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

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 28 Jul 2026, 22 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/0ae53eb6-8e49-4701-a82c-b4950115d6ba/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu -George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, & Airlines Analyst, discusses earnings from Boeing and JetBlue. Boeing Co. generated better-than-expected cash flow in the second quarter on continued strong demand for its aircraft. JetBlue Airways Corp. shares rose 5% after it reaffirmed its full-year outlook and said it will reach positive cash flow next year, as strong demand helped offset high fuel prices tied to the Iran war. --Thomas Black, Bloomberg Opinion Columnist, discusses UPS earnings. United Parcel Service Inc. shares fell after its outlook for volume and profit margins underwhelmed investors, with average US daily package volume expected to decline in the mid-single digits in the third quarter. -Ken Shea, Bloomberg Intelligence Senior Consumer Products Analyst, discusses earnings from Coca Cola. Coca-Cola Co. raised its full-year outlook, bolstered by demand last quarter while it served as a major sponsor of the FIFA World Cup. The company now sees organic sales growth of 5%, and raised its forecast for earnings-per-share growth to as much as 8%. -Diksha Gera, Bloomberg Intelligence Global Fintech and Payments Analyst, discusses earnings from PayPal. PayPal Holdings Inc. would “carefully consider” opportunities to create greater value for shareholders if they arise, Chief Executive Officer Enrique Lores said. The company's shares rose 3.6% to $58.08, giving the company a market value of $51 billion, after Lores' remarks on a conference call with analysts. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
[0:10] Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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[0:17] Speaker 1: Business App. Listen on demand wherever you get your podcasts,
[0:21] Speaker 1: or watch us live on YouTube.
[0:23] Speaker 2: We've got earnings coming left and right.
[0:25] Speaker 3: Boeing just reported, and George Ferguson is our senior aerospace,
[0:29] Speaker 3: defense and airlines analyst.
[0:30] Speaker 2: He joins us now from Princeton. George.
[0:33] Speaker 3: The headline here that Bloomberg News has highlighted is that
[0:36] Speaker 3: Boeing generated better than expected cash flow in the second quarter,
[0:40] Speaker 3: and it's still aims to generate one to three billion
[0:42] Speaker 3: dollars in free cash flow this year. It sounds like
[0:46] Speaker 3: that is the metric that matters the most to investors
[0:48] Speaker 3: right now, isn't it?
[0:50] Speaker 4: It is, right, So I think that it's all. First,
[0:53] Speaker 4: it's always super important to generate cash. You can tell
[0:55] Speaker 4: if companies are cheating or not depending on whether or
[0:57] Speaker 4: not they're generating cash and the good shown and no cash,
[1:01] Speaker 4: and then you're like, doesn't matter. But the second thing
[1:04] Speaker 4: for Boeing is they want to pay down some of
[1:07] Speaker 4: this debt they have in the balance sheet every time, right,
[1:09] Speaker 4: they need to get themselves into a better rating sort
[1:12] Speaker 4: of territory, and so that cash generation will go to
[1:16] Speaker 4: at some point helping to liquidate some of that debt
[1:19] Speaker 4: and tightening up the balance sheet.
[1:21] Speaker 5: George, where's Boeing these days on delivery those seven thirty
[1:26] Speaker 5: seven max? You've told us in the past that that's
[1:28] Speaker 5: really the cash generator for this company. And where are
[1:31] Speaker 5: they these days? And wherehere do you expect them to
[1:33] Speaker 5: get to?
[1:34] Speaker 4: Yeah, so, Kelly orper confirm it. They're at forty seven
[1:37] Speaker 4: a month about now. We're seeing a little bit less
[1:41] Speaker 4: come out the door of the factory, but that they
[1:44] Speaker 4: measure these at different points in the production schedule. But
[1:47] Speaker 4: they're forty seven go into fifty two early next year.
[1:52] Speaker 4: Another important component of that cash flow story, right. The
[1:55] Speaker 4: beauty of this business is it does finance itself as
[1:59] Speaker 4: you increase build rate. And so as you increase build rate,
[2:03] Speaker 4: airplanes start to you get ready to cut metal in airplanes,
[2:08] Speaker 4: you go out and ask the customer to start bringing
[2:10] Speaker 4: the deposits, and they bring deposits as the airplane moves
[2:14] Speaker 4: down the production process to essentially fund the build of
[2:17] Speaker 4: the airplane. So when you're increasing build rates, customers are
[2:22] Speaker 4: increasing the send of money into the company. And that's
[2:25] Speaker 4: what we saw driving cash flot today. When you slow
[2:27] Speaker 4: down build rates, unexpectedly, customers stop sending that money in
[2:32] Speaker 4: and you suddenly have to finance it somewhere else. So again,
[2:35] Speaker 4: this cash generation a nice positive. Customers are submitting cash
[2:40] Speaker 4: because airplanes are about to be cut or in the process,
[2:43] Speaker 4: and as you boost that build rate, you bring more
[2:45] Speaker 4: of that in, which means it should persist if things
[2:47] Speaker 4: go well.
[2:49] Speaker 3: Let's talk about Jeff Blue because that company reported earnings
[2:52] Speaker 3: as well, and it looks like it posted a loss
[2:55] Speaker 3: in the quarter, but it was narrower than what analysts
[2:58] Speaker 3: had anticipated. Jet Blue kind of I don't want to
[3:02] Speaker 3: call it, and also ran but it's not doing as
[3:04] Speaker 3: well as Delta and United with their premium offerings. But
[3:09] Speaker 3: it's been trying to make up for that lost ground.
[3:11] Speaker 3: How's it doing in that effort.
[3:13] Speaker 4: Yeah, I mean yields came in a bit better than
[3:16] Speaker 4: we thought. I think there were high single digits, getting
[3:18] Speaker 4: close to ten percent. I think that's pretty good. It's
[3:21] Speaker 4: pretty challenging right now, I think, you know, for a
[3:26] Speaker 4: company like jet Blue, you know, the good portion of
[3:29] Speaker 4: their business right now is going to be the premium business,
[3:31] Speaker 4: and any loyalty money they can make, it's never going
[3:34] Speaker 4: to be as much as Delta and United, and so
[3:38] Speaker 4: they kind of operate from from a disadvantage to that standpoint. Again,
[3:42] Speaker 4: they do have a bunch of premium you know seats
[3:45] Speaker 4: inside those airplanes, especially Transcon they have a pretty loyal following.
[3:50] Speaker 4: But that back of the airplane basic economy seat, I
[3:53] Speaker 4: think is the challenge seat right now for getting the
[3:57] Speaker 4: right price for it. And so there's a bit of
[4:00] Speaker 4: a scramble I think going on now between them and
[4:03] Speaker 4: Frontier to try to grab those customers that Spirit Airlines
[4:07] Speaker 4: left behind. Now, again that's not the that's not a
[4:11] Speaker 4: high end customer, but it looked a bit better to
[4:14] Speaker 4: us during the quarter than we had originally expected as well.
[4:17] Speaker 4: So it does okay, and we're still you know, this
[4:21] Speaker 4: is still a very challenging environment for them, but looked
[4:25] Speaker 4: at it better than we expected.
[4:26] Speaker 3: George, I'm so glad you bring up Spirit because Jet
[4:29] Speaker 3: Blue has one quart approval to acquire Spirits LaGuardia slots,
[4:32] Speaker 3: it still requires the FA approval, but it's trying to
[4:35] Speaker 3: pick up some of the benefits of you know, a
[4:39] Speaker 3: competitor going away. Does that change a game for Jet
[4:43] Speaker 3: Blue to get these precious slots at LaGuardia Airport.
[4:47] Speaker 4: Well, I mean, I don't know that it changes the game,
[4:49] Speaker 4: but it's LaGuardia slots are are high value slots. You know,
[4:55] Speaker 4: given the proximity to New York City, this is a
[4:58] Speaker 4: core market for Jet Blue. You'd like to not only
[5:01] Speaker 4: take those slots, but keep competitors out of there to
[5:04] Speaker 4: you know, fight for those those for those tickets or
[5:07] Speaker 4: those customers. So to me, it'd be a good sign
[5:10] Speaker 4: if they can get a hold of them, and it
[5:11] Speaker 4: probably well on their way if they've already got the
[5:14] Speaker 4: they got water approval.
[5:15] Speaker 5: George, I'm not sure if you were aware, but I
[5:17] Speaker 5: know you'll you'll value this. I recently became a one
[5:19] Speaker 5: million mile flyer for United Airlines. Are you impressed?
[5:23] Speaker 4: Very nice? Yes, I don't think I'm there yet.
[5:25] Speaker 5: Yeah, that's what happens when you spend you know, forty years.
[5:29] Speaker 5: You say, Jacket's shilling for money all across the global
[5:32] Speaker 5: Wall Street here. That's kind of my life.
[5:34] Speaker 2: What did they give you?
[5:35] Speaker 4: What did they give you I got.
[5:36] Speaker 5: I had the pilot come up to me before we
[5:38] Speaker 5: took off, sat down next to me. We had a
[5:41] Speaker 5: nice little conversation. You got him and said, you got
[5:43] Speaker 5: a little medallion.
[5:45] Speaker 3: Do you get little wings upon in your jacket? But
[5:47] Speaker 3: you get the medallion, which is very okay, Medallion's cool.
[5:50] Speaker 5: It's very cool. So I got a little plaque and
[5:51] Speaker 5: all that kind of stuff. So I'm especially in la
[5:54] Speaker 5: in case you didn't know that.
[5:56] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[6:03] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[6:07] Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android
[6:10] Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
[6:13] Speaker 1: you get your podcasts, or watch us live on YouTube.
[6:17] Speaker 5: UPS reported some numbers here today. I think the outlook
[6:20] Speaker 5: a little disappointing to people. The stocks trading down about
[6:24] Speaker 5: four or five percent. Here Thomas black Joints. He's a
[6:27] Speaker 5: columnist for Bloomberg Opinion, covers logistics, manufacturing, and aerospace, calling
[6:32] Speaker 5: in via that Zoom thing from Dallas, Texas. Thomas, I
[6:35] Speaker 5: see the stock trading off a little bit here. What
[6:37] Speaker 5: did the company's results say about their business.
[6:43] Speaker 6: It's still a tough market. They are cutting costs and
[6:47] Speaker 6: trying to increase more profitable packages by calling out some
[6:54] Speaker 6: of the Amazon business that they had relied on. And
[6:57] Speaker 6: this is all to make up for the most expensive
[7:00] Speaker 6: force in the industry. So that's that's the path A're on.
[7:04] Speaker 6: And they've already kind of they've done most of their
[7:06] Speaker 6: initiatives and now they need to let them play out
[7:09] Speaker 6: and see if they're going to work their way through
[7:11] Speaker 6: to higher operating margins.
[7:13] Speaker 5: Talk talk about their relationship with Amazon. I know they're
[7:17] Speaker 5: in the in the process of unwinding that relationship with
[7:21] Speaker 5: delivering Amazon dot com packages. What's what's the strategy behind
[7:24] Speaker 5: that policy.
[7:26] Speaker 6: The strategy is to to not deliver so many of
[7:29] Speaker 6: the low cost packages that Amazon likes to dump on
[7:34] Speaker 6: other entities, right either the postal service or UPS or
[7:38] Speaker 6: other folks. These are a lot of times lightweight packages
[7:43] Speaker 6: that go short distances, and UPS doesn't make much money
[7:47] Speaker 6: and it has a high cost labor force. Again, so
[7:50] Speaker 6: it's trying to get away from that. It's it's not
[7:53] Speaker 6: a complete walk away from Amazon. It's more of a
[7:55] Speaker 6: glide down. As CEO carold to May likes to say
[7:59] Speaker 6: they've gone and they've glided that down to about nine
[8:02] Speaker 6: percent of their total sales going to Amazon. It used
[8:07] Speaker 6: to be about thirteen percent at the height of the pandemic.
[8:10] Speaker 6: So they're not going to break from Amazon completely. They
[8:13] Speaker 6: just want the higher profit packages from them.
[8:17] Speaker 5: So, you know, it's interesting when I think about it
[8:19] Speaker 5: FedEx or UPS. I think about a big fixed cost businesses,
[8:22] Speaker 5: you know, the warehouses, the planes, all that kind of stuff,
[8:26] Speaker 5: and I would think you'd want to punt as much
[8:29] Speaker 5: volume through there as possible. But I guess you know,
[8:33] Speaker 5: UPS is saying we need to focus on kind of
[8:35] Speaker 5: the unit profitability a little bit more.
[8:38] Speaker 6: That's correct, And they're also looking to automate more. They've
[8:42] Speaker 6: shut down a lot of facilities in the end by
[8:45] Speaker 6: the end of this year, would be one hundred and
[8:47] Speaker 6: fifty facilities that they're shutting down. These are older ones
[8:50] Speaker 6: that don't have as much automation, so they're moving towards
[8:53] Speaker 6: more automation and packages that cost more. That's mostly in healthcare,
[9:00] Speaker 6: all businesses. Some businesses. They're getting away really from the
[9:05] Speaker 6: e commerce packages which ten which have become commoditized.
[9:09] Speaker 5: Interesting you mentioned kind of just technologies you have to
[9:12] Speaker 5: kind of weave in and I'm sure I wonder how
[9:14] Speaker 5: the company weaves an AI into their operations. What are
[9:18] Speaker 5: they saying about that?
[9:20] Speaker 6: Yeah, they have a pretty powerful network now because they've
[9:23] Speaker 6: introduced RFID, which sounds like an old technology, but it
[9:28] Speaker 6: actually has gotten so cheap and so small that they
[9:32] Speaker 6: can print RFID labels. So these labels they go on
[9:37] Speaker 6: the packages can be picked up without having to physically
[9:41] Speaker 6: scan them. So that's a pretty powerful tool. And then
[9:44] Speaker 6: you marry that all that data flowing in automatically into
[9:47] Speaker 6: the system, and that's where AI takes that data and
[9:50] Speaker 6: breaks it down and works its magics.
[9:53] Speaker 5: What's the company saying these days about? Maybe it's growth strategy.
[9:56] Speaker 5: We've heard over the last couple of years kind of
[9:58] Speaker 5: how do they want to focus on profitability? But at
[10:01] Speaker 5: some point they need to talk about, you know, how
[10:02] Speaker 5: they believe they're going to grow their top line.
[10:06] Speaker 6: Right, they're going all in on healthcare, that's a big one.
[10:10] Speaker 6: This is where you get into some of the specialized
[10:12] Speaker 6: deliveries with cold chain, where the things have to remain
[10:16] Speaker 6: cold and sometimes at very very low temperatures throughout the
[10:20] Speaker 6: whole network. And UPS has been building on that fedext
[10:23] Speaker 6: has also entered into this and small businesses. These are
[10:27] Speaker 6: the folks that don't have enough volume to really get
[10:30] Speaker 6: those big discounts, so they tend to be more profitable customers.
[10:35] Speaker 6: And of course the B to B the business the
[10:37] Speaker 6: business deliveries of those are bread and butter deliveries that
[10:41] Speaker 6: they won't walk away from. What they are walking away
[10:44] Speaker 6: from are some of those e commerce deliveries, especially the
[10:46] Speaker 6: residential ones where you don't have a lot of packages
[10:49] Speaker 6: going to one stop. That density where you can deliver
[10:53] Speaker 6: more packages that one stop is a key to boosting margins.
[10:56] Speaker 6: And the residential deliveries they they're never going to be
[11:00] Speaker 6: as profitable as business delivers So talk to.
[11:03] Speaker 5: Us about just the geographic growth. Did they call out
[11:07] Speaker 5: I know they're primarily in the US, but they have
[11:09] Speaker 5: a pretty decent international exposure as well. Do they call
[11:13] Speaker 5: out any area as a potential opportunity or potential problem area?
[11:17] Speaker 6: Yes, they talked about international quite a bit. I think
[11:20] Speaker 6: they have some opportunities to do what they did in
[11:23] Speaker 6: the US in international, which is to maybe call out
[11:27] Speaker 6: some of those low profit packages and concentrate on the
[11:31] Speaker 6: higher dollar ones, if you will. And also to automate
[11:35] Speaker 6: more and become more efficient. They also talked about some
[11:39] Speaker 6: of their trade lanes becoming more normalized. They said that
[11:43] Speaker 6: they had growth in their China to US trade lane
[11:47] Speaker 6: for the first time in many quarters, and they're working
[11:51] Speaker 6: through the elimination of the dominimous packages. I don't know
[11:56] Speaker 6: if you remember that whole flat, but that was a
[11:58] Speaker 6: lot of volume that was coming through you and at
[12:01] Speaker 6: a pretty good price too. That's that that went away
[12:03] Speaker 6: very suddenly, and they're starting to lap at so it's
[12:07] Speaker 6: looking a little bit better on the numbers.
[12:09] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[12:16] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[12:20] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[12:23] Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
[12:27] Speaker 1: you get your podcasts, or watch us live on YouTube.
[12:31] Speaker 5: Let's switch gears to get back to the market and earnings.
[12:34] Speaker 5: We've been talking about Coca Cola all morning. They put
[12:37] Speaker 5: up some better than expected results, perhaps helped buy the
[12:41] Speaker 5: World Cup. Let's check out Ken Shae. He's a Bloomberg
[12:43] Speaker 5: Intelligence Senior Consumer Products analyst, can break down Coca Cola's numbers,
[12:48] Speaker 5: they seem pretty good. The stocks up six percent to
[12:51] Speaker 5: a fifty two week high today.
[12:53] Speaker 7: Yeah, Hi, Paul, they certainly were good. You know, we're
[12:56] Speaker 7: talking about a sure consumer products company. We're not talking
[12:58] Speaker 7: to tech stock here now, Paul. So you know, seven
[13:02] Speaker 7: percent sales growth beat the five percent estimates. You know,
[13:05] Speaker 7: comparable EPs up eleven. These are good numbers. You know.
[13:09] Speaker 7: Consensus was a little bit below that, and a lot
[13:12] Speaker 7: of it's because consumer sentiment in a lot of big markets,
[13:15] Speaker 7: including the US, continue to be subdued, and so there
[13:18] Speaker 7: was some hesitation going in, although we kind of knew
[13:21] Speaker 7: World Cup was going to give them a lift, and
[13:23] Speaker 7: it did a really nice lift. So it was a
[13:26] Speaker 7: high quality performance. It was a very much volume driven,
[13:30] Speaker 7: wasn't so dependent on price as it had been in
[13:32] Speaker 7: the past few quarters, and balance sheet got stronger. It
[13:36] Speaker 7: was just hard to find any fault in this in
[13:38] Speaker 7: this quarter.
[13:40] Speaker 3: I'm curious about the portfolio of drinks that Coca Cola
[13:44] Speaker 3: now has because it's not just Coca Cola or the
[13:46] Speaker 3: slim version of it that Paul liked so much, but
[13:49] Speaker 3: there's also sugar free soda, sports drinks, water. Because this
[13:53] Speaker 3: younger generation seems to you know, not like the sugary
[13:57] Speaker 3: soft drinks as much as others in the past. What
[14:01] Speaker 3: is the fastest growing part of that beverage portfolio, Ken.
[14:05] Speaker 7: That's a good question, Scarlett. You know, Coke would say that,
[14:09] Speaker 7: you know, part of the benefits of the FIFA World
[14:11] Speaker 7: Cup sponsorship is that it gets them close to the
[14:13] Speaker 7: consumer and it hears about trends, you know, in real time,
[14:17] Speaker 7: gives them the post what's going on in the market.
[14:19] Speaker 7: And so what they said today is look in the
[14:22] Speaker 7: second half for Coke zero zero to get a higher
[14:27] Speaker 7: level of promotion. What is that, Well, they're very successful.
[14:30] Speaker 7: Coke zero reformulated is going to have a no caffeine
[14:33] Speaker 7: version that's not exactly novel to the soft drink industry,
[14:37] Speaker 7: but it's been probably under marketed, underpromoted for people like me,
[14:40] Speaker 7: I can't drink caffeine afternoon or I can't sleep. This
[14:44] Speaker 7: is going to be a kind of front and center
[14:45] Speaker 7: for them in the second half. But to your point, Scarlet,
[14:49] Speaker 7: functionality getting more from your beverage than just hydration is
[14:52] Speaker 7: still very key. You know, in terms of consumer demand,
[14:55] Speaker 7: they want more protein. Fair Life is a leader and
[14:58] Speaker 7: it was of eighteen percent sales in the quarter, really
[15:01] Speaker 7: really strong numbers. Advance Hydration, that's power aid, that's getting
[15:06] Speaker 7: more marketing muscle now in the second half. So look
[15:09] Speaker 7: out for more of that. And I'm sure the company
[15:11] Speaker 7: has more innovation up at sleeve. Didn't want to share today,
[15:14] Speaker 7: but at least those three products, we can look for
[15:16] Speaker 7: a higher level promotion in the second half.
[15:19] Speaker 5: So can do Investors and analysts? Do they even look
[15:24] Speaker 5: at market share any more Coke versus Pepsi or is
[15:26] Speaker 5: that just the thing of the past.
[15:28] Speaker 7: Oh, they certainly do. And we get here Bloomberg Intelligence
[15:30] Speaker 7: by virtue of Circana. Now got to remember that, Well,
[15:33] Speaker 7: it's Kanda. It's really predominantly a US tracking And Pepsi
[15:37] Speaker 7: would argue, you know, we're more than just soft drinks. PepsiCo,
[15:40] Speaker 7: I think has probably a wider portfolio of different categories
[15:44] Speaker 7: than Coca Cola. Does Coke still seventy five percent Sparklings,
[15:48] Speaker 7: seventy five percent brand Coca Cola, and so, but they're
[15:52] Speaker 7: branching out, you know, beyond that. But Pepsi would say, hey,
[15:56] Speaker 7: be fair, we're more than just cola. Yeah, but but
[16:00] Speaker 7: but Coke is gaining share in virtually all of its categories.
[16:04] Speaker 3: Ken we mentioned how the World Cup was definitely played
[16:07] Speaker 3: a role here, but how does a company like Coca Cola.
[16:10] Speaker 2: Coca Cola build.
[16:11] Speaker 3: On that momentum generated by the World Cup, which is,
[16:13] Speaker 3: you know, one time event as far as you know
[16:15] Speaker 3: earnings impact is concerned.
[16:17] Speaker 7: It is a one time event. But Coke went out
[16:20] Speaker 7: of its way to say this morning, look, you know
[16:22] Speaker 7: the consumer engagement that we got from the World Cup.
[16:26] Speaker 7: You know, they had a lot of activities beyond that
[16:29] Speaker 7: innovative packaging. They had games and events outside the stadium
[16:33] Speaker 7: going on, They had digital interactivity, they had a lot
[16:40] Speaker 7: going on that they feel that there's going to be
[16:43] Speaker 7: you know, benefits resonating beyond just the immediate. So we'll look,
[16:48] Speaker 7: we'll look for that. But like I said, you know,
[16:50] Speaker 7: Coke engaged with its consumers, and I think that pays dividends.
[16:55] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[17:02] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[17:06] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[17:09] Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
[17:12] Speaker 1: you get your podcasts, or watch us live on YouTube.
[17:16] Speaker 5: Is Scarlo fil and Paul Sweeney live here in our
[17:18] Speaker 5: Bloomberg Interactive Broker studio, streaming live on YouTube as well.
[17:21] Speaker 5: We have some ernie's coming out of the payments in
[17:24] Speaker 5: fintech space today and break it down. We're gonna go
[17:26] Speaker 5: to Dick she Garrett. She's a senior tech and payments
[17:29] Speaker 5: analysts for Bloomberg Intelligence's out there in San Francisco. Dicktion,
[17:32] Speaker 5: let's first talk about PayPal. I know they reported some
[17:36] Speaker 5: numbers that beat estimates. We can talk about that. Talk
[17:38] Speaker 5: to us about the strategic opportunities potentially for this company
[17:42] Speaker 5: because I'm not sure if it's in play or not
[17:45] Speaker 5: in player, but people are interested in it. Talk to
[17:47] Speaker 5: us about PayPal.
[17:49] Speaker 8: Yeah, Hi, Paul, great to be here with you. As always.
[17:53] Speaker 8: I think the results beat was interesting nine percent and
[17:56] Speaker 8: just an EPs beat shows that the business is executing
[17:59] Speaker 8: better that was feared in this tough environment. Volume was strong,
[18:03] Speaker 8: transaction margins were decent. Branded checkout growth also stabilized around
[18:09] Speaker 8: two percent, and the companies reaffirmed it's one point five
[18:12] Speaker 8: billion savings target and they've said about four hundred million
[18:15] Speaker 8: run rate savings by the end of the year. So
[18:18] Speaker 8: things seem to be on track, but I think the
[18:20] Speaker 8: key issue that remains with PayPal is the core profit driver,
[18:24] Speaker 8: which is the branded PayPal button that has seen single
[18:28] Speaker 8: digit growth. And the context around that is digital walllets
[18:31] Speaker 8: like Apple, pay, like Shop pay Card, auto films are
[18:34] Speaker 8: all capturing checkout mind share. So I think the focus
[18:38] Speaker 8: needs to shift. Whatever management does, those back, like those
[18:43] Speaker 8: old days of milking the branded button are never going
[18:46] Speaker 8: to come back, so they need to find alternative ways
[18:49] Speaker 8: to monetize the network. And that said, the biggest catalyst
[18:52] Speaker 8: for the stock right now is the Stripe and add
[18:54] Speaker 8: In bid. They've made a fifty three billion dollar joint
[18:57] Speaker 8: offered to acquire PayPal. The board officially hasn't responded to,
[19:02] Speaker 8: but one way or the other, it forces the market
[19:04] Speaker 8: to value this company appropriately.
[19:06] Speaker 3: Now do you expect the board to have any issues
[19:09] Speaker 3: with this deal?
[19:13] Speaker 8: So here's the deal, right, Scarlet, Why does Stripe want PayPal?
[19:17] Speaker 8: Stripe dominates the developer first merchant side payment infrastructure, but
[19:21] Speaker 8: what it lacks is a two sided consumer network. So
[19:25] Speaker 8: the asset that PayPal has, which is its four hundred
[19:27] Speaker 8: million consumer wallets, the Venmo and distribution that it has,
[19:31] Speaker 8: and now the stable coin and agentic Ai rails. All
[19:34] Speaker 8: of these are valuable assets, and management is in so
[19:38] Speaker 8: many ways communicating that. So the board has shown that
[19:42] Speaker 8: this low wall offer isn't where they see the company's
[19:44] Speaker 8: true potential. If you pay attention to the words in
[19:48] Speaker 8: Enriquez commentary today, the message is clear they're open to
[19:52] Speaker 8: a deal, but it needs to reflect the true franchise value.
[19:55] Speaker 8: And management said that they feel confident about the turnaround
[19:58] Speaker 8: execution with fast slane or with margin expansion, and they
[20:02] Speaker 8: think that'll yield higher long term shareholder value, and they
[20:05] Speaker 8: are willing to do the hard work or at least
[20:07] Speaker 8: go down trying. So these comments are likely reflecting in
[20:10] Speaker 8: the share price more than the earnings itself today.
[20:14] Speaker 5: How credible was this buyer? Can you tell us about
[20:16] Speaker 5: who this buyer is and who this bidder is and
[20:18] Speaker 5: kind of how credible they are.
[20:21] Speaker 8: So Stripe is a very large competitor and a direct
[20:25] Speaker 8: competitor for PayPal. They're a private company, and which is why, like,
[20:29] Speaker 8: strategically this asset makes sense for Stripe to kind of acquire.
[20:34] Speaker 8: It's just that the offer was a low ball offer.
[20:38] Speaker 8: This asset gives Stripe direct consumer relationships. So they do
[20:42] Speaker 8: the merchant side of the processing. They have all the
[20:45] Speaker 8: AI native companies. They have a wonderful new modern tech stack.
[20:50] Speaker 8: But the paypals two sided network where they have all
[20:53] Speaker 8: the consumers and the merchants. That's something that Stripe would
[20:57] Speaker 8: that Stripes envy. That's what they want. A consumer wallet,
[21:01] Speaker 8: something like a Venmo, which has become a verb instead
[21:04] Speaker 8: of a company acid right, so when I say okay,
[21:08] Speaker 8: let me Venmo, you you understand what I'm talking about.
[21:11] Speaker 8: So that's something that Stripe would like to acquire.
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