Tesla Earnings Report | Daybreak: Europe 04/24/2024
Good morning.
This is Bloomberg Daybreak Europe on Tom
Mackenzie in London.
These are the stories that set your
agenda.
Tesla shares soar as investors cheer
Elon Musk’s promise of making cheaper
cars sooner.
Investors overlook a big miss on
earnings stock’s gain in Asia.
Following a tech fueled rally on Wall
Street.
A $69 billion sale of two year
treasuries.
No solid buyer demand, even as a 5%
coupon proves elusive.
Plus, President Biden says fresh U.S.
military aid will start flowing to
Ukraine within days after the Senate
passes a long delayed aid package.
Let’s check in on some of the earnings
that are breaking across the terminal.
Right now, we go to Volvo cars with the
focus, of course, on the competition,
the price cutting, the cost cutting,
that company.
We know that EV sales overall, of
course, across Europe have been slowing
in terms of the growth is over EV sales.
Volvo Cars sees full year revenue at
least of up 15%.
So they see full year revenue growing at
least 15%.
That’s pushing forward.
In terms of the first quarter, the
revenue is a miss for Volvo cars logging
93.8.
So 94 billion Swedish krona in the first
quarter in terms of revenue below the
estimates that had seen just shy of 100
billion Swedish krona in terms of
operating income for the first quarter,
that number came in again below the
estimates, 4.71 billion Swedish kronor,
4.7 billion versus the estimates of just
shy of 6 billion.
The margin as well.
Also a miss 5% versus just shy of 5.7%.
But again, the full year revenue still
seen that growth of up 15% to Volvo
cars.
That is a company we will watch, of
course, at the open as we continue to
contend with a little bit of softness in
terms of that demand.
Again, the competition from China, the
price cutting, the competition from the
likes of Tesla as well, a red head as
well on Rush.
We’ll get to that shortly.
But just a fly that we’re going to be
speaking to, the Volvo car CEO and
President Jim Roe in that conversation
at 7:15 a.m.
UK time and on road, the redhead
crossing for this Swiss drug maker.
First quarter sales coming in just shy
of the estimates, 14.4 billion CHF.
The estimates have been for 14.5
billion.
So just a small mix coming through for
the first quarter.
We know that in terms of the COVID 19
input, that has slowed the sales,
basically that business fading last
year.
So we know that that could have
potentially been a drag as well.
We look for more details on this, of
course.
And then the Swiss see the the impact of
that strong Swiss franc is a factor to
be looking at as well.
They’re confirming their outlook for
2024.
Not a big surprise that that was
expected.
But again, the outlook confirmed by
Roche for 2024.
And in terms of the breakdown in some of
the individual drugs, we’ll get the
details on that.
But the top line is first quarter sales,
just slight mess there for Roche in the
first quarter.
Let’s check in on these markets because
the earnings story is part of the
package here, but there’s a number of
positive catalysts coming through and
feeding into the upside that we’re
seeing.
The good news is bad news or the bad
news is good news when it comes to us
data with business activity slowing.
And that suggests that there is
certainly still a window for the Fed to
cut at some point this year.
Then that was a Treasury auction that
was very well received as well.
And then the earnings story and the
optimism in terms of the outlook coming
through from Tesla, the earnings not as
bad as they could have been, was the
line from some analysts out there and
then pushing forward in terms of
potential cheaper model.
We’ll break that story down for you, of
course, in detail through the show.
European futures pointing out by 4/10 of
a percent footsie 100 looking to add 48
points.
Commodities getting a lift as well,
copper and iron.
Also, keep that in mind, S&P futures
back above 5100, looking to gain 3/10 of
a percent after two solid days.
In terms of the upside that we’ve seen
for the S&P, NASDAQ futures currently
pointing higher by 7/10 of a percent.
Let’s flip the board and look across
asset then with the focus on the
Treasury curve.
Given that two year auction yesterday in
the US, it was well received for 92 on
the two.
Yet right now Eurodollar at 1 to 7 flat
essentially for the single currency but
back above that 1 to 6 level Brent $88 a
barrel up just a 10th of a percent in
iron ore rallying today on question
marks about supply close to 5% on iron
ore.
So we’ll be watching basic resources and
the miners at the open.
Let’s cross over to Asia now and see how
that market is shaping up.
Optimism there as well.
Abraham standing by for us in Singapore,
April.
Optimism indeed, as we saw last week,
though, remember how it was very
tentative in the Asian markets and we
saw the infotech sector badly beaten up.
It was that confluence of factors, no
thanks to the Fed narrative, Middle East
tensions and then tsmc’s guidance.
Today, Asian markets are getting their
groove back on the info.
Tech sector is the top performing one we
already knew coming to this week that
earnings were going to be a key test.
So far what we’re hearing from Tesla and
Texas Instruments as well is providing
that sense of promise and optimism to
the markets.
You’re seeing the Nikkei, Cosby, Taiex
all moving higher and the Hang Seng
also, well in the green for another
session, erasing the declines for the
year.
Let’s take a look at what this is doing
to the effect space.
There is a read through from that tech
rally that the board as the south Korean
one, is a top performing currency in the
region today amid the stock market
inflows.
Taiwan dollar also doing well, keeping
an eye on the Aussie after a hot
inflation period.
Now we are also keeping an eye on the
yen weakness despite the Bloomberg
dollar index softer fourth session, it
is moving towards that 155 level on
dollar yen as the BOJ heads into that
two day policy meeting tomorrow, you can
bet that yen weakness will figure
heavily into the equation and
conversations about imported inflation
that the board.
Again, I want to take you to the chip
stocks in the region after Texas
Instruments gave that solid forecast.
It is, of course, seen as a bellwether
for the sector.
So the South Korean, the Japanese chip
related stocks, they’re moving on up and
that’s good.
The board again, take a look at what
we’re seeing among the EV related
stocks, thanks to Tesla allaying some
concerns about its strategy by saying
it’s going to push out these cheaper
models soon and it’s taking along for
the ride its suppliers as well as some
of its peers.
These two listed in Hong Kong, Tom.
Okay, as April says, the Asian markets
getting their groove back.
April Hong and Singapore, thank you very
much indeed for the breakdown there in
terms of the Asian market action and as
you said, tying that to the Tesla story,
at least to some extent on the earnings
story.
Tesla shares then surging after it said
that it is accelerating the launch of
more affordable models following a
decline in its profit margins and sales.
The EV maker says it aims to start
production as soon as this year, well
ahead of the like 2025 timing that had
previously been pledged by the company.
Let’s bring in Robert Lee, standing by
now, a senior analyst for Bloomberg
Intelligence, joining us with the
details, the deep dive on the earnings
story when it comes to Tesla.
I’m pushing ahead as well.
And arguably, Rob, it was all about the
call rather than numbers that came
through for the earnings.
It was the call and the conversation
with Musk that seemed to alleviate those
investor concerns.
No, I think you’re absolutely right.
I mean, the market anticipated weak
results and it truly got those.
But those are in the rearview mirror
now.
To use a driving pun, it’s all about
looking forward.
And I think investors gained a bit of
confidence on the strategic direction of
the company, given that it now seems to
be focusing more on the mass market and
returning to their original stated aim
to go into lower priced EVs.
So the market’s taken that quite
positively.
Robo taxis, etc.
is still a potential focus, but the I
think most people would agree that’s a
longer term opportunity with various
question marks as to when these things
really become viable.
And then secondly, the CYBERTRUCK, which
is a low volume product for them at the
moment.
Tesla confirmed, or Elon Musk, I should
say confirmed, that production is
ramping up faster than expected on that.
And that gave the market some confidence
that that particular business line could
potentially reach breakeven as soon as
Q4.
So those were two main incremental
positives that the market didn’t really
see coming, and that’s why you’re
getting both a bit of a short squeeze
and a rally in the aftermarket.
How was that tying in to the earnings
outlook for Tesla and how that’s
adjusted?
Rob?
I guess analysts are still pencilling
away on that.
And so we’ve yet to see the update on
the consensus numbers.
But arguably, the you know, the numbers
given that were baking in very low
expectations, could come up a little bit
for this year.
And also, looking at the numbers
reported, the gross margin also came in
a little bit higher than expected.
And Tesla has clearly been cutting costs
with the staff, layoffs, etc..
So there is maybe some incremental
upside on earnings estimates in the near
term.
And as I said, I think most people would
agree that the mass market opportunity
is both near-term to them.
And as you said in your intro, they’re
looking to roll that out faster than
expected.
But that’s a more near-term opportunity
versus robo taxis, which really, I would
argue, are still in the realms of realms
of science fiction to some degree.
There’s been some interesting trials,
but that technology is nowhere near
becoming mass deployed at the moment.
So the lower priced EVs is a near-term
market opportunity for them that could
well generate some medium term upsides
to their earnings estimates, assuming
they execute in a very, very competitive
market.
Okay.
Rob Lee, on the near-term and then
longer term prospects for Tesla, senior
analyst at Bloomberg Intelligence.
Thank you for the analysis, Rob, as
ever.
Now to the US and the macro,
particularly when it comes to what is
happening on the fiscal front, the US
Treasury’s hefty $69 billion sale of two
year notes still solid buyer demand.
There some questions as to whether or
not that would happen, but even as the
much desired 5% coupon proved elusive,
you’re close to that be didn’t cross the
5% level.
It comes as business activity meanwhile
in the US expanded at its slowest pace
slowest pace in four months.
The jobs component also softened within
that data point.
Bloomberg strategist Mary Nicola joins
us for the breakdown.
Mary, let’s start with the Treasury
markets, at least the auction and to
what extent this was well absorbed by
the markets, A positive, it seems.
Yeah, absolutely.
I remember yesterday I was on your show
saying that there were headwinds for the
2% for the two year auction.
But obviously, you know, the 5% coupon
is quite attractive.
So it could signal that we could see a
good one for the five year and the seven
year today.
But it will still be on what the run up
looks like heading into these auctions
and how Treasurys are playing out.
But it’s it’s the momentum for
Treasuries right now looks a bit still a
bit precarious when you have GDP data
coming out and of course the you’ve got
PC on Friday as well.
And meanwhile, Australia a reminder that
inflation isn’t just sticky in the US,
it’s sticky in Australia and it seems
the markets are starting to push back in
that jurisdiction as well.
The prospect of cuts from the central
bank that talk to us about the relevance
of that inflation data out of Australia.
Absolutely.
It just resonates the higher for longer
a longer mantra.
Not only is it coming from the Fed, but
it’s also from the RBA, and it just
shows the stickiness of inflation more
globally.
And of course, then you have the
resilience in oil prices.
Oil prices still remain high.
So there’s still some upside risks to
inflation, which could keep a lot of
central banks on the sidelines for now.
RBA’s perfect case heading into the CPI
data swap markets, we’re looking about a
70% chance of a cut.
Now they’re pricing in about less than a
50% chance of a cut for this year.
So a lot of a lot of these the the
inflation numbers are coming out showing
that, you know, the central banks really
have to be a bit more careful before
even considering these rate cuts.
Yeah, the hard work that needs to be put
in to get through that last mile when it
comes to inflation, with that three plus
percent handle in terms of CPI, I think
was 3.6% on Australia wasn’t a stretch.
As Mary Nicola, thank you very much
indeed.
Walking through the Treasury auction in
the US and of course that inflation
print and how that resonates globally
out of Australia.
Here’s what else to think about that day
ahead 7 a.m.
UK time because it is a big week in
terms of bank earnings across the
eurozone here in the UK as well.
7 p.m.
UK time we’re going to get Lloyds
Banking Group earnings.
So think about that in terms of
scrutinising what is happening in the UK
banking space.
9 a.m.
UK time as well.
The German Ifo business climate is
expected to take up is expected to build
out the picture of a modestly improving
German economy.
That data and that data out at 9 a.m.
UK time.
And of course on the earnings front,
another big big day.
Winning at Boeing in the US of course
matter and to what extent the air
catalyst is feeding through into that
company, IBM as well and Ford on the
autos front, all of those earnings
coming out later in the day stateside.
Coming up, US President Joe Biden
expected to sign a long delayed aid
package into law today, today clearing
the way for resumed weapons shipments to
Ukraine as soon as this week.
The details are next.
This is bloomberg.
Welcome back to Bloomberg Daybreak
Europe.
Now US President Joe Biden is expected
to sign a long delayed $95 billion
emergency aid package for Ukraine,
Israel and Taiwan into law as soon as
today.
It clears the way for resume shipments
of weapons to Ukraine this week.
Let’s bring in Bloomberg Markets today
anchor Christine, for the details on
this.
So quickly, what can Ukraine expect from
this, though, replenishment of air
defense systems?
That’s the big one here.
We already had a really unique, for
example, the last 24 hours, talk about
giving long range missiles in
particular.
So the ammunition is coming from other
parts of the world.
But the actual machinery, the actual
systems, the actual air defense systems,
drone warfare, for example.
That’s the part that’s getting
replenished from the this aid package,
about $14 billion of US defense getting
added to that $13 billion.
When it comes to the actual machinery,
the equipments, the firearms.
There you have about 9.5 billion though,
in forgivable loans.
I think this part is a really key piece
of the equation simply from a political
standpoint.
One, because this was President Trump’s
initial idea and actually brought on
some of the kind of more right wing
congressional representatives onto this
bill.
But it also means that it has to do
things with more things like aid, for
example, in parts of communities.
It’s not necessarily related directly to
the defense store in Ukraine has a
little bit more to do with economic
assistance.
So that is the key parts of the
Ukrainian bill at a time, by the way,
when the ports, for example, are coming
back into focus, you’re really keeping
an eye on things like grain shipments
out of Ukraine and what that looks like.
It was certainly under a lot of pressure
as Russia was making ground.
And arguably the Ukraine segment of this
bill was the most important.
But there was a lot in there, including
additional sanctions on Iran.
Iran is already heavily sanctioned, of
course.
So do these additional sanctions
actually move the dial?
In theory, they should.
And all of your blocks over I Bloomberg
opinion made a great point that’s
actually not about more added sanctions
about the enforcement of the sanctions.
The question is how much money does it
add?
And I think the fine print is really
important here because it’s not just
about targeting refineries or ports or
vessels for Iran, which is already being
done in a lot of ways.
By the way, it’s targeting the financial
infrastructure that ends up with a lot
of Iranian crude into places like China,
for example.
Again, Javier Blas I love his column in
this week where he said that a lot of
that output is being kind of branded as
Malaysian crude instead and ending up in
China.
What’s important here is that this bill
now targets that financial
infrastructure, the banks, the financial
institutions that really carry out some
of those trades.
What it means for the oil price, though.
Eurasia Group saying that stricter
enforcement of those sanctions, not just
passing it, would add 2 to $3 per barrel
on top of a $90 baseline.
Again, it comes with the implication
that it has to be stricter.
Enforcement is something that the Biden
administration has been having a lot of
pushback on that they haven’t been tough
enough.
But even the White House saying that
they’re okay with doing this this time
around.
What about enforcement?
Amrita said something else yesterday as
well, that that enforcement hasn’t been
there up until this point.
So we watch that, as you say.
Meanwhile, the divestment of TikTok from
Bytedance that will be signed into law,
they have a period of time to work
through that.
Legal challenges.
What’s next?
Well, it doesn’t happen as quickly as
perhaps it has in the past, where TikTok
just disappears from the App Store or
Google Play or whatever it is, being
already a hotly contested issue.
You have the leadership over at
Bytedance, in particular in China, but
also in tech talk as well, saying we’re
going to put this up in the court.
This is a long legal battle if indeed
the United States is able to pass this
bill, which is looking like, but it
won’t immediately disappear from
everyday use.
The concern here, of course, is the
algorithm.
You’ve made the point that this is
China’s hard line as well.
It looks like it’s the United States
hard line as well.
I think what we’re looking for ahead is
a very long legal battle that will
ultimately end up in the Supreme Court.
Yeah, 170 million users or so in the US
will be looking at that as well,
monitoring that Kristie.
Thank you very much indeed for the
breakdown, the importance, of course, of
this bill as it clears the Senate hurdle
and will be heading to the president’s
desk, where, of course, he says he will
sign it.
Now, coming up, Boeing prepares to
release results without nets, watching,
of course, for the cash burn in the wake
of its max seven crisis.
The challenges for Boeing and how that
is all fitting in to those earnings.
We don’t set you up with the preview for
that.
Stay with us.
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Speaking to Bloomberg’s Jennifer Zagat.
Sandra and Jennifer will be leading, of
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Africa amplified right here on Bloomberg
TV.
So tune in for that as well.
Back to the earnings story now and
Boeing’s cash burn will be in focus when
it reports earnings later today.
The plane maker is engulfed, of course,
in a crisis involving its main source of
revenue, the 737 max jet.
Let’s get more then from Bloomberg, said
Philip, who covers all of this for us in
great detail, said, what do you and the
team or investors going to be looking
for then from Boeing’s results?
Morning, Don.
So what investors are really looking for
from Boeing is about the cash flow and
the cash burn this quarter, because
essentially there’s an estimate that
they may have burned through as much as
4 billion in cash and also taken
basically 4 billion and debt.
So that would have reduced that
available cash by almost half.
And that’s a really big concern to see
what that cash burn looks like and how
they can sort of get that cash flow and
get cash back towards the estimate that
they had at the start of the year before
the blow out on the airplane.
Okay, So the cash flow in the cash burn
clearly in focus under the lens for
investors and you and the team.
What about what about the moves from
regulators around Boeing?
How consequential have they been?
What action have regulators been taking?
Yes, the regulators have obviously put
going under a lot of scrutiny because of
the max max nine door blood blowout on
January, in early January on the Alaska
Airlines plane.
And that’s really been a big concern for
both for Boeing’s production because
regulators there, they’ve restricted
them from ramping up production on the
77 max.
They also sort of demanded lots of
audits and they’ve done lots of various
quality checks.
And that’s really had an impact on
basically deliveries.
And so Boeing isn’t able to deliver as
many planes to airlines.
And as a result, they’re basically
hamstrung in terms of being able to sort
of ramp up production at a time when
demand is really soaring.
And said, get us up to speed in terms of
the steps that Boeing is taking to kind
of address these multitude of issues
and taking a wide range of measures,
including the fact that they’ve
announced a sweeping management change
with the CEO stepping down at the end of
the year, the chairman stepping down,
and also they replaced the head of the
commercial airplanes unit.
So they’ve announced wide leadership
changes.
They’ve also announced the fact that
they are looking at acquiring Spirit
Aerosystems, which is an important
supplier to Boeing and which makes 70%
of the 77 max fuselage.
And so they’ve announced various
measures, and now it’s really a question
of implementation.
And also investors will be looking at
questions about what would the next EU
is going to be.
What the board is looking for and
essentially what where where Boeing goes
from here.
Okay, Glenn Beck said.
Phillip, setting us up in terms of the
preview for those Boeing earnings.
Clearly and a lot of questions still
need to be answered, whether it’s the
executive team at Boeing, of course, the
changes, adjusting some of these
challenges and the cash flow as well.
The cash burn clearly going to be in
focus for investors.
Thank you very much.
And don’t miss our interview, by the
way, with the CEO of their competitor,
Airbus GM.
For that is tomorrow.
That interview, of course, well worth
tuning in for.
Let’s check in on the futures and a
number of catalysts coming to the floor
to push us up in terms of setting us up
for a positive day across the equities
space.
We’ve had a solid handover from Asia and
of course the gains coming through from
the US.
European futures pointing higher by 5/10
of a percent.
The earnings story is there.
The fact that the Treasury auction in
the US was well received footsie 100
futures as well, pointing up by 6/10 of
a percent.
The commodity story, particularly the
likes of copper and iron ore, will play
into that.
DAX futures over in Germany looking to
add 4/10 of a percent.
Coming up, Tesla’s earnings, miss.
But it’s overtaken by Elon Musk’s new
plan to deliver cheaper cars faster.
He’s relatively optimistic on the
prospects.
We get the details on that key story.
That is next.
This is Bloomberg.
Good morning.
This is Bloomberg Daybreak European Tom
Mackenzie in London.
These are the stories that set your
agenda.
Tesla shares soar as investors cheer
Elon Musk’s promise of making cheaper
cars sooner.
Investors overlooking a big miss on the
earnings stock’s gain in Asia following
a tech fueled rally on Wall Street.
A $69 billion sale of two year
treasuries.
The solid buyer demand, even as a 5%
coupon, proves elusive.
Plus, European earnings gear up with
Volvo car missing revenue estimates for
the first quarter.
And French luxury maker Karen comes
under pressure after Gucci sales tumble
on weak demand in China.
Let’s check in on these markets then.
In terms of the earnings picture, a
little bit mixed when it comes to
Europe, but the conflicts coming through
from the US, certainly you’ve had two
straight days of solid upside for the
S&P logging gains of 1.2% yesterday, the
best back to back rally for the S&P in
two months.
NASDAQ as well.
The NASDAQ 100 ending up 1.5%.
European futures pointed gains of 5/10
of a percent.
The footsie 100.
Keep an eye on copper and iron ore
prices and basic resources.
That index pointing higher by 6/10 of a
percent.
S&P futures looking to build on the
gains of yesterday, 5126 looking to add
19 points.
Nasdaq futures 17,734 at 7/10 of a
percent.
Yes, the optimism around Tesla, despite
the lackluster earnings, that’s the
outlook and the guidance coming through
from Elon Musk, but also the
semiconductor space getting a lift this
morning in Asia and that could filter
through to Europe as well.
On the back of what we saw from Texas
Instruments and an upgraded or at least
more positive outlook coming through.
Of course, Mac Key semiconductor maker,
let’s flip the board and look across
asset as well for you.
The US two year in focus for us 492 well
received in terms of that $69 billion
auction.
So some relief there across the Treasury
markets yesterday.
Euro dollar 1 to 7 Brent the $88 a
barrel up 2/10 of a percent.
Iron ore soaring just shy of 5%.
Copper also getting a lift as well.
A red head crossing right now when it
comes to the real estate story of China.
Of course, iron ore ties in to that as
well.
Interestingly, this is around country
Garden and the news coming through that
they have negotiated to extend that yuan
bonds in terms of the payment on those
yuan bonds to avoid a first local
default.
For the context Country Guide, one of
the biggest real estate companies in
China.
It’s a brand that’s very, very well
known.
They did default on their dollar bonds.
That default has happened about a year
ago.
It’s the local bonds, the yuan bonds on
which they have avoided their first
local default.
So a bit of relief coming through in
terms of the ability for this key real
estate company in China to negotiate its
debt payments at a time.
Of course, when you continue to see
pressure across the real estate market
in China, an 83% slump in home sales
just last month.
And that cash crunch is, of course,
proving extremely painful for these
countries.
But a big relief coming through for
country.
Got move.
Going to watch the local bonds on the
back of that.
Let’s get more on Tesla then in terms of
the earnings share surging, as I
mentioned in late trade after it promise
to accelerate the launch of more
affordable models following a decline in
first quarter profit margins and sales.
Let’s bring in Bloomberg Asia transport
reporter Danny Lee standing by for us in
Beijing.
Danny, tell us about what Elon Musk said
during the earnings call that led to
this this optimism amongst investors.
Yeah, Elon Musk looking to bring forward
and Tesla’s looking to accelerate the
production or or the unveiling of what
should be a new low cost set of EV
models.
And this is really important for Tesla
and its future growth story, and
particularly as around 2020 for which
Tesla faces notably lower growth.
And so therefore by having these
potentially new and more affordable
models out there, it helps potentially
refresh a lineup that has become stale.
A lot of it is also very small.
And so investors are broadly happier
with this accelerated timeline,
something that was going to happen at
the end of last end of next year in 2025
could come as soon as this year or early
next.
So this is potentially very, very
positive.
But unfortunately, there is still a lot
of details that is yet to be really been
clarified by Elon Musk.
And he’s saying wait until August, wait
until August, when we will have an
announcement on something related to a
ROBOTAXI and whether that could involve
one of the things that could be low cost
and help to drive and revive this
slumping stock performance.
Yeah, and it just comes down to
implementation.
Now, the key question of whether or not
they can actually implement around that
sped up time time frame.
Interesting.
The Dan joining us out of Beijing where
of course the competition out of China
has been one of the key factors, key
challenges for Elon Musk and Tesla, the
first quarter mix.
Bogdan, Danny, what stood out to you?
I think just across the range of the
metrics that we were looking at,
everything that had fallen in terms of
missed estimates, rather.
And so this was not too much of a
surprise given what we saw coming based
on weak first quarter delivery numbers.
And so therefore, with what Elon Musk
has been trying to do to kind of turn
this this ship around on Tesla, in fact,
the fact that they had cut made its
biggest workforce cuts last week ever.
And therefore it’s also really going to
laser in on on further cost cuts going
forward.
So that for me was the most interesting
point, aside from this accelerated
announcement on on low cost of
production.
And so therefore, it could put it in a
better financial standing going forward.
Okay.
Bloomberg Asia transport reporter Danny
Lee giving us the context around those
Tesla earnings.
Thank you very much indeed.
Joining us out of Beijing.
Now, another of the Magnificent Seven in
action later today with Mazda reporting
first quarter earnings.
Today, the company’s generative AI tools
expected to continue strengthening its
position.
Arguably, matter was ahead of the curve
when it comes to building out.
Let’s get more from Matt Bloxham from
Bloomberg Intelligence.
Matt, what are you in the street gonna
be looking for then?
Yeah, I mean, I think the M-word is
important.
Magnificent.
I think people are expecting these to be
really good results.
And I had a bit of a lull 12 months or
so ago, but they’ve kind of really come
out of that.
You know, the market’s looking for about
something like 26% year on year revenue
growth, really big improvement in
profitability.
They said some of that is coming from
AI.
They’re really using those tools
effectively to improve ad impressions,
advertise, saying, yeah, we want to
advertise on Instagram, on Facebook,
because these tools are helping us to
reach customers and actually sell
product to them.
So that’s really helping them obviously,
in this kind of whole news around Tick
tock, tick tock.
It’s been a big shadow for matter for a
long time now.
Reels, which was the Instagram kind of
rival to tick tock It’s time to getting
traction too.
So that’s helping.
So generally, I think when the street
looks at results, they’re expected to
see really positive numbers.
I don’t think they’re going to
disappoint, but obviously the share
prices may be reflecting that already.
See, another thing that people are going
to be looking at is the forward guide.
So for next quarter, where is Matic
going to kind of position revenue
expectations?
The Street’s looking for about $38
billion of revenue.
I think a lot of people are expecting
maybe that could be a little bit
conservative.
So we’ll see.
Okay.
$38 billion of revenue expected by the
street you touch on sector.
It very likely he’s going to he’s going
to face, at least on paper a ban on is
being divested from bytedance.
The president’s going to sign that bill
it seems later today.
There’s a legal process to work through,
of course, and it’s very unsure,
uncertain as to whether or not you’ll
actually see that ban in consequence.
But it could prove consequential for
matter.
Yeah, could I say that that the the
clock starts ticking on this to 70 day
timeline in theory at least maybe later
today.
As you said, there’s lots of kind of
resistance expected from bytedance, all
sorts of legal avenues they can pursue
to at least delay this from it being
implemented perhaps by up to a year,
possibly longer.
But, yeah, I mean, I think if ultimately
tick tock in the US is either sold or it
has to be kind of closed down, then for
sure matter is going to be one of the
principal beneficiaries of that because
it is such a big rival to Instagram that
a lot of content creators are going to
have to think, well, maybe we’re going
to have to go back to Instagram and use
the online platform.
It’s going to give a big boost to reels.
Obviously, lots of different things
could happen in the next 270 days, but
definitely I’m sure there’s a lot of
work going on within a matter to make
sure they’re well positioned and they
should be a big beneficiary of any any
ban.
Yeah, the prospect for them arguably is
going to be is going to be tantalising
is.
Matt, thank you very much indeed.
Setting us up, of course, the importance
of the matter, earnings coming out of
the US and what to scrutinize in terms
of those numbers.
Matt blocks, of course, from Bloomberg
Intelligence with a deep dive there.
Thank you.
Now for some of the other stories making
news today, Bloomberg understands that
IBM is in advanced talks to acquire
software company Hashi Corp with a
possible agreement coming as soon as
today.
Has she Corp.
shares jumped on the news, posting that
biggest one day gain in more than two
years, giving the San Francisco based
company a market value of 5.8 billion
USD.
IBM reporting later today.
By the way, these are shares, meanwhile,
gaining in extended trading after the
company reported a profit beats the
payments.
Giant says adjusted net income for the
fiscal second quarter rose 17 one seven
17% to over $5 billion.
US credit card spending growing over 6%
from a year earlier, with worldwide
payments volume rising 8%.
Heineken, the drinks maker, of course,
due to report in the next half hour,
also expected to benefit from an earlier
Easter.
So some of those seasonal changes.
For a preview on the numbers with this
company, I’m joined by Bloomberg’s Dasha
Silva for the details.
Dasha, what are we expecting?
Boring, I think with Heineken, like a
lot of the consumer goods companies, 20
at last year was a really difficult year
because they had contracting volumes.
And in this quarter Heineken is
actually.
Fixing to come back to growing volumes
and sales are expected to grow about 6%.
So I think the key the key thing to look
for is is that growth driven more by
price or by volume.
And the balance of that will kind of
tell us whether Heineken is going to be
able to claw back its margin.
Okay.
The price versus volume split is going
to be important then.
And in terms of in terms of the outlook,
to say, look, it’s less about the
earnings and more about the outlook.
Now, what is the expected outlook for
this company?
Right.
Yes.
So I think that the the expectation is
that it is going to
grow volume and also grow sales this
year.
And I think that the margin is expected
to come back to and it’s expected to
sort of increase profitability and also
trying to find ways to claw back that
raw material costs that it lost last
year.
Okay.
Thank you very much, indeed.
Setting us up for the Heineken earnings,
of course, dropping potentially next 20
minutes or so.
The volume of question, the pricing
question, input costs, of course, and
what’s happening across that Africa
business is all going to be in and under
the lens for us.
Thank you.
Here’s what else to watch out for then.
Today, you’re going to get those
earnings, of course, crossing imminently
from Heineken.
10:30 a.m..
Then after that UK time, Germany will be
coming through with a ten year auction
for €4 billion that will be scrutinising
that at 1 p.m.
London time.
I smell that AGM begins really, really
important.
Of course, the most important, arguably
the most important European tech company
and changes at the top of the executive
team as well.
The CEO stepping down and making way for
a new CEO.
Christopher Kate will be taking over 6
p.m.
UK time.
Meanwhile, the US is going to come
through with that five year auction of
$70 billion worth of five year notes or
five year treasuries.
Others say after the two year treasuries
well received that auction.
What we saw yesterday is this the
market, this feeling indigestion or will
it be?
Well, we’ll see it what we see soon.
Meanwhile, the UK prime minister
visiting Germany.
He continues his European tour.
Anthony Blinken, the US secretary of
state, is arriving in China later today,
expected to touch down in Shanghai.
He’s got a message or two for his
Chinese counterparts later US earnings,
of course, IBM, Boeing.
We set you up with that one Ford Motor.
And as we’ve been discussing matter with
the focus on the economy, it’s coming
up, luxury spending going out of style
in China as the economy, of course,
continues to struggle.
We’re going to check in on how that is
affecting the world’s biggest fashion
brands, including caring after Gucci
sales tumbled on weak demand.
That is next.
This is Bloomberg.
Welcome back to Bloomberg Daybreak
Europe.
We bring you the earnings, of course, as
they break any Italian oil and gas major
coming through with first quarter
adjusted net income that comes in just
marginally above the estimates just by a
hair €1.58 billion.
The estimates have been for 1.57
billion.
We know that the expectation was that
the gas division, the gas unit, this
business would be performing relatively
badly within this quarter and it would
be the downstream part of the do the
heavy lifting.
First quarter production on that
question, 1.74 million barrels of oil,
the estimates have been for 1.69.
So production coming in slightly higher
than expected exploration and production
adjusted operating profit, by the way,
coming in at 3.32 billion.
But the red had across the terminal for
any adjusted net coming in just
marginally above the estimates at €1.58
billion.
Now to the luxury space where Karen was
warning that profit will plunge in the
first half of the year after wealthy
shoppers curbed spending on Gucci
products.
Comparable sales at Gucci tumbled 18% in
the first quarter on tepid demand in
China.
Joining us for the details is Deborah
Aiken now from Bloomberg Intelligence.
What is causing this this deeper decline
actually than Deborah?
So.
Well, so many different things, but
where to stop?
Yeah, we start with the fact that the
carryover stock isn’t working, that the
product coming from new creative diseno
is only 7% of it is in stores and it’s
only in Gucci owned stores, it’s not in
the wholesale stores.
And then also the fact that they’re
trying to really push the clean up.
There’s so much going on within the
brand overall and we should see
improvements in about three.
Q But that is going to make it much
worse for 2024 overall versus consensus.
Okay.
Well, on that pushing forward then and
then Outlook and what we learned from
the earnings in the earnings call over
the last day or so and how that informs
your view about the second half, what is
your expectation about how challenging
it will be or if they can overcome these
obstacles by the end of the second half
of this year?
So the company has guided the second
half.
So through the first half operating
profit they look for been down 40 to 45%
now against this pre-release sales
number for minus ten for the company for
carrying a minus near -20 came in -18
for Gucci.
She said they were looking at what
consensus was expecting operating to be
down 21% so they guide 40 to 45.
Let’s take the back end of that.
And in the second half, well, for Q2,
they’re saying there’s no pickup for
Gucci and for the brands, for the sector
overall, there’s no real pickup in spend
in Q2 versus Q1.
So another soft quarter and softer than
was expected the beginning of the year.
And what does that do then?
It probably means we get about 100 basis
points improvement on off on margin, but
from a lower base.
So we’re going to see margins tumble and
the 30% margin that they forecast around
30% for Gucci just isn’t going to hold.
We’re going to see those numbers come
down to.
So that 30% margin looks looks
vulnerable at this point.
China, Chinese customers turning their
back on this brand to some extent at
least.
What is the read across to the broader
industry?
It’s a little bit more granular, isn’t
it?
That’s what came through from the call.
It’s not just a one size fits all when
it comes to the Chinese consumer, the
Chinese consumers being being a little
bit putting a bit more scrutiny into
what they buy.
So I think if we go back to the
portfolio of Karan, overall, Gucci is
just in terms of brand perception is in
the wrong place and it is taking longer
to fix and it needs to do more at the
top in the bottom end.
And so China is Chinese shoppers are
scrutinizing on that.
I think that overall China for them is
about -20%.
And I can compare that at the bottom end
where we have such is a L’Oreal even
saying market is flat in China, but that
they’re growing 6%.
So it’s Gucci doing something wrong
versus peers like LVMH and others.
It’s a difficult marketplace.
But if you’re brands in the right place,
you can do well.
Some of kering’s other brands are doing
better.
But overall, you see elsewhere what
they’re doing with all of the other
brands.
If we think about Yves Saint Laurent,
that’s going to be clipped by
aspirational shoppers at the lower price
point, Bottega Veneta is picking up
Balenciaga.
You can’t get ahold of their bags.
They’re haute again.
Rodeo bags.
No, there’s nothing in stock.
But everywhere Kering is doing a clean
up whereby they’re taking around 25%.
Or you can see on the numbers -25% out
of wholesale.
So while you have Gucci dragging in
retail, nobody is going in their stores
elsewhere.
They’re pulling out of boutiques and
department stores and trying to elevate
all of their brands at the same time.
It’s really a difficult place for them,
China.
Otherwise you’ve got to have your brand
and actually even for the Gucci and all
of their brand range and what we call
the Chinese cohort.
So moving out of the mainland, shopping
elsewhere, Japan is up 16% because
weakness of the yen and we are seeing
that also with.
Do some shopping on yen weakness for
beauty brand in Japan.
But overall, still, I would say China is
probably down 20% for them.
Okay.
Sounds like a mountain to climb for the
Gucci brand.
A rodeo handbag.
I have no idea what that is.
I have to Google after the short
separation.
Thank you very much, indeed.
Breaking down those earnings for us from
Carrie and of course, the Gucci brand
from Bloomberg Intelligence.
Meanwhile, on fashion, Chanel CEO Leena
Nair says the luxury giant plans to
continue investing in China.
We’ve just been talking about that
market despite the uneven economic
recovery.
Speaking exclusively to Bloomberg’s
Francine Lacqua, Nair spoke about the
strategy behind recent price hikes.
So we could raise our prices according
to the inflation that we see sort of
really linked to the cost price.
We’ve also made a commitment to price
harmonisation across the world, which
means our clients should not experience
excessive price differentials.
No price differentials, no matter where
they buy.
How do you see the China market right
now compared to the US market?
Because it’s not it’s not that volatile
actually.
You kind of have like a base that stays
for for quite some time.
China is a very central market for the
luxury eco system because of the fast
adoption of luxury, because of the
appreciation of refinement and
sophistication.
So it’s a very important, essential
market for us.
I came back recently from China and I
was really happy to see the energy and
vibrancy in the market.
So we continue to run our business for
the long term and continue to invest in
China for the long term.
Okay.
Chanel CEO Leena Nair speaking
exclusively with Bloomberg’s Francine
Lacqua.
And you can see that full interview on
Leave US with Lapa 9:30 p.m.
this evening in New York and tomorrow at
6:30 p.m.
here in London.
There’s plenty more coming up.
Stay with us.
This is Bloomberg.
The theme is, is that it’s a very
unbalanced economy.
And that’s the thing we’ve had for a
while.
So post-COVID, it’s just been a very
unpredictable environment for a lot of
reasons.
Some of those things we got really
right, some of the things we got really
wrong.
And I think we’re we’re trying to figure
out kind of what the next stage is.
Morgan Stanley’s a might.
Well, Sunak also called the sell off in
2022.
He’s very firmly and closely watched,
but he’s being cautious around how to
make the calls around 2024.
Given all the uncertainty these outlined
in the recent couple of days, though,
the strength has come through.
For the S&P yesterday it was the
semiconductors, it was the tech space,
it was in video lifting the index.
And by the way, for the context and this
chart shows it the best back to back
rally for the S&P in about two months,
where the earnings story continued to
propel the momentum.
That’s the picture when it comes to the
upside.
And the futures are pointing to further
gains today.
Meanwhile, let’s flip the board and have
a look at what’s been happening at
Tesla, because the earnings were not
good, but the analyst came out and said
they could have been worse and not quite
as bad as they could have been.
But also more importantly, arguably,
it’s about the outlook and the fact that
there was a little bit of hope that was
sprinkled through that earnings call
coming through from Elon Musk, 21
billion on the revenue that was a mess
versus the 23 billion EPS as well.
Also a mess and a pretty sizable one at
that $0.45 versus the $0.52.
But again, the reason that after hours
Tesla move time, we’ll see that chart
surely is because of the views and the
detail around these cheaper cars and the
timeframe being pulled forward.
There’s all sorts of questions around
how they implement this and how they get
this out to customers.
Again, the cost cutting has come through
the challenge from the Chinese
automakers, but that gave the grain of
hope certainly for investors.
They jumped on that comment.
Tesla then gaining after 13.3%.
Let’s put the ball and have a look at
Texas instrument as well.
This has a touchpoint in so many
different parts of the US economy, the
industry auto space and they are seeing
a draw down inventories and they’re
seeing a turnaround and they coming
through with a stronger guidance,
stronger outlook from Texas Instruments
that read through into the Asian
markets.
It’s likely to percolate through into
the European markets as well.
So the affiliates there coming through
from Texas Instruments, that’s been
under pressure.
A turn around then in some of those
lower end chips and that stock rallied
on the back of that.
Looking ahead, we’re going to be
watching Germany’s Ifo business climate
index later today for clues about the
state of Europe’s largest economy.
We’ll be speaking to them.
Markets today is next.
Stay with us.
This is Bloomberg.
Bloomberg Daybreak Europe is your essential morning viewing to stay ahead. Live from London, we set the agenda for your day, catching you up with overnight markets news from the US and Asia. And we’ll tell you what matters for investors in Europe, giving you insight before trading begins.
On Today’s show with Tom Mackenzie, we cover Tesla’s plan to speed up production of cheaper cars, the latest European earnings and the American push to get more aid to Ukraine.
00:00:00 – Bloomberg: Daybreak Europe Headlines
00:06:42 – Tesla To Speed Up Cheaper EV Launch
00:14:02 – US Senate Approves Ukraine Bill
00:19:24 – Boeing Engulfed in 737 Max Crisis
00;27:01 – Tesla Ramping Up Launch Of Affordable Cars
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1 Comment
Thats funny I seen they dropped 55%