Boeing Beats on Cash Flow, Books New Charge on Air Force One

0:00So like 100 % of investors think that protection is important, but only about 70 % of advisors are like talking to their clients about that. Where do you think the disconnect is happening? There's this huge differences that exist in terms of what advisors think they're talking about their clients, what clients are actually hearing. Whatever your goal, trade show giveaways, client gifts, or team gear, 4imprint has the promo products to match. With thousands of options, from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget with standout choices at every price point.

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1:14Bloomberg Audio Studios. Podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. We've got earnings coming left and right. Boeing just reported and George Ferguson is our senior aerospace defense and airlines analyst. He joins us now from Princeton. George, the headline here that Bloomberg News has highlighted is that Boeing generated better than expected cash flow in the second quarter, and it still aims to generate$1 to$3 billion in free cash flow this year.

1:57It sounds like that is the metric that matters the most to investors right now, isn't it? It is, right? So I think that first, it's always super important to generate cash. You can tell if companies are cheating or not, depending on whether or not they're generating cash. They could show earnings and no cash, and then you're like, it doesn't matter. But the second thing for Boeing is they want to pay down some of this debt they have in the balance sheet over time. They need to get themselves into better rating sort of territory. And so that cash generation will go to, at some point, helping to liquidate some of that debt and tightening up the balance sheet.

2:33George, where's Boeing these days on delivery of those 737 MAX? You've told us in the past that that's really the cash generator for this company. And where are they these days and where do you expect them to get to? Yeah, so Kelly Ortberg confirmed that they're 47 a month about now. We're seeing a little bit less come out the door of the factory, but they measure these at different points in the production schedule. But they're 47 going to 52 early next year. Another important component of that cash flow story, right? The beauty of this business is it does finance itself as you increase build rate.

3:13And so as you increase build rate, airplanes start to get ready to cut metal in airplanes. You go out and ask the customer to start bringing the deposits. And they bring deposits as the airplane moves down the production process to essentially fund the build of the airplane. So when you're increasing build rates, customers are increasing the send of money into the company. and that's what we saw driving cash flow today. When you slow down build rates, unexpectedly customers stop sending that money in and you suddenly have to finance it somewhere else. So again, this cash generation, a nice positive because customers are submitting cash because airplanes are about to be cut or in the process.

3:55And as you boost that build rate, you bring more of that in, which means it should persist if things go well. Let's talk about JetBlue because that company reported earnings as well. And it looks like it posted a loss in the quarter, but it was narrower than what analysts had anticipated. JetBlue, I don't want to call it an also-ran, but it's not doing as well as Delta and United with their premium offerings. But it's been trying to make up for that lost ground. How's it doing in that effort? Yeah, I mean, yields came in a bit better than we thought. I think they were high single digits getting close to 10%.

4:31I think that's pretty good. it's pretty challenging right now. I think, you know, for a company like JetBlue, you know, the good portion of their business right now is going to be the premium business and any loyalty money they can make. It's never going to be as much as Delta and United. And so they kind of operate from a disadvantage to that standpoint. Again, they do have a bunch of premium, you know, seats inside those airplanes, especially Transcon. They have a pretty loyal following, But that back of the airplane basic economy seat, I think, is the challenge seat right now for getting the right price for it.

5:10And so, and there's a bit of a scramble, I think, going on now between them and Frontier to try to grab those customers that Spirit Airlines left behind. Now, again, that's not a high-end customer. But it looked a bit better to us during the quarter than we had originally expected as well. So it does okay. Again, we're still, you know, this is still a very challenging environment for them, but looked a bit better than we expected. George, I'm so glad you bring up Spirit because JetBlue has one-quarter approval to acquire Spirit's LaGuardia slots. It still requires the FAA approval, but it's trying to pick up some of the benefits of, you know, a competitor going away.

5:53Does that change the game for JetBlue to get these precious slots at LaGuardia Airport? Well, I mean, I don't know that it changes the game, but LaGuardia slots are high-value slots, given the proximity to New York City. This is a core market for JetBlue. You'd like to not only take those slots, but keep competitors out of there to fight for those tickets or those customers. So to me, it'd be a good sign if they can get a hold of them and probably well on their way if they've already got one approval. George, I'm not sure if you're aware, but I know you'll value this. I recently became a one-million-mile flyer for United Airlines.

6:34Are you impressed? Very nice, yes. I don't think I'm there yet. Yeah, that's what happens when you spend 40 years shilling for money all across the global Wall Street here. That's kind of my life. What did they give you? What did they give you? I had the pilot come up to me before we took off, sat down next to me. We had a nice little conversation. He got a little medallion. Do you get little wings to put on your jacket? No, but I did get the medallion, which is very... Okay, medallion's cool. Yeah, it's very cool. So I got a little plaque and all that kind of stuff. So I'm special, George, in case you didn't know that.

7:08Stay with us. More from Bloomberg Intelligence coming up after this. I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, how would you spend your time? And that's exactly what a lot of my clients talk about. And the term they'll use is a work-optional lifestyle. I agree. like the next gen, millennials and below. We're not thinking about retirement. We're thinking about let's find something that we enjoy, that we can have financial independence. I think that's a better way to think about the end of life stage versus quote unquote retirement.

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8:16Plus, you'll get expert help, fast turnaround times, and their 360-degree guarantee, so you can be fore-imprint certain your order will arrive on time and look exactly right. Whatever your goal, 4imprint makes it easy to find your perfect promo match. Explore the possibilities today at 4imprint.com. 4imprint, 4certain. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf.

8:53Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

9:32Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. UPS reported some numbers here today. I think the outlook a little disappointing to people. The stock's trading down about four or five percent here.

10:11Thomas Black joins us. He's a columnist for Bloomberg Opinion, covers logistics, manufacturing and aerospace. calling in via that Zoom thing from Dallas, Texas. Thomas, I see the stock trading off a little bit here. What did the company's results say about their business? It's still a tough market. They are cutting costs and trying to increase more profitable packages by calling out some of the Amazon business that they had relied on. And this is all to make up for the most expensive workforce in the industry. So that's the path they're on. And they've already kind of, they've done most of their initiatives, and now they need to let them play out and see if they're going to work their way through to higher operating margins.

10:58Talk about their relationship with Amazon. I know they're in the process of unwinding that relationship with delivering Amazon.com packages. What's the strategy behind that policy? The strategy is to not deliver so many of the low-cost packages that Amazon likes to dump on other entities, right? Either the Postal Service or UPS or other folks. These are a lot of times lightweight packages that go short distances, and UPS doesn't make much money, and it has a high-cost labor force, again. So it's trying to get away from that. It's not a complete walk away from Amazon. It's more of a glide down, as CEO Carol Tomei likes to say.

11:46They've glided that down to about 9 % of their total sales going to Amazon. It used to be about 13 % at the height of the pandemic. So they're not going to break from Amazon completely. They just want the higher profit packages from them. So it's interesting when I think about it, FedEx or UPS, I think about a big fixed cost businesses, you know, the warehouses, the planes, all that kind of stuff. And I would think you'd want to punt as much volume through there as possible. But I guess, you know, UPS is saying we need to focus on kind of the unit profitability a little bit more. That's correct.

12:24And they're also looking to automate more. They've shut down a lot of facilities in the end. By the end of this year, it'll be 150 facilities that they're shutting down. These are older ones that don't have as much automation. So they're moving toward more automation and packages that cost more. That's mostly in healthcare, small businesses. Some businesses, they're getting away really from the e-commerce packages, which have become commoditized. Interesting. You mentioned kind of just technologies you have to kind of weave in. And I'm sure I wonder how the company weaves in AI into their operations.

13:03What are they saying about that? Yeah, they have a pretty powerful network now because they've introduced RFID, which sounds like an old technology, but it actually has gotten so cheap and so small that they can print RFID labels. So these labels that go on the packages can be picked up without having to physically scan them. So that's a pretty powerful tool. And then you marry that, all that data flowing in automatically into the system. And that's where AI takes that data and breaks it down and works its magic. What's the company saying these days about maybe its growth strategy? We've heard over the last couple of years kind of how they want to focus on unit profitability.

13:45But at some point, they need to talk about how they believe they're going to grow their top line. Right. They're going all in on health care. That's a big one. This is where you get into some of the specialized deliveries with cold chain where things have to remain cold and sometimes at very, very low temperatures throughout the whole network. And UPS has been building on that. FedEx has also entered into this. And small businesses, these are the folks that don't have enough volume to really get those big discounts. So they tend to be more profitable customers. and, of course, the B2B, the business-to-business deliveries.

14:24Those are bread-and-butter deliveries that they won't walk away from. What they are walking away from are some of those e-commerce deliveries, especially the residential ones where you don't have a lot of packages going to one stop. That density where you can deliver more packages at one stop is a key to boosting margins. And the residential deliveries, they're never going to be as profitable as business deliveries. So talk to us about just the geographic growth. Do they call out, you know, I know they're primarily in the U.S., but they have a pretty decent international exposure as well. Do they call out any area as a potential opportunity or potential problem area?

15:02Yes, they talked about international quite a bit. I think they have some opportunities to do what they did in the U.S. in international, which is to maybe call out some of those low profit packages and concentrate on the higher dollar ones, if you will, and also to automate more and become more efficient. They also talked about some of their trade lanes becoming more normalized. They said that they had growth in their China-to-U.S. trade lane for the first time in many quarters. And they're working through the elimination of the de minimis packages. I don't know if you remember that whole flap, but that was a lot of volume that was coming through UPS and at a pretty good price, too.

15:47That went away very suddenly, and they're starting to lap that, so it's looking a little bit better on the numbers. Stay with us. More from Bloomberg Intelligence coming up after this. Whether you're planning a big tech event, launching a new campaign, or just stocking up on team gear, finding the right promotional products makes all the difference. 4imprint offers thousands of options, from on-trend apparel and premium drinkware to tech, totes, and giveaways, so you can find the right fit for any audience, purpose, or budget. You can customize it all, your logo, your message, your look, and many items come with no setup charge to help you save.

16:25And if you're really watching the bottom line, you'll find standout choices at every price point so you can make a real impact while staying on budget. Plus, you'll get expert help, fast turnaround times, and their 360-degree guarantee. So you can be 4imprint certain your order will arrive on time and look exactly right. Whatever your goal, 4imprint makes it easy to find your perfect promo match. Explore the possibilities today at 4imprint.com. 4imprint. 4certain. Support for this show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions.

17:01Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API.

17:41Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. If your best finance people are doing expense reports, chasing receipts, or spending time on month-end close, it's time to get Brex AF, a Gentic finance that eliminates that work before it starts. Learn more at brex.com slash AF. You're listening to the Bloomberg Intelligence Podcast.

18:23Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's switch gears and get back to the market and earnings. We've been talking about Coca-Cola all morning. They put up some better than expected results, perhaps helped by the World Cup. Let's check out Ken Shea. He's a Bloomberg Intelligence Senior Consumer Products Analyst. Ken, break down Coca-Cola's numbers. They seem pretty good. The stock's up 6 % to a 52-week high today. Yeah, hi, Paul. they certainly were good.

18:59You know, we're talking about a mature consumer products company. We're not talking about tech stock here now, Paul. So, you know, 7 % sales growth beat the 5 % estimates, you know, comparable EPS up 11. These are good numbers. You know, consensus was a little bit below that. And a lot of it's because consumer sentiment in a lot of big markets, including the U.S., continue to be subdued. And so there was some hesitation going in, although we kind of knew World Cup was going to give them a lift, and it did, a really nice lift. So it was a high quality performance. It was very much volume driven, wasn't so dependent on price as it had been in the past few quarters, and balance sheet got stronger.

19:40It was just hard to find any fault in this quarter. I'm curious about the portfolio of drinks that Coca-Cola now has, because it's not just Coca-Cola or the slim version of it that Paul likes so much, but there's also sugar-free soda, sports drinks, water, because this younger generation seems to, you know, not like the sugary soft drinks as much as others in the past. What is the fastest growing part of that beverage portfolio, Ken? That's a good question, Scarlett. You know, Coke would say to that, you know, part of the benefits of the FIFA World Cup sponsorship is that it gets them close to the consumer and it hears about trends, you know, in real time, gives them a pulse of what's going on in the market.

20:22And so what they said today is look in the second half for Coke Zero Zero to get a higher level of promotion. What is that? Well, they're very successful. Coke Zero reformulated is going to have a no caffeine version. That's not exactly novel to the soft drink industry, but it's been probably under marketed, under promoted for people like me. I can't drink caffeine afternoon or I can't sleep. This is going to be kind of front and center for them the second half. But to your point, Scarlett, functionality, getting more from your beverage than just hydration is still very key in terms of consumer demand.

20:59They want more protein. Fairlife is a leader. It was up 18 % sales in the quarter. Really strong numbers. Advanced hydration, that's Powerade. That's getting more marketing muscle now in the second half. So look out for more of that. And I'm sure the company has more innovation up its sleeve. Didn't want to share today. But at least those three products, we can look for a higher level promotion in the second half. So, Ken, do investors and analysts, do they even look at market share anymore, Coke versus Pepsi, or is that just a thing of the past? Oh, they certainly do. And we get here at Bloomberg Intelligence by virtue of Circona.

21:36Now, you've got to remember, well, Circona, it's really predominantly a U.S. tracking. And Pepsi would argue, you know, we're more than just soft drinks. PepsiCo, I think, has probably a wider portfolio of different categories than Coca-Cola does. Coke's still 75 % sparkling, 75 % brand Coca-Cola. And so, but they're branching out, you know, beyond that. But Pepsi would say, hey, be fair, we're more than just cola. But Coke is gaining share in virtually all of its categories. Ken, we mentioned how the World Cup was definitely played a role here. But how does a company like Coca-Cola build on that momentum generated by the World Cup, which is a one-time event as far as earnings impact is concerned?

22:21It is a one-time event, but Coke went out of its way to say this morning, look, the consumer engagement that we got from the World Cup, they had a lot of activities beyond that. Innovative packaging. They had games and events outside the stadium going on. They had digital interactivity. They had a lot going on that they feel that there's going to be benefits resonating beyond just the immediate. So we'll look for that. But like I said, Coke's engaged with its consumers, and I think that pays dividends. Stay with us. More from Bloomberg Intelligence coming up after this. Whether you're planning a big tech event, launching a new campaign, or just stocking up on team gear, finding the right promotional products makes all the difference.

23:114imprint offers thousands of options, from on-trend apparel and premium drinkware to tech, totes, and giveaways, so you can find the right fit for any audience, purpose, or budget. You can customize it all, your logo, your message, your look, and many items come with no setup charge to help you save. And if you're really watching the bottom line, you'll find standout choices at every price point so you can make a real impact while staying on budget. Plus, you'll get expert help, fast turnaround times, and their 360-degree guarantee. So you can be 4imprint certain your order will arrive on time and look exactly right.

23:46Whatever your goal, 4imprint makes it easy to find your perfect promo match. Explore the possibilities today at 4imprint.com. 4imprint. 4certain. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index.

24:25You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Rokered services by Open to the Public Investing, Inc., Member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures.

25:06Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically so your team can spend their time on what actually compounds. It's time to get Brex AF. Learn more at brex.com slash AF. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App.

25:47Listen on demand wherever you get your podcasts or watch us live on YouTube. It is Scarlett Field and Paul Sweeney live here in our Bloomberg Interactive Broker Studio streaming live on YouTube as well. We have some earnings coming out of the payments and fintech space today. And break it down, we're going to go to Dixia Guerra. She's a senior fintech and payments analyst for Bloomberg Intelligence. She's out there in San Francisco. Dixia, let's first talk about PayPal. I know they reported some numbers that beat estimates. We can talk about that. Talk to us about the strategic opportunities potentially for this company because I'm not sure if it's in play or not in play, but people are interested in it.