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- [00:00]
Ann Berry
Many employees can't afford a hefty medical bill that pops up out of the blue. But it happens. And employees who are financially stressed are understandably more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, Aflac plans help with out of pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more at aflac.com/brewmarkets that's aflac.com/brewMarkets
- [00:26]
John Coteau
Microsoft on its way to the biggest daily market cap gain in history. We examine why the stock is up and why rival matters is down. Airlines reporting record revenue but spending billions more on fuel. We put tickers on a sticker and race through the sky. High earnings results and Chipotle, its turnaround recently faced an unexpected stress test, but it appears the burrito chain passed with flying colors. We break down why. For Thursday, July 30, it's Brew Markets Daily and I'm Ann Berry. More market details to come. But first, Chipotle shaking off the cyclosporus scaries to deliver a much stronger than expected quarter. The fast casual dining company ticker CMG today reported adjusted earnings of 33 cents a share just ahead of Wall street estimates. While eking out that beat was a win as Chipotle absorbed higher food and packaging costs instead of passing them fully on to customers. And another victory lap came as the company blew past revenue expectations. That top line climbed over 9% to hit more than $3.3 billion with that all important sector metric. That same store sales rising 2.2% comfortably beating forecasts of just over 1% thanks to both higher traffic and modest menu price increases. Then there was new unit growth that was healthy too. For the quarter, 100 company owned restaurants came to life. But the biggest headline was the outlook. And we know the market loves the forecast. Management raised its full year same store sales growth forecast from essentially flat to low single digits, not least thanks to menu innovation with new offerings. We've talked about some of them here on the show including Honey chicken and the return of Chicken al Pastor to help drive customer traffic. Well, all this good news was especially notable because investors have been worried about how the recent cyclospora outbreak went linked to iceberg lettuce at competitor Taco Bell would hit Polai's turnaround momentum this year. And just to explain the link, Chipotle has emphasized that its own letter supply is not linked to the outbreak. It doesn't use shredded iceberg lettuce and sources its romaine from California which is not the location linked to the problem, but the negative headlines have weighed on fearful customers sector wide. I can only speak for myself. I know I have stopped eating lettuce no matter where I am and no matter what type, rational or not, though that may be. And Chipotle's July sales did dip about 2%, with management cautioning that the third quarter will likely be the most challenged in terms of a lingering impact from the letter's headlines. Chipotle market cap, just under $50 billion, has been looking to get the share price going again. It's still down over 11% for the past year and that's even after a more than 13% pop today. So there are green shoots. The big question for the specific quarter coming up on Will its operational efforts continue to outweigh a health care scare it can't control? A big second half of the year coming up for the business now. We're going to keep on watching. Well on now to other headlines from the day's trading session, starting with Meta shares falling nearly 8% after investors digested its massive spending bill. Now the company said that free cash flow plunged 91% from a year ago as capital expenditures on AI continue to surge.
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And going forward, Meta raised its spending outlook, expecting to spend as much as $145 billion this year. And once again, CEO Mark Zuckerberg teased the idea that the company might lease out excess system capacity to third parties, saying, quote, we're getting a lot of offers for Compute at a significant premium over what we paid for it. Well, today investors appear concerned about Meta's pace of spending and might be looking for more concrete details around possible revenue
- [04:22]
from excess compute over to a company with a thriving cloud computing business. And that is Microsoft shares of the company Ticker MSFT jumping more than 16% after delivering a beat on both revenue and earnings.
- [04:36]
Azure Cloud revenue surged 43%, its fastest growth in four years, suggesting Microsoft's AI investments are translating into stronger customer demand. Capital expenditures also climbed sharply, rising 70%. But unlike Meta, investors appeared comfortable with the bill.
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One note there. Microsoft is on Track to add $490 billion to its market cap today, which would be the largest one day increase in market value for any stock in history. And that is saying something when we see this sheer magnitude and volatility in tech stocks that we have done over the last 18 months.
- [05:10]
Moving over into retail shares of Steve Madden Ticker shoe s h o o that's great. Jumped more than 7% after the footwear and accessories company beat Wall Street's estimates and raised its revenue outlook.
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Growth was led by its namesake Steve Madden brand, which CEO Edward Rosenfeld called the quarter's quote highlight direct to consumer revenue climbed 30% from a year ago, underscoring continue in online and owned retail channels.
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The results suggest that shoppers are still willing to spend on apparel even as high prices and economic uncertainty continues to pressure budgets and or Steve Madden is making a product that consumers want. Shares in the company are up more
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than 10% this year and sticking still with earnings. Shares of Starbucks ticker SBUX rose more than 2 1/2 percent. That's after the company posted its fourth straight quarter of same store sales growth, that magic metric up 7.9% for the quarter. The coffee chain also beat Wall Street's top and bottom line estimates and raised its outlook.
- [06:10]
And this one data point stood out to me. Starbucks refreshers have grown into a $2 billion business. The juice based drinks are helping drive afternoon traffic, giving the company another growth engine beyond its traditional morning coffee rush.
- [06:23]
The results also jess that CEO Brian Nichols back to Starbucks turnaround is gaining traction. The company has spent heavily on labor and store renovations to improve sales, service and the in store experience. Investors have been waiting to see signs that this is working and shares of Starbucks are up over 27% this year in response. And finally, since we started the show with Chipotle navigating the letter scare, let's finish headlines with an update from Taco Bell parent Yum Brands.
- [06:51]
That's right, the company reported earnings today and shares rose 3% after leadership assured investors that the foodborne illness outbreak appears to be a temporary setback and and that sales trend are already improving.
- [07:02]
Well, Yam delivered a strong quarter or so profit, more than doubling from a year ago, helped by robust same store sales growth, particularly at the beleaguered Taco Bell. Well, let's take a quick break and when we come back we fly through airline earnings to see how the carriers are responding to soaring fuel prices. Puns galore in this one.
- [07:21]
Commercial Announcer
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- [07:50]
John Coteau
airlines have all reported Q2 earnings over the past few weeks and we're seeing that travel demand is up. Revenue is breaking records, but then again, so are fuel prices. Overall, it's estimated that the entire airline industry's profit will be cut in half this year because of the spike in jet fuel costs. Well, John and I are going to run through the earnings of the biggest carriers with our favorite form of role play. Back by popular demand, we have ticker on a sticker. We will take turns telling the earnings story of each airline going from largest market cap to the smallest. So, John, reflecting that you are the largest, kick us off.
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That's right. I am the largest. I am Delta Airlines ticker dal on the New York Stock Exchange. And I've written dal on this sticker that I have attached to my shirt, the market cap of $57 billion and shares up 25% year to date. I just reported record revenue of $17.5 billion, up 14% year over year. That beat estimates and my adjusted earnings per share of $1.56 also beat. And, and we're all going to talk about our fuel bills. And mine was $4.4 billion. Unfortunately, another record. It's the highest quarterly fuel expense in my history. And even though I reaffirmed full year guidance, I saw my share price drop. I guess after a 25% rally earlier this year, reaffirmed guidance does get a bit boring. Now, of course, we have to talk about the edge that makes me unique among all of the airlines. I actually own an oil refinery in Pennsylvania. It helps in two ways. I, I make money selling that fuel. And revenue there jumped 83% this past quarter to over 2 billion. But also, owning that refinery means that my fuel cost is lowered by about 11 cents a gallon. Also, we're all going to talk about our loyalty programs. This is a great line on the earnings call. There's no numbers around it, but my CEO Ed Bastian said if you ask a consumer why they chose Delta, they'll tell you it's because it's Delta.
- [09:46]
Well, there you go. You're marketing, working Delta. But moving on, I am now going to be United Airlines. That's ticker UAL on the nasdaq. Here it goes. Sticker coming off the paper coming onto my shirt. I'm wearing my sticker market cap, $40 billion. My share price up 10% this year. Well, Delta, I'm going to one up your fuel pain. Mine jumped 84% this quarter, which is the biggest swing of the big four carriers. I now expect almost $6 billion more in fuel costs. This year than I'd planned back in January. And Delta, you may have a refinery, that's how you've been getting in front of your fuel costs. But I was proactive in a different way, raising $2.7 billion in new liquidity. The My CEO Scott Kirby called quote, insurance from geopolitical uncertainty while having the money in hand at relatively low rates. And bear in mind I've raised this before. Speculation that we might see interest hikes on the way means that we at United Airlines can react to more quickly to a fuel crisis than before. And just for some context for how difficult it is for airlines in general to prepare for these changing fuel prices. As the US Iran cease fire began to fray at the start of this month, the cost of jet fuel surged by nearly 30% right around the time that the airlines were starting to roll out earnings. Well, here's something that my CEO Scott Kirby said on the earnings call quote, at this time last week I was planning to tell you that we had a good line of sight to growing earnings year based on what we expected our guidance to be at the time. But fuel's gone up a lot in the last week. He went on to argue that United is well positioned to absorb price shocks and there is still room to raise fares. So the bottom line is I raised my full year EPS guidance even despite all of this. And just one last thing here regarding my passengers. I'm rolling out to them free Starlink WI Fi. It's on 450 planes now, but heading to nearly a thousand by year end. I'm going for the crowd pleaser.
- [11:47]
That's right, very pop. And now I am Southwest Airlines Ticker Luv, which is great on the New York Stock Exchange market cap of $22 billion. My share price is up about 9% this year and I reported the highest quarterly revenue in my history, $8.7 billion. Adjusted earnings per share of 94 cents. Nearly doubled what Wall street was expecting. And here's the real story this year. It's not fuel. I have ended my 55 year open seating policy, rolled out assigned seats and started charging for that first checked bag. And the change is resonating with business travelers. My corporate travel revenue hit an all time high, up 30% in the last quarter. Rapid rewards enrollment is up 35%. I have nearly 100 million members there now. And Chase Co branded credit card signs are up 28%. Now one thing to keep an eye out for. This is one concern. I fly an all Boeing 737 fleet and I've got $14.8 billion in max orders committed through the next five years. But Boeing is backed up. We just learned that from their earnings report. I'm anxious to get my hands on these new planes to expand the network and upgrade for those business travelers.
- [12:59]
Well, we're going to go on. I am now going to be American Airlines. And I am in fact a loyal American Airlines traveler. Although actually I travel on every single one of these airlines far too much. Here I am, my ticker aal on the nasdaq, on the sticker on my shirt. My market cap is 10 billion DOL dollars. My share price flat this year despite the fact that I have hit record revenue of $16.7 billion lately. That is up 16 year over year. Well, where other airlines see premium class tickets as the greatest revenue driver, my CEO highlighted that quote, revenue growth was strong across all entities and cabins, with premium, main cabin, domestic and international, all up meaningfully year over year, which is pretty extraordinary considering what's been going on in the Middle East. But the fuel bill, which was up 83%, did make a big dent in my margins, down to just 2.7% from 8.2% a year ago. So my margins are never that chunky, even in the best of times. As a result, I cut my full year guidance yet again. So I'm now projecting full year adjusted earnings ranging from a loss of 65 cents a share to a profit of 65 cents a share. So symmetry in either direction, plus or minus, basically a coin flip, but just showing the level of volatility that my industry is having to live with. Analysts aren't quite sure what to make of me at the moment. Jefferies cut its price target on me to 15 bucks from $18. JP Morgan went the other way and raised their target to $24 from 22. Just one final note. I just became the first US carrier to head back into Venezuela.
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Ann Berry
Oil.
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John Coteau
And the markets and oil coming back at me in a slightly different and unexpected direction.
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Absolutely. I'm going to move on to Alaska Airlines. It's Alaska Air Group. But and this is my favorite, this is John Couteau speaking right now.
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Why is it your favorite?
- [14:50]
When I lived in Los Angeles, visited my parents in D.C. there was a direct flight. The rewards were great. I got upgraded a lot. It was a, it was a good run. So I am Alaska Air Group and I am Ticker Alk. And that's the parent of Alaska, Hawaiian and Horizon. Market cap of $6 billion. Share price down 6% this year. I'm a laggard revenue of 4 billion. Slightly missed expectations. Plus I posted an adjusted loss of $0.92. It actually beat what Wall street did. It was one of those not as bad as expected results. My CEO didn't sugarcoat it. We lost almost $500 million in the first half of the year. But the second half, it's going to be a complete mirror image. Part of that optimism is that I'm trying to be better prepared for spikes in fuel prices. Like United, I raised some new liquidity to the tune of a billion dollars to try to have that money on hand. And of note, for the first time, more than half of every revenue dollar I generate now comes from outside the main cabin. So of course we're all saying premium, that's up. And premium is up for me too, 15%. But also cargo revenue rose 21%. So that's a niche for Alaska Airline Group. And like United, I'm rolling out Starlink. We're already getting great reviews. The guest satisfaction with Starlink equipped aircraft is up 20% higher than other aircrafts. And this is just one interesting structural nugget and one thing to look forward to with the airline. I'm still not on a network wide revenue management system across Alaska, Hawaii, Horizon, those all operate independently and they're ticketed independently as I've made these acquisitions. But next year I hope to have them all together which is going to definitely bring efficiencies to the company.
- [16:32]
That is a big lift getting onto the same system there, Alaska. So big execution project behind you there. Well, we did say that we were going to go from the largest airline to the smallest. I'm also actually pretty small, so it's apt that I am going to be JetBlue Airlines. That is ticker JBLU trading on the NASDAQ. Here is the ticker on my sticker on my shirt. Market cap about $2.2 billion. I really am the smallest of the bunch. Shares my shares up 30% year to date. My revenue hitting $2.7 billion, up 14 and a half percent year over year and beating estimates for this earnings season. Well, let's tackle fuel. I have to do it. Everyone else has. I did see spend $911 million on jet fuel this quarter, up a whopping 81% year over year. So suffering along with my larger brothers and sisters. However, I did recapture close to half of that incremental cost through pricing and capacity moves. And my team believes that we can fully offset higher fuel costs by early 2027. Demand has not weakened despite my Fare increases. Plus I've been scooping up Spirit's alt for Lauderdale routes since SP shut down. Revenue there up 11% or nearly 40% more capacity that all important Florida market that's been growing. I also just won Spirit's LaGuardia Airport slots at auction. So my presence serving the New York area about to go up. Finally, loyalty does remain a bright spot. New credit card acquisitions are up nearly 40% and loyalty revenue up 21%. However, my CEO has not gone out and said, if you ask a consumer why did they choose JetBlue, they'll tell you it's because JetBlue. I leave statements like that to Delta.
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Thank you.
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We made it. We made it. Now we can breathe. Actually, we need some water in here.
- [18:22]
Yeah, that would be great. And I know looking at your schedule and that you're traveling again this weekend.
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I am traveling. I'm flying on United tomorrow morning. I'm going to the west coast and I am flying back on Saturday night on a red eye on American Airlines.
- [18:34]
Ann Berry
Oh my goodness.
- [18:35]
John Coteau
I know you do hit them all. I do hit them all. It's a lot. Anyway, we've come to the end of ticker on a sticker. It is 4pm on the east Coast. There it is, the closing bell. The market's wrapping up for the day. We don't have a ticker tape, so let's throw it over instead to our human ticker, our producer, John.
- [18:50]
That's right. The markets came roaring back today on the back of those Microsoft results and a broader rise in chip stocks. The S&P 500 finished up 1 and 7, 10 of a percent. The Dow was up 1 and 2, 10 of a percent. And the NASDAQ finished the day up nearly 3%.
- [19:06]
Lots going on. We're about to brew some coffee. More earnings coming out. And very, very excitingly, we just covered the airlines partly as an excuse because we do love to talk about travel here. And on tomorrow's show, we get to double down on that. The CEO of Marriott International, Anthony Capuano joining us here on Brew Markets. Well, his vantage point at the top of the 10,000 property $100 billion market cap hotel giant gives Anthony a really unique perspective on what is going on with global travel trends. And of course, how is AI changing the relationship between traveler and service provider? That's it for today's Brew Markets Daily.
- [19:43]
Brew Markets Daily is hosted by Ann Berry and produced by John Coteau, Tarkat, Bellatief Avenue Laroy and Emily Millard. Technical direction by Uchena Waugh Brittany Dotako is our audio engineer. And the president of Morning Brew, Inc. Is Devin Emery.
- [19:54]
Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew daily. See you back in tomorrow, same time, same place.