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This episode is brought to you by Charles Schwab. Timing the market, Fighting inflation, Managing risk Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab can help join host Mark Reape as he breaks down practical strategies to help overcome the mental traps that may affect your investing decisions. Listen@schwab.com FinancialDecoder
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it's just another merger Monday with a possible tie up of two major pharmaceutical companies. We dig into why the potential deal has one analyst perplexed Warehouser. The century old timber company is looking to get into data centers, literally. We have the latest and Visa fighting AI powered scams with a $2.4 billion corporate acquisition that comes with a treasure trove of biometric data. We break it all down for Monday, August 3rd. It's Blue Markets Daily and I'm Ann Ber. More market details to come. But first, Visa, the more than $680 billion market cap payments OG kicking off the week with the purchase of BioCatch. Visa announced today it's buying the Tel Aviv based fraud intelligence company in a cash deal of about $2.4 billion. Now the acquisition comes as banks and payment companies face a surge in increasingly sophisticated cyber attacks and AI po with scams. Now, Biocatch may not be a household name, but chances are its technology is already helping to protect your money, which is really why this deal caught our eye. The company uses something called behavioral biometrics to analyze how people interact with their devices, everything from typing patterns and mouse movements to touch screen gestures, and uses this data, along of course, with AI to help determine whether it's really you making a transaction or if it's a bot or or if it's a criminal who has stolen your credentials. Well, According to Visa, BioCatch technology is already used by more than 350 financial institutions in 21 countries, protecting, or you could say tracking roughly 760 million users across a whopping 1.8 billion devices. Well, by bringing all of those capabilities in house, not to mention that treasure trove of data, Visa hopes to detect fraud earlier and strengthen security across its Global Payments Network. MasterCard made a similar move with its acquisition of cyber intelligence firm Recorded Future about two years ago and a pretty similar price tag that was just over $2.6 billion. And when you look at the need for this, the reason for all the activity is pretty clear. Payment card fraud losses across the entire global ecosystem reach more than $30 billion each year. And what's interesting is that Visa and MasterCard as corporate entities, don't actually absorb the vast majority of those losses directly. The ones who suffer are the merchants and the card issuing banks and financial institutions on their platforms. Plus of course, the consumers who actually have those cards get the loss of time and energy that they have to work through when they get hit too. So from Visa's point of view, the Biocatch deal is really a commercial move to expand one of its divisions, and that's its value added services business. It sells fraud prevention, cybersecurity and analytics software to financial institutions. And as Pure Play Payments, its core business, has become more competitive, this value added services division has become one of the company's fastest growing hitting 20% compound annual growth since 2021 to reach revenue last year of $11 billion. While investors giving a sort of thumbs up on this deal today, Visa stocks started up on the news and bumped on down, coming in towards the end of the day flat. But overall, the the thesis intact. Coming up in a moment, a spin through the headlines that are moving the markets today, including earnings out of Tyson Foods and Nissan. But first, this episode is brought to you by Charles Schwab.
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Is recency bias skewing your potential stock picks? Is attribution bias messing with your retirement plan? Overconfidence describes our tendency to overestimate our abilities. Loss aversion helps explain why losing a dollar hurts more than gaining a dollar. Financial Decoder, an original podcast from Charles Schwab explains how these cognitive and emotional biases can affect the decision make about your financial life.
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Host Mark Reap, head of the Schwab center for Financial Research, and his guests offer actionable insights on what you can do to help fight off those decision making biases.
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Download the latest episode and follow@schwab.com financial decoder or wherever you listen.
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Let's take a quick spin through some of the headlines that are moving the markets today, starting with another potential Monday merger moment.
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That's right. UK based AstraZeneca is reportedly in talks to combine with US pharmaceutical giant Bristol Myers Squibb. If the deal comes, it would be one of the largest pharmaceutical mergers ever. The resulting company would have a combined value of nearly $400 billion and it would create the world's fourth largest drug maker.
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Well, analysts interestingly immediately questioned the proposed deal, highlighting that AstraZeneca has actually been doing pretty well on its own. It's been growing steadily for over a decade and has developed a solid pipeline of new drugs. Meanwhile, Bristol Myers is expected to see a period of slowing growth as many of its blockbuster drugs are due to hit the patent cliff. That's right.
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Jeffries wrote, quote. Given the streng of AZ's growth and innovation profile, we are a bit perplexed. So far investors don't support the deal. Shares in AstraZeneca are down nearly 7% and Bristol Myers Squibb are trading near flat today. Over to earnings and Tyson Foods, the largest meat producer in the United States,
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well, the company missed revenue expectations and cut its full year profit outlook. That's as stubbornly high cattle prices continue to weigh on the bottom line. Tyson's beef division posted $142 million loss and saw an almost 16% drop volume for the quarter.
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Well, you know, I still think of Tyson as Tyson Chicken and that segment delivered its seventh consecutive quarter of growth. And management said it expects that momentum to continue into the current quarter. Shares of Tyson Foods ticker TSN trading over 2% higher today and then sticking
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with earnings but this time moving from the farm to the road and to Nissan. Shares in the Japanese automaker trading 3% lower despite the company posting its first quarterly net profit in two years. That turnaround helped by stronger sales in the United States and in Japan while Nissan continues its aggressive restructuring effort that including plans to cut 20,000 jobs by 2028.
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But while Nissan maintained its full year outlook, it is reporting a China problem. Nissan explicitly cited a slower Chinese economy as the reason. It now expects sales there to fall 11% this year, reversing its previous forecast of 8% growth in China. And finally, more news on the transportation front this time taking to the skies where shares In Boeing ticker BA are trading over 8% higher today after the FAA cleared the 737 Max 7 for takeoff after almost a decade of delays.
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Well, the 7 is the smallest in the 737 Max line. And certification was repeatedly delayed by increased regulatory scrutiny following fatal crashes of its sister 737 Max 8 airplane.
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You know, last week and when we were reviewing the earnings out of all the airlines, we highlighted Southwest as exclusively employing Boeing 737 planes for its fleet and that the airline was anxious for its backordered Boeing planes to be manufactured and delivered. So today Southwest, no surprise, said in a statement that quote, certification is an important step towards continuing to modernize our all Boeing 737 fleet with upgraded interiors. That's right. Southwest ditched its open seating and it's going after that premium traveler with upgrades.
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Shares in southwest up over 4% today on that news. Well, let's take a quick break. And when we come back, Warehouser, the timber company knocking on wood. The AI can double its profits. This episode is brought to you by Facebook. So you were scrolling on Marketplace and there it was, the bike you'd been searching for. You sent a message and it turned out the seller was super chatty, kind of funny, and an avid cyclist. The next thing you know, you're in a cycling crew. Well, a community cycling group. The thing about Facebook, you might find more than what you're looking for, from a browser to a bike ride this summer. Find more on Facebook. This episode is brought to you by Charles Schwab. Timing the market, hedging against inflation, balancing risk Investing is about more than math. It takes both side of your brain. And those confusing mental traps can sometimes lead you astray. Financial decoder and original podcast from Charles Schwab can help join host Mark Reepe, head of the Schwab center for Financial Research, as he breaks down practical strategies to help outsmart the mental traps like overconfidence, loss aversion and recency bias that often cloud your investing decisions. Listen@schwab.com financialdakoda or wherever you get your podcasts. Well, earnings came out last week for Warehouser, the timberland company, and the results caught our eye because of the superlatives involved in the company's story. Weyerhaeuser owns over 10 million acres of U.S. timberland, meaning about the size of Switzerland, which makes it the largest corporate landowner in America. If we go back in history for a moment, the company was founded in 1900 by Frederick Weyerhaeuser, a classic Gilded Age lumber baron. But the company is actively looking to modernize, including getting more of its wood into, yes, you guessed it, data centers. More on that in just a moment. And John, before we hop on the data center bandwagon, start us off with some background on the company. Right.
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Weyerhaeuser ticker WY on the New York Stock Exchange market cap of about $18 billion. And the stock has been flat year over year. It's very boom and bust in the timber cycle over the last 15 years, ups and downs. It's organized as a REIT. It's a real estate investment trust, which means the company is legally required to distribute at least 90% of taxable income to shareholders. So while the share price may not be rising consistently, there has been a consistent dividend over the years, which currently sits at about 3.5%. And those 10 million acres you mentioned, you know, they Grow wood. The company harvests that wood. It's primarily used in construction. They also manufacture wood derived products, but that is a smaller part of the business. In the most recent quarter, Q2 revenue of $1.9 billion was down 8% year over year. Part of that boom and bust. But it beat expectations because expectations were low and earnings per share of $0.13 beat estimates by about a nickel.
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So when we hone in here on timber to try to figure out why that revenue is down, one of the critical reasons continues to be weak demand for new housing construction. Or even if the demand is that there has just been a weak environment for new housing construction. And on one earnings call, the CEO Devin Stockfish going to read this out. Turnover of existing homes remains well below historical levels given higher mortgage rates and the ongoing lock in effect, which basically means if people are not turning over existing homes quickly enough, obviously they're not moving into new builds. And that pipeline of demand isn't being placed there for the benefit of somebody like a warehouser. The other issue is they're seeing existing homeowners doing smaller remodeling projects which typically require less wood. So even the demand for their product in the installed base not hitting the kind of cyclical highs that we've seen in previous cycles.
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Right. Maybe they're putting up some new wallpaper or fresh coat of paint, but they're not putting a big addition onto the house necessarily.
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Right? Exactly, exactly.
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So the housing slump has knocked warehousers shares down 40% from all time. Highs they reached in 2022 during the pandemic lumber boom. And I keep stressing this boom and bust because I remember at that time people were doing big remodeling projects at home. They were at home all the time. There was the construction of all those outdoor restaurant shelters. I mean we had them in Los Angeles and they have them here in New York in the streets. These large wood frame structures. And I remember at the time prices for two by fours and plywood. If you went to Home Depot or something like that, it had quadrupled from pre pandemic.
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Yeah, all these huts too are sort of popping up. Do you remember this? Sort of outdoor seating areas.
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Exactly.
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So it was a very interesting moment in the construction boom in the pandemic because I also remember that the corollary of this was there were parts of construction that completely slowed down. Right. Because contractors couldn't be in small spaces to do their work with social distancing. So it was a very peculiar kind of construction boom that we saw over
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the pandemic you saw a lot of outdoor framing.
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Yes, exactly, exactly. Well, as a real estate company, Warehouser is finding success. So this is quite distinct from the timber side of the business. On the real estate side, what the company has been doing is buying high quality off market. This is their words, timberland recently in North Carolina, in Virginia, in Washington State, and selling acreage that's less strategic for timber but fetches higher prices from buyers who value the land for purposes other than for timber production. So they're basically using their eye to spot land because they get access to it, being pretty savvy about what the alternative use could be and then finding the right buyers at the right times for those packages of land.
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Absolutely.
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So commercial development could be one use of these parcels of land, wind farms and. Da, da, da. Drumroll please. Data centers, of course, the demand for land now being an opportunity for the business. And so in the most recent quarter, just as one example, the company sold nearly 30,000 acres of what it called non core timberlands in Oregon for 114 million over there in the Pacific Northwest.
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And to put some numbers around this about those data centers on the call, CEO Stockfish says they're actively marketing a handful of sites for data center buildouts where the price per acre from data centers is pretty significant and just an extraordinary margin above timber values. So they're sitting on that land just like you said, and they say maybe the trees here aren't going to yield the best amount of money, but the land under it can get us some scratch.
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The other thing too. And this is where the two sides of the business perhaps come together. And we first talking about this, I sort of scratch my head a bit. So bear with me and what I'm about to say. Warehouser is apparently now positioning wood as a viable construction component for data centers. So just to really put this all together, they're taking the real estate side of their business, selling land to be developed into data centers, data center parks, and now also saying with a straight face, P.S. you can use our timber as one of the components with which to build these data centers. So it really is trying to be a one stop shop here. Well, the CEO Al Warehouser, again, that's Devin Stockfish, said that the company is actively pitching developers to replace steel and concrete with mass timber. And he says today it's all about speed. What we've got to do is we've got to convince the developers that you can get mass timber up more quickly than the alternative building product. So the pitch is that the timber retains its carbon during construction, meaning, by the way, that it would have a smaller carbon footprint than steel and concrete. So you could just like throw up your wooden data center and off you're off to the races.
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Well, I spent the space the weekend in Loudoun county, which is the home of data Centers outside of D.C. and Virginia.
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Oh, you went home?
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Yes, that's right.
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Oh, fantastic.
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Visited my mother, she beat me twice at Parcheesi. And you know those data centers themselves which are built out of steel and concrete, go up almost like barns, like a barn raising. And so I can imagine the same day that they're placing in these huge pieces of steel and concrete, maybe they just lift up a big frame of wood. I don't know. I could imagine that the CEO might have a point, I don't know about the rest of the construction usage there. Now the company is going to use AI and they think that that can boost their annual profits by $1 billion. That can double their profit in the next five years by efficiencies achieved through AI. I read a great article in the Wall Street Journal today, it came out earlier this year about some of the company's approaches. And by the way, based on the sheer size of the operation, these AI shortcuts make a lot of sense. And the company plants more than 100 million seedlings a year. That's 190 seedling trees a minute, Ann. And they have to keep track of all of them. And so they're looking to automated drones that can survey the growth of all of these trees, the hundreds of millions of them. And they can also use satellite imagery, drone photography and lidar to map the forest floor. And one way they could do that is to look at different parts of their footprint and see which forests are ready to be harvested and which maybe if they waited a year or two, could fetch more money at market. And so all these decisions could be helped through automation from AI. And then there's the trucks. On any given day there's 5,000 trucks traveling over tens of thousands of miles of roads on warehouser property. They maintain almost as much road as the United States interstate road system.
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There's so many fun facts in this. We need to have a trivia. We need to have a quiz. Yes. Which is just the warehouser corporate quiz. Yeah.
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Which is bigger.
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Totally. Exactly.
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So with all those trucks, the company is looking to optimize the routes with AI. It makes me think of Walmart, their distribution center. But this is sort of internal, all just to warehousers land.
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And this is all as you said sort of in the early stages of developing logging equipment and then you think about what could be operated remotely. You talked about drones with respect to detection and tracking things. But there's a fairly short, you know, pathway that goes from just using drones and automation and unmanned systems for tracking to actually putting them into effect for use for other things over time as well.
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They're working with a Swiss company to figure out how to do logging remotely. The actual cutting of the tree, that's, that's interesting.
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It's not a very safe exercise, logging actually. It's one of those things that could lend itself perhaps to robotics as well. Who knew, John Croteau, that there'd be so much lurking inside a timber company? I was gonna give a shout out to John because when we were, we were pinging this morning and we actually, there was another brilliant idea for a story that came up today. Our teammate Avni suggested that we cover the big hedge fund story, the collapse, which we'll do at some point over the course of this week. And, and John goes, but I'm really excited about this timber company and just, it's brilliant. Like the nuggets that are in here are absolutely brilliant to keep an eye on. Much fun, lots to keep an eye on. And by the way, so far shares in this company stock up 5%. And what remains to be seen whether the data center pitch gets bought by the investors, but you know, definitely one to keep an eye on. Taking a look at these analysts recommendations of the 12 that cover the nine of them have this as a buy or a strong buy trading at the moment below the sort of high end of the price target. So one we're certainly going to keep on watching. Well, it's 4pm on the east coast. There's the closing bell, the market's wrapping up for the day and we don't have a ticker tape, but let's throw it over to our human ticker. As always, our producer John, and we're
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going to start with oil. On Sunday, President Trump wrote on Truth Social that he had called off a planned strike on Iran. And the Post sent Brent crude futures down about 5% to $83 a barrel. Then just a few hours ago, the President expressed his disapproval of ExxonMobil and Chevron's windfall profits that the two companies reported just last week. Exxon's profits more than doubled and Chevron's quadrupled. Trump told reporters at the White House today, quote, they're making too much money based on a shortage. I don't like it. They're going to give some of that back to the public and they better cut the retail price. As for the major indices today, The S&P 500 finished up 1.5%. The NASDAQ finished up over 2% and the Dow was up one and a third to a record close of 53,178.
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The market's absolutely ripping on decent news. Not incredible news, decent news. Going to keep watching to see whether this can keep on lagging higher. Well, just as a final thought, I just wanted to flag a conversation that we had on Friday's show and that was with the CEO of Marriott International, Anthony Capuano, and he very graciously joined us to talk about what's been going on at one of the biggest hospitality companies in the world. Well, Marriott reported its earnings this morning and it was a very interesting reaction. The stock just closed. I was just watching as, as John was taking a look at where the market numbers came in, closed 7% down today with investors, it seems spooked by the impact of the Middle east on demand for travel across Europe, the Middle east and Africa, something that the company had signaled, but looks as though the outlook not quite buoying up investors spirits. Definitely worth looking at that because the other travel stocks are starting to come out. We're going to see continued reporting out from the rest of the industry in coming weeks. So do check out again. That was an interview that we posted on Friday and we're going to keep on tracking this travel sector. One of our favorites. As we all know, that's it for today's Brew Markets Daily.
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Brew Markets Daily is hosted by Ann Berry and produced by John Curto, Tarka Bellatief, Ivan Elroy and Emily Milian. Our technical director is Uchena Waugh. Brittany to Talk, who is our audio engineer and the president of Morning Brew Inc. Is Devin Emery.
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Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. See you back here tomorrow, same time, same place.