houston, and interestingly also in Japan. There's a real international component to this business. It's got an enormous global footprint. The one in Houston is going to be pretty large, John. It's 1.3 million square feet in total. And it's going to Stock A whopping 230,000 SKUs at SKUs with the capacity for half a million. Look, here's, here's why I love these kinds of businesses. So I'm just going to, I'm going to share a story. I covered industrials for a long time in private equity. And there was one deal I worked on. We took private a business called HD Supply, which was a distribution business, not dissimilar products to these slightly different end markets. And as part of that, I had to do visits to their distribution centers as part of the due diligence. When you do these kinds of deals, it take private. You literally go and visit the locations. And there is nothing like walking in to these absolutely enormous distribution centers. And they're incredibly well organized. You see robots whizzing along sort of picking out SKUs and products in response to orders and, and the enormity of these physical spaces and the variety that's in there is absolutely amazing. I'm such a nerd. I love this stuff. It's really fascinating to walk around.
- [10:21]
John
Absolutely. And Granger was pointing out on the earnings call today that they're using AI to try to improve productivity in those spaces. Like you're saying with the. The robots zooming around. Well, the company is all about inventory. The second unit is called and I love this Endless assortment. That's their goal. In that unit, it's the e commerce website Zorro, which was launched in 2011 and it's online only. Sal, it's not the high touch business that you talked about. It offers 12 million SKUs on the website. And yesterday we talked about Sofi's virtuous cycle of engaging new members into its variety of services, trying to get them into financial services and then move them over to lender. Well, I was looking at the, the presentation today that Grainger put out and they have their endless assortment flywheel. That's what they're big on. Step one, and this is the key. Expand product assortment. They just want endless assortment. Then increase web traffic. That means increased purchase frequency. That attracts new suppliers. Step five, improve profitability. And then you're back to expanding product.
- [11:22]
Ann Berry
Assortments, which is the Amazon playbook, by the way. Right. So if you think about it in our own lives, because we're not to be. To be, that is scale is the secret sauce for Amazon. That's why we keep going back there and why it gets the pricing it does.
- [11:33]
John
And it seems to be working because last quarter Endless Assortment sales were up 14% year over year.
- [11:37]
Ann Berry
I actually do love the names of these two business units. So Endless Assortment sales really is like stack it up, you know, and sell it online. High touchscape back to B2B because it's a strategy that others have been leaning into is the idea that when you're selling to contractors, you're selling to other distributors or to hardware stores. That is more of a consultative sale. Right. People are coming to you say this is the need. And this is where Granger will say, well, let us help you make the decision. Versus on the endless assortment side, it's sort of picking and click at it.
- [12:03]
John
And they can get them on the back end with service, support, repair.
- [12:06]
Ann Berry
Exactly. And that becomes a sticky reoccurring set of ordering or reoccurring sales. So I do like these, you know the B2B. There's more to it than you might think. Well, the share price hit a 52 week high today. I pulled up some equity research and research on this because I wanted to see what the analysts had to say. Just to put it in perspective, coming into this earnings report, more than half of Wall street analysts had this stock as a hold or as a sell. And the reason wasn't that they were fundamentally worried about the condition of the company. These are good businesses, they tend to be resilient. I'll come back to that in just a moment. The issue was the price has gotten so high, the street was basically saying, is there going to be an earnings report that justifies the level at which the stock has been trading? As you said, John, the share price you said at the top was up again, hit a 52 week high today. Morgan Stanley's one I described really quickly before I came into the studio, set out a report, did a quick turnaround, keeping it an equal weight. That's a hold at an 1100 price target. So again you can see it's trading now above that. And so the pressure here is coming from the fact that the valuation here is so high it has to execute. Just one nugget for those of you who sort more financially oriented and sort of, as we know, I'm a nerd on this stuff. One of the reasons that when I was looking at the sector that it's so attractive is it's considered to be a recession resilient kind of business. And here's the reason. So if, just bear with me for a moment. If you are a business like a Granger, a lot of your cash goes on buying inventory, right? You said that. So what happens if demand slows down?
- [13:39]
John
You have that on hand and you.
- [13:40]
Ann Berry
Can get rid of it, you sell out of it, right? You don't use more of your cash to buy more inventory because you're not replenishing. So you have this sort of ironic situation where demand comes down. A business like that can actually see cash being released and that provides sort of a buffer or a cushion to be able to get through a downdraft period. So I find that kind of interesting. But this is why distribution businesses frankly have become a little bit more highly valued over time. They're considered to be, you know, a stalwart in people's portfolios. Going to switch gears and go to a business on completely the opposite end of the spectrum, which is Palantir, you know, it's a newer business and if ever there was one that was truly about, you know, hardcore technology as opposed to physical distribution centers, this one would be it. Well, last week we did an earnings roundup of more traditional defense names. Northrop Grumman rtx, formerly known as Raytheon, Lockheed Martin and General Dynamics. We did this using the ticker on a sticker format to try and whiz through them. And we promised that we would do an update when Palantir's earnings came on out. Now we think of Palantir in terms of its defense origin story, AI systems for the government. But it's also been doing a lot in the private or commercial sector. So let's hit the highlights and talk about what Palantir has been up to.
- [14:54]
John
Absolutely. So Palantir ticker PLTR on the NASDAQ market cap of $370 billion, shares are up 87% over the past year and the company reported revenue of $1.4 billion. That was up 70% year over year. And earnings per share of $0.25 beat estimate. And the outlook, yes, full year 2026 revenue guidance of $7.2 billion was nearly $1 billion higher than Wall Street's expectations and represents an expected 61% growth in revenue this year.
- [15:28]
Ann Berry
I've got it. I've got to tell you, I mean, that is beyond a blowout earnings report. And I'm just having deja vu to slightly earlier days of Nvidia, right when it just became clear that Nvidia was going to be such a winner in AI and, and it reached the point where the earnings, the backward look at the prior quarter, they were just blowing through expectations over and over and over again and to the point where people got so used to the outperformance that the share price reaction is pretty limited. And now to your point, it's all about that forward look. It's all about the revenue guidance. 2026, four year guidance here from Palantir. A billion higher than Wall street had expected. Just to repeat exactly what you were saying, John, just to force the point home. Really extraordinary. And there's something else here year that Palantir has done, it's had cynics and the cynics would say two things. Number one, it can't sustain its rate of growth. And number two, it's way too heavy on government when it comes to revenue from the government, it's got too much of a concentration issue. Well, not only has Palantir continued to outperform on the growth front, it's also continued to outperform on the diversification front in this past quarter. Commercial revenue, again, that's private sector companies up 137% year over year, hitting $500 million. Now this is what's fascinating. And I just say this as someone who works with companies a lot who are thinking about how to put more AI infused into their data and their operation systems. And I said this on Bloomberg at one point, actually, the way I can see Palantir becoming compelling beyond government contracts is becoming ultimately the enterprise resource planning software, the ERP backbone for lots of other companies. And it's happening. It's actually doing what Alex Karp said they were going to go do. Yes.
- [17:11]
John
He said today on one of the earnings calls in the press that he's doing, quote, the people focused on the market don't understand how it works on the front line, in the battlefield or in a very complex business. We have this thing that actually unlocks the underlying value of AI. That's how you get these numbers.
- [17:28]
Ann Berry
That's right. That's Alex Karp, the CEO of Palantir, who also by the way, writes very interesting shareholder letters. I would really recommend that people have full of literary references, usually everything from biblical references to sort of J.R.R. tolkien references. But yeah, I a cynic and I've actually none of the companies I work with are using Palantir, but I can actually envision what it is he's talking about. So this one's been fascinating to me. There was a bit of a sell off after the previous earnings report because there were fears that there was an AI bubble, that the aspirations for the stock were just too high. And so actually going into these earnings, John Palantir had been down roughly 25% from the all time high it hit back in early November. So it's still got a little bit of ways to go to that. Shares in Palantir today though, up over 6%. The market's liking what it's hearing. I am going to be curious to see if the analysts come out and actually put out new price targets for Palantir. If they say look, it's just realizing its potential in the stock level it's been at. But we'll keep on watching for that. Well, look, we're going to take a quick break and when we come back, we take a spin through headlines that move the markets today, including new CEOs at Disney, Target, Walmart and PayPal. Public.com just launched generated assets which helps you turn any idea into an investable index with AI. Start with any product prompt, say renewable energy companies with high free cash flow or semiconductor suppliers growing revenue over 20% year over year. And it'll get to work.
- [18:50]
John
The AI can screen thousands of stocks and we'll build you a one of a kind index and lets you back test it against the S&P 500. Then you can invest in just a few clicks.
- [18:58]
Ann Berry
Just head to public.com brewmarkets to see it in action. That's public.com brewmarkets paid for by Public Investing.
- [19:04]
John
Full disclosure in podcast description.
- [19:08]
Ann Berry
It'S 4pm on the east Coast. There it is, the closing bell. The markets wrapping up for today. Well, we don't have a ticker tape, but we'll throw it over instead to our producer John.
- [19:17]
John
That's right. The S&P 500 finished down 8/10 of a percent today. The Dow was down about a third of a percent and the Nasdaq finished down nearly one and a half percent. Yesterday. Ann, you covered Disney's mixed earnings, including the standout performance of its Experiences division. That's theme parks, resorts and Cruises brought in $10 billion in revenue during the quarter for the first time. Well, today the chairman of experiences, Josh D', Amaro has been named to succeed Disney CEO Bob Iger.
- [19:44]
Ann Berry
So he's taking over as CEO on March 18th and Iger will remain as a board member and as a senior advisor through the end of the year. Now Dana Walden, who is co chair of Disney Entertainment and was also said to be in the running for the seat, will become overall Disney president and chief creative officer. Reporting to tomorrow. Well, this marks the second time that Disney has selected a replacement for Iger in six years. And the shares were down 7% yesterday off the back of earnings because we saw there was a little bit of cost pressure despite revenue growth, shares in Disney were sort of flat on the news. Think that generally speaking, this was the outcome the market had expected. In other news though, there was another big leadership change announced today that I don't think was expected in quite the same way, and that is PayPal, the OG fintech payments company had warned that earnings will fall this year and as a result named a new CEO. And that is the former HP chief executive Enrique La, who's going to start beginning beginning March 1, which is a sign that this has been actually a while coming behind closed doors. Now the most recent CEO Alex Christus was in the seat about two and a half years. PayPal's board came out and said, quote, the pace of change and execution was not in line with expectations. I've actually a couple of thoughts on this one actually.
- [21:04]
John
Yeah, let's hear. It's only been two and a half years since he's been there, so that seems like a drastic change.
- [21:08]
Ann Berry
It is. You know, I'm so interested. So I have been following PayPal for a long time and I have been until recently a frustrated shareholder. Because I looked at this when I first bought the stock. I thought this is one, I guess I bought it about five or six years ago and I thought this is one that's got all the benefits of an incumbent. It's got the scale, it's, you know, the biggest PayPal and Venmo. It's unbelievable in terms of peer to peer. It's got a head start at the time on the likes of the Block. It should have been going into things like buy now, pay later. And it was so frustrating, John, because I remember thinking all the benefits innate to be an incumbent here, it just needs to innovate, just needs to move. It needs to get on top of these new products coming out and start pushing it out to its user base and it's there for the taking. And I just watched and watched and watched, waiting for it to sort of get the memo and pick up the pace of innovating. And I remember when Alex Chris has came over as the new CEO two and a half years ago and I thought this is the moment. Either it's going to happen now or it's just going to not be able to catch up with the likes of Block. And I was pretty hopeful. Now what typically happens is a new CEO, particularly for something that is turnaround, as this so clearly was, is given a grace period of, call it six months to figure out what's going and to try going on and to try and come up with a strategy in which to turn it around. Then it's usually given about a year to go and hire in the team that's going to execute on a new plan. And you often see change over at the top as new fresh perspective and new blood comes in. Then you're 18 months in, right. And so here you're seeing one year post that 18 month grace period, the results coming out and for the board actually to their credit to say we've given it a enough time, this isn't working out. I salute them for moving quickly because there are lots of public companies that would have just let it carry on another six months, let's just see if it happens and if it goes better. And I think they've moved relatively swiftly.
- [22:56]
John
We said there's so much innovation in the space. Yes, easy to be left behind quickly.
- [23:00]
Ann Berry
Yeah.
- [23:01]
John
And it's been a long decline, as you can see in your own portfolio with this, shares in PayPal sank as much as 18% today and are down 50% over the last year, 83% over the last five years.
- [23:13]
Ann Berry
Yeah, I sold it at the end of last year as part of my tax loss harvesting strategy. I was like I'm going to take the loss on this thing and offset some of the other gains. But yes, that was, it's been a long decline. And the fact that you saw such a sell off today is very interesting to me because it just shows that the market is saying, wow, if they couldn't figure it out. Yes, you've got a new guy in the seat. But it's not absolutely clear to us what a new plan might in fact look like. Well, lots of CEO or changing of the guard this week. We saw Michael Fidelke taking over this week at Target, looking to turn that retail chain's performance around. But he's absolutely the poster child for the insiders. Insider, he started out as the, that's an intern at the company over 20 years ago now. Target shares were up over 5% this week, still down 17 over the last year including by the way, when it was announced that he was taking over. So he's definitely in the seat to try and prove himself in the eyes of the market. Also a new CEO at Walmart. Also an insider, former president and CEO of Walmart's U.S. business. That's John Furner who's taken, taken the top job and it has been quite start actually to this new tenure. John?
- [24:21]
John
Yeah, quite different than Target. What a week. With Walmart stock up more than 24% in the past year, the company passed the trillion dollar market cap threshold today joining tech giants like Nvidia, Alphabet and Apple.
- [24:34]
Ann Berry
Well, just to put that in some perspective, Walmart is one I've been following for a very long time and I actually wrote an article about six years ago which was called Walmart is a Big Tech Stock Hiding in Plain Sight. Because at the time what was just a nascent business, both E commerce but also an ad tech business, was starting to come to light. We saw in December that Walmart actually shifted its listing from the New York Stock Exchange to Nasdaq really to try and send the signal to the market that it should be considered a big tech business. Well, lots going on there. Again, earnings continue to pile in. We're about to go brew another cup of tea or coffee because we're going to be up late tonight plowing on through them. That's it. Meanwhile, for today's Brew Markets Daily.
- [25:14]
John
Brew Markets Daily is hosted by Ambery and produced by John Cotaud. Tarika relative, Olivia Graham and Emily Milian. Our technical director is Uchene Waogu, and the president of Morning Brew, Inc. Is Devin Emery.
- [25:24]
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.