BI Weekend: Deere, Walmart Earnings, Berkshire Hathaway 13F Filings

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1:49On today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide in-depth research and data on some of the 2 ,000 companies and 130 industries our analysts cover worldwide. Today, we'll look at why AI is emerging as a catalyst for office-based demand despite fears of job cuts. Plus, we'll discuss what recent 13F filings revealed about Warren Buffett's last quarter as CEO of Berkshire Hathaway. But first, we begin with news from the farm machinery leader, Deere. This week, Deere boosted its annual profit outlook as the company, which is the world's biggest farm machinery maker, anticipates the agriculture economy will soon get better.

2:23For more, we were joined by Chris Cialino, Bloomberg Intelligence Senior U.S. Machinery Analyst. We began by asking Chris for his take on the latest at Deere. It was a really solid beat and raise quarter, and I think this kind of gives us the all clear on the cycle in that, you know, 26 will be the trough earnings year. The 1Q beat was broad base. All segments, better top line, better margins than expected, really on the back of higher shipment volumes with particular strength in the small ag business and construction. Those are those are markets that, you know, have started to already recover now this year.

3:00The large ag business, which is obviously their bigger growth engine, continues to be soft. But I think we're seeing that business stabilize. And really, for the first time, you know, in years, we're starting to see some green shoots emerge there. order books strengthened a little bit during the quarter as well. How does this compare and contrast with what CNH Industrial reported earlier this week, which took a more, it feels like a cautious stance? Yeah, you know, I think, so both companies are calling 26 as the bottom. I think that's pretty well understood at this point. I think the incremental piece coming out of Deere is that you're starting to see some early signs of improvement in the North American large ag business.

3:39That's a market they're projecting in terms of unit volumes to be down 15 to 20 percent this year. That's going to put volumes at the lowest level in more than four decades. But what you're starting to hear from them this quarter is that the order book strengthened, particularly just in the last month of the quarter. You're starting to see a little bit more trade flows going to China. The fleets continue to age. You have the government aid support. So this is not a big step change, but it's really the first signs of incremental improvement. You got to have a great sense of timing, Chris. As I said, Deere's up 42 % year to date.

4:11So the market's anticipating this business bottoming and then turning up. How long is this cycle for some of these companies that you follow here that are cyclical? Yeah, so a typical downturn in this business will last anywhere from two to four years. This will be the third year of the downturn. So in terms of the downturn, it looks very similar to what we've seen historically. Typically, the upturns last a little bit longer. But this is an incredibly volatile market, and it's ultimately dictated by crop prices and farmer profitability. So the crop outlooks do have a significant impact here in terms of what farmers are willing and able to spend.

4:51And it looks like Deere relies on the U.S. for a huge part of its revenue, if not half. What is it doing in terms of growing its business overseas? Is it just kind of a trajectory of growth there that is similar to what it sees in the U.S., or is it competing against some established players? Yeah, so they're regional markets, but in terms of what markets matter for deer, it's North America and then South America is becoming more important. Reason being, those are typically the bigger producers of row crops, corn, soybeans. There are larger farms. They utilize more the larger equipment that is more conducive to some of the precision technologies, which come in at a higher margin.

5:38Europe tends to be a little bit more stable. They get a lot of government support. So think of that market as less cyclical, lower peaks, higher troughs. Those are really kind of the three big growth engines if you think about Deere's geographic exposure. So what is Deere saying about the U.S. farmer these days? Listen, things are still challenging. Let's not understate that. Crop prices really haven't moved that much and still under tremendous pressure as we look at another year of near record production. They are seeing some signs of stability, I would say. And like I mentioned earlier, I think we're starting to see some early signs of improved order activity.

6:19Again, albeit off a very low base. And a lot of that's predicated on, you know, we're starting to see a little bit more exports go into China. You have continued government support. And then also, you know, there's certainly a need for replacement. The age of the fleet is as old as it's been in a number of years. So as farmers get more money, you start to see some stability on the crop price front. That should, you know, unlock some pent up demand. Yeah, I'm just looking at the stock price trading at a record high, but it really has gone on a tear over the past three weeks or two weeks. What accounts for that?

6:53Was it anticipation of this report or was it something else? A combination of things. You know, I think, you know, it's pretty well understood now that this year will be the trough of the cycle. So I think there's some positioning ahead of that. And, you know, a lot of these heavy machinery companies typically do well early in the rate cut environment. So the anticipation of lower rates, stronger growth environment, not only in the ag business, but also construction. I think that sometimes gets overlooked. They're completely refreshing their excavator product lineup. They have a pretty strong position in construction equipment, and I think the growth dynamics there, moving for 26 and 27, are still quite favorable.

7:32Our thanks to Chris Cialino, Bloomberg Intelligence Senior U.S. Machinery Analyst. We move next to the retail giant Walmart. This week, Walmart issued a forecast for four-year earnings that missed higher expectations, flagging the unpredictable state of trade and labor market conditions. So we brought in Emily Cohn, Bloomberg's consumer team leader. We first asked Emily for her take on Walmart's most recent results. It is another solid quarter for Walmart in the fourth quarter. They did come out with conservative guidance, which is pretty typical for Walmart, come out with cautious guidance and then exceed it later in the year, which is sort of their playbook.

8:08And then their guidance was also paired with some warning signs or cautious outlook about the economy, which I found interesting. Yeah, I want to pick up on that idea because the CFO talked to Bloomberg and mentioned that tariff-driven inflation has reached or is reaching its peak, which I thought was really interesting given that there's so many people expecting rate cuts later on this year, given that inflation seems to have settled down. What more can they tell us about pricing? I think they told us that prices rose 1 % in the quarter, which I think was the same as the last quarter. But they also mentioned other things like tepid job growth, student loan delinquencies rising, consumer sentiment being uneven, things that would give any CEO or CFO or company pause when they're trying to outlay what might happen in the coming year.

9:03And I noticed over the last couple of years, they've talked about how maybe their customer base is changing a little bit. People, some middle class, maybe even upper income areas coming down to Walmart, they're seeing more and more of that. Is that still the case? I think, yes, that's definitely the case. And that's sort of their superpower right now. That, you know, poor, this is the case shaped economy that we talk about a lot. Poor customers are pulling back in areas, but what they're seeing is wealthier clients, clientele who might not have come to Walmart in the past, shopping at Walmart, especially for things like their groceries, which they've invested in a lot in the last 10 years.

9:40You can now find organic groceries. And that's really paying off. And they also have this Walmart Plus program, which they're really putting a lot of emphasis on. It's actually one of the benefits if you're an American Express Platinum cardholder, which speaks to that idea that they're really reaching for the higher income consumer. How's that going? And is it making any headway on stealing market share from Amazon with its Prime program? Yeah, they're seeing a huge growth in e-commerce. I think that was one of the major areas that grew this quarter. That is drawing in higher income shoppers who actually pay even more than the membership for faster deliveries, speedier pickup times.

10:18And that's helping them also grow market share among wealthier shoppers who are looking for convenience over everything else. What are they saying about, did they even talk about on the conference call tariffs anymore? Is that still a discussion point? And what's the company saying about tariffs? Yeah, tariffs came up a little bit, but they said that they expect that tariff-driven inflation to peak now. I think they also benefit here, again, from their groceries. Groceries are a portion of their assortment that is less impacted by tariffs. And they're really benefiting from, I think, 60 % of their sales come from groceries these days.

11:01You mentioned e-commerce. It sounds like Walmart will continue to invest in technology and automation. What were some of the things that they flagged that they're working on in terms of innovation and building on the technology that they have already implemented into their system? Yeah, it was interesting. They said most of their fulfillment in stores is now coming from automated warehouses. Most of their fulfillment for e-commerce is coming from automated warehouses. They have really made huge gains here to speed up fulfillment centers and I think we should expect to see more of that in the coming quarters.

11:38They cited store remodels and automation as the main areas where they're going to be continuing to invest. One of the things that's amazed me really for 10, 15 years about Walmart is how well their digital business has been, their e-commerce business. They have built that to not only, I mean, they can go toe-to-toe with Amazon.com on just about anything, it seems like. Is that still a growth story for them? Yeah, I think they said something like a third. They've seen a huge amount of shoppers are now actually interacting with their AI assistant on their app and on their website, really helping people make shopping decisions faster.

12:21They're seeing an increasing spend from customers who interact with the AI shopping assistant, they said, which I think we can expect to see more of that. in the last five years, their EBITDA has roughly doubled, but their CapEx has tripled. Yeah. So there's that e-commerce build out, that tech build out. Yep. So, I mean, they're putting their money where their mouth is here. Wow. You know what Paul's dream job is, Emily? Must he mention this to you? No. Be a greeter at Walmart. See, I'm a nice, friendly guy. He wants the smock. He wants to wear the smock. But, you know, to that point, Walmart employs about 2.1 million people, which makes it a huge employer.

12:55Do we have a sense of whether they've been growing their employee base at all with this commitment to technology, to automation? I think they've definitely made a huge investment in technology. They have a lot more people working on tech than they ever have. And I think we could expect to see more of that for sure. That was Emily Cohn, Bloomberg Consumer Team Leader. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries. You can access Bloomberg Intelligence via B.I. Go on the terminal. I'm Scarlett Foo. And I'm Paul Sweeney.

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14:33This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio. Move next to news from amusement resort operator Six Flags Entertainment. This week, Six Flags reported 2025 earnings and revenue that were slightly ahead of analysts' estimates. For more on this and the latest in the travel and leisure space, we're joined by Jody Lurie, Bloomberg Intelligence Credit Analyst. We first asked Jody for her take on Six Flags earnings. So I think what's interesting, Paul, is that we're seeing that some of what Six Flags said oddly was similar to what we saw on Avis' call. And both companies had these large impairment charges to boost EBITDA, but it didn't necessarily equate to cash generation.

15:14and both companies are focused on improving their debt load and also just the core of the business, the operational side, adding in AI to boost the business and figuring out ways to turn around. And both companies are dealing with new CEOs. So it's just like a weird sort of compare contrast scenario that I've been toying with in my head. I mean, Paul was talking about how Hershey Park was his first amusement park. And then obviously the big one would be Disney or Universal. Have you been there? No. Okay, that's a pretty good one. Yeah, everyone. Is that the competition for Six Flags, or does it work on a different level than those?

15:52It is, and it isn't the competition, Scarlett. I mean, I think Six Flags likes to compare itself more to alternatives in leisure and entertainment. There was a great slide that they provided that showcased the value proposition. If you compare it to concert tickets or insert sporting event, the amount of time that you spend at Six Flags in theory is all day, right? So the cost to enter and the cost for the, you know, all the sort of concessions is much lower than what you would pay to go to like a Taylor Swift concert. Now that said, I mean, I think what's so interesting is, is when the company combined, there was this image that they could create like an all pass promotion, right?

16:35That you can enter in all parks. They've only finally started rolling out something that's a regional pass recently. And I'm curious to see what could happen with the company as they improve those sort of points of it. Because what's funny is, if you look at it from a revenue perspective, it did actually pretty well this year compared to 24. And 24 was a pretty strong year. Same thing with some of the per cap spending pieces of it, right? The per cap component, the admissions were down, but the in-park spending was decent. And so you say, what's going on? Like, why are they having such issues?

17:08And it comes down to an operational issue. It comes down to the fact that the legacy Six Flags assets, I think, were in way worse shape than Cedar Fair anticipated when they took on the company. And they're saddled with a lot of debt. So it's really a question of if the capital markets are going to be encouraging enough to help them through. You know, they helped them through in January with a new issue. But really, are they able to sort of support the company through this transition? That park pass you mentioned sounds like the amusement park version of an epic pass, which makes sense if you're a skier and you are chasing the weather around the country.

17:40But does it make sense to go to the West Coast for Six Flags and then come back? I don't know. It could, Scarlett. You don't talk to Ira Jersey enough, apparently, at least when it comes to roller coasters. You probably talked to him about interest rates. Next time when you have him on, ask him about his son's American Coasters Enthusiast card that he proudly carries. Oh. If you are deep into the roller coaster dynamics and culture, people will go to the end of the earth. And I am curious to see how the Middle East traction for Six Flags, for SeaWorld and for some of the other parks that have expanded there, how that's going to play out.

18:16If you do see these park coaster enthusiasts fly out to Saudi Arabia, fly out to the UAE to ride certain coasters. Our thanks to Jody Lurie, Bloomberg Intelligence credit analyst. We move next to the real estate sector. Bloomberg Intelligence recently put out research entitled AI drives office demand amid job cut fears. And according to BI, AI is emerging as a catalyst for office demand, reinforcing leasing momentum in New York City and San Francisco. For more on this, we're joined by Jeffrey Langbaum, Bloomberg Intelligence senior U.S. REIT analyst. We started our conversation by asking Jeffrey to discuss what people are saying to him with regards to AI and office space.

18:52Right now, what people are thinking about is what the impact is going to be on office space. If AI makes all of these industries that lease office space irrelevant, what does that mean for demand for space? And we saw last week that it started with software and then it went to industry after industry and ended up with the real estate brokers and eventually the office REITs getting hit hard. So, so far, this is just kind of fear that's wafting across the market. Have we actually seen any evidence of this happening? Not yet. And in fact, we've seen some of the opposite. Leasing velocity has been at the highest level since before the pandemic in markets like New York and San Francisco.

19:36The REITs that we follow, names like SL Green, Vornado, Boston Properties, or now BXP, these guys are reporting very strong leasing volumes. We're starting to see occupancies tick up off the bottom in their portfolios. And one of the dynamics at play is that AI firms are leasing space as they grow. And to the extent that companies being impacted by AI start to recede a little bit, there's an offset there. So your office REIT stocks last week sold off on this fear? Yeah, and it's not a new fear. I mean, it's been at play for some time now. You know, work from home kind of worked its way through and everyone kind of got comfortable with where hybrid kind of settled in.

20:26And then, you know, what was the next thing to hit office? And it was this. And it's been, you know, it's been out there for probably a couple of quarters now. What is the impact going to be? But last week when software rolled over, it just compounded. Is this something where because of the evidence that companies are still leasing quite a bit of space that we're going to see a just as sharp recovery? Well, that's possible. But, you know, there's also the risk that, you know, the equity markets are turbulent and forecasting. Right. And so there is the possibility that there will be negative leasing news to come.

21:03It's certainly not showing up in the numbers now. And we do think, and this is backed up by some survey work that we just did last week of office workers in both New York and San Francisco, we actually think that there's still a period of time to come where firms are actually leasing more space. They're expanding their headcount to try and figure out how to take advantage of AI and to grow their business. And that could actually, I don't know about a sharp snapback, but it could prolong the positive vibes for some time. What's the sector of the REIT market that you like the most right now? Senior housing is, I mean, it's the one aspect where you cannot refute the demand story at all.

21:50And at the same time, where real estate guys typically love to build, to take advantage of those demand stories, there's not much senior housing coming out of the ground. So there's a huge supply-demand imbalance. Okay, but is senior housing more attractive in certain markets over other markets? How do you pick between winners and losers when it comes to senior housing? It's really more about the local operator than it is about the specific market. I mean, obviously, if you're in a place where, you know, the economics aren't as strong and you don't have as affluent a potential resident base, then that's going to potentially impact.

22:25But strong local operators, when there's not a lot of supply coming out of the ground and you basically just have an aging American population that is going to need housing solutions, it's really a play across the board. All right. Thanks to Jeff Langbaum, Bloomberg Intelligence Senior U.S. REIT Analyst. We move now to some research that Bloomberg Intelligence recently published on American Express. According to BI, American Express's focus on attracting new premium cardholders should help it meet its consensus EPS growth in 2026 and 2027. So we brought in Edward Najarian, Bloomberg Intelligence Consumer Finance Analyst.

23:02We first asked Ed about Amex's most recent quarter and what we've learned since a company rolled out its increased fee for the platinum card. When they reported the quarter, great quarter, everything kind of in line with expectations or in some areas better, and gave great guidance in terms of mid-teens EPS growth for 2026. And a lot of conversation about the refresh and how great the refresh is going and acquiring lots of new customers. But generally, there were two things that sort of analysts picked on in the quarter. when you're trading at sort of a high multiple for financial. And those two things were, number one, that the new card acquisition rate kind of went down a little bit relative to last year and relative to the third quarter.

23:53And additionally, all the money that they're spending on rewards and services and all of what they call variable customer engagement expenses went up a lot, a little too much in some people's opinions. So what we kind of learned recently was sort of some supporting data around two things. And the big thing was, while the number of new cards acquired went down a little bit, the fee per new card went up from 196 in the third quarter to 282. What? So huge jump. Now, why is that? That's because a lot of a much bigger percentage of those new cards came from new platinum customers, which is much better than just a regular customer.

24:36So even though a little less customers acquired, you're getting many more new platinum customers, much better economics. So that's sort of one thing. And then I talked a lot about how they're absorbing all of those extra reward costs, if you will. but still that's and that's fine because it's enhancing revenue growth and sort of the revenue growth benefit of that offsets the reward cost more than offsets that reward cost. Okay Edward one thing that I've noticed from these Facebook groups is that people get a platinum card that's you know for the sign-up bonus and everything else but then they start branching out and they get the gold card because there's more reward points for groceries there.

25:17They start to compile a lot of Amex cards. So a lot of the users have multiple cards, don't they? Yeah, no question about that. And obviously, you've got a lot of sort of families on the platinum card. So there's sort of a primary platinum card owner and then issuer of multiple cards related to that. So you sort of have this sort of network effect of the platinum card that just keeps building. And to some extent, And, you know, if you can, you know, when you come back to the JPMorgan Sapphire card, if you can, you know, build that reward and service infrastructure even bigger and better, you know, you create the, you know, sort of the mode effect, which is what they're trying to do and seems to be working.

26:02Hey, Ed, I have the green card I got the day I graduated college. I kept it all. But Scarlett and other folks, I understand, they go crazy for these really expensive cards and all the points and managing that. You need to go platinum, Paul. No, I just can't. I can't do it. But how big of a business is that for these card companies? Is that really the value driver, the Scarlet Foods of the world? That's it. Yeah. They care much more about Scarlet than they care about you, I have to say. Yes. That's why you need to upgrade. She's about to pay$895 a year, up from$695 a year. They're going to give her a heck of a lot of rewards and services for that.