Closing Bell - Closing Bell Overtime: Another Earnings Bonanza; Next AI Gold Rush Catalyst 7/25/24

Episode Date: July 25, 2024

Earnings from Norfolk Southern, Boston Beer, Deckers, Dexcom and more. Melius’s Ben Reitzes breaks down OpenAI’s SearchGPT news and what it means for Google, plus how he is thinking about the software sector right now and what could be the next catalyst for AI stocks. Morgan Stanley Global Chief Economist on the macro environment and next week’s Fed decision. Anu Duggal is the founding partner of Female Founders Fund; she walks us through what she is telling founders in the current market and why only 2% of VC dollars went to women founders in 2023. Plus, Jefferies analyst Sheila Kahyaoglu on the move higher in defense stocks. 

That's the end of regulation. Provident Financial Services ringing the closing bell at the New York Stock Exchange. BlackRock doing the honors at the Nasdaq. Big swings for the major averages today following Wednesday's tech-driven plunge, though small caps going out with big gains. The S&P and Nasdaq failing to do so. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Well, we've got reads on the rails. Consumer spending, tech, and defense coming this hour. We get earnings results from Norfolk Southern, Decker's, Juniper Networks, L3 Harris, and more. Plus, is a July rate cut really on the table? Well, Morgan Stanley Global Chief Economist

Seth Carpenter joins us with his read on the Fed ahead of tomorrow's key inflation report. And Alphabet taking a leg lower mid-session, ending down 3% after OpenAI announced a prototype of a search engine called SearchGPT. We will talk about how big of a threat that might be for Google. But first, let's talk about this market. Uncertain mood after Wednesday's sell-off. The NASDAQ up more than a percent at the highs, down more than a percent at the lows. More strength for the Russell 2000, though, especially relative to most everything else. Let's bring in our market panel, Barbara Duran of BD8 Capital Partners and Jim Paulson of Paulson Perspectives. Jim, do we believe that the rotation continues?

And that's the explanation here. Why all the bumping around? I think it will, John. I think we're well into that and it will continue. But I think we're going to have to find before we can really feel secure, I guess, a bottom for the MAG-7 here at some point, a bounce, a close at the close someday where we bounce off lows and rally into the close. And that might take a few days into next week. Who knows till we see that. But I think the character of this pullback is very interesting because I don't know what the mag seven's off now. It's probably off 13 percent, something from its highs in July 10th. But there's so many other things that are up over that same

time period. You mentioned small caps are up, but like the S&P low quality index is up. The S&P high beta index is about flat. The equal weighted S&P is up over that period or just about flat. The cyclical sectors of the S&P are all up over that same time period. International stocks are up over that period. So it's not your father's market collapse here so far. It's got a very different feel where most of the market is doing pretty well through this. Yeah. Bob, I wonder about your thoughts here, especially on tech. And I'm not talking just big tech.

Big tech, yes, especially on tech. And I'm not talking just big tech. Big tech, yes, suffering a bit. But I'm looking at the WCLD today. That WisdomTree Cloud Computing Fund is up two and a quarter percent. So a little bit of an odd bifurcation here or, you know, that difference continuing even beneath the surface. It's not just the Russell versus the Magnificent Seven. Yeah, John, I think you're right. You know, I think what you've seen is just a normal pullback. But you're taking money from the high flyers and from the areas that have done well. I mean, really, fundamentally, what has changed? Not a lot.

The economy is slowing but strong. And we know that from wages and job growth. You saw the GDP number, you know, this morning, which was much better than expected for the second quarter. You've got the Fed giving us more certainty about upcoming rate increases. Now it could be as many as three this fall. So the market has really moved ahead and powered ahead. At some point, we always expect there's a pullback. And here it's coming out of tech.

So I think Jim's right. It may be a couple of days. We don't know in terms of where tech settles. But I don't think the leadership is necessarily over there. Right now, money is looking for a place to go in this continuing bull market. And that's the laggers. That's the ones that have stayed behind. It's the cyclicals, even small cap, although small cap is a question. I mean, that's typically you invest there when they're coming out of recession, but they've had plenty of time to have good earnings and the earnings aren't quite showing up there yet. So we'll see if that small cap has legs. But I think this is really just normal pullback and taking

money out of the high flyers. OK, well, we've got our first earnings report. Norfolk Southern results are out. The freight railroad reporting an earnings beat revenue in line three point zero four billion dollars on the top line, but adjusted earnings of three dollars six cents per share. Now, it's not immediately clear if that's comparable to consensus estimates. It excludes a few notable items, derailment, restructuring. The proxy fight it successfully thwarted a few months ago. There is in the gap results a 10-cent negative impact from that proxy battle against investor Ancora.

But even if that is included, you're still looking at an adjusted non-gap EPS figure of $2.96 per share. That's still better than those consensus estimates. Now, volume up 5 percent, pricing 3 percent lower overall. Adjusted operating ratio, this is a key industry metric, 65.1 percent. That fell 480 basis points from Q1. It's lower year over year as well. Lower is always better for operating ratio.

Norfolk Southern also reaffirming guidance of a full year adjusted operating ratio of approximately 66 percent. We're going to get more on that outlook. Also, the macroeconomic picture and the freight picture tomorrow when CEO Alan Shaw joins me exclusively on Squawk on the Street for an interview to discuss these results. That's going to kick off at 10 a.m. Eastern tomorrow. It doesn't look like shares of Norfolk are moving, at least not yet on this report. We'll monitor it. But Barbara, I am going to go back to you on this because I've been saying this for the better part of a decade on CNBC, especially when you talk about a mixed macro picture. Watch the freight flows. And we have been in a freight recession, despite the fact that you are seeing railroads like Norfolk Southern maybe improve their productivity, improve their service to navigate it better.

Your thoughts? Yeah, they are working on it. I mean, they hired a new COO in March and they're, you know, working on some structural cost reforms. But you're right. It's been it's renowned of the third year of a freight recession. And the question is why? I mean, I think a big part of that, there was a big bounce back, you know, after the COVID shut down in terms of inventories, which helped everybody. But there's a lot more competition in truckloads. Their product mix this

time is not so attractive. I think their international volumes are lower yield, lower margin. So they've got a tough road to hoe. And it's hard to see, even though the economy's been strong, it's hard to see where this ends and what's going to happen next. So this call or the interview you're going to have with him tomorrow will be very interesting to see what he sees going forward. Okay. Jim, I want to get your thoughts on the fact that you've got technicals at play here for the broader market. You've got seasonality at play. And now we have fundamentals with earnings rolling out. Where do you put money to work right now? and how much does that

seasonality in particular really matter? Well, I think, you know, historically it's, we're entering the really bad seasonal period. There's no doubt about that. I think the August, September, October period, Morgan, since 1950 has averaged like about a three and a half, 4% annualized return. But when I look back at that, and if you look at the months where there's some support, policy support, where money growth, annual money growth is rising and where bond yields have been declining, those results do so much better. They average around 15.5% annualized in the next three months. And I think it's important to recognize where we are.

Yes, we're entering the bad seasonal period, but we also have money growth, M2 money growth, which has been accelerating from very low levels, but accelerating over much of the last year. Just went up one percent in June, just reported this week, year on year, and it's headed higher, I think. And then the bond yields have been flat to down now for the last year. And so I think it's a good bet with the Fed saying they're looking to ease that bond yields are going to be lower, money growth is going to be higher. And that typically leads to very good market conditions, even in bad seasonal months. You know, we've dealt with this entire bull market with a constant Fed tightening cycle. That's never happened in post-war history that a bull has lived entirely under a tightening cycle. And we're very close to the first easing cycle of

this bull. And typically what we're going to get is we've had the power of disinflation, but if we add lower yields, greater money growth and rising confidence, I think we're going to see what we've seen in recent days in the broader market, a broader participation in a more powerful rally reminiscent of the beginning of a new bull. And I hate to run away from that just when it's starting to come. Okay. Well, great to kick off the hour with both of you, Jim Paulson and Barbara Duran, as we did have a mixed picture for the market today. The S&P finishing down about half a percent, 53.99 it it looks like, is the level there. Well, let's bring in CMTC Senior Markets Commentator Mike Santoli for a different look at this market rotation. Mike. Yeah, Morgan, halfway around the world. I mean, so much of the activity we've seen recently is reversals of very persistent

trends that's gone from kind of crowded trades to neglected trades. So this is the dollar yen relationship. So this is yen per dollar. So when this line's going up, the yen is weakening relative to the dollar. And you see how this was just pretty much straight up for most of 2024. So the yen, it was a heavily shorted currency. A lot of folks borrowing in yen to buy other risk assets. At least that was the prevailing idea and trade out there until recently when it reversed. Very sharp rally in the yen against the dollar that coincided with this little hiccup we've seen in some other risk markets. Now, take a look here at the Japanese Nikkei index alongside the Nasdaq 100. This is over a one year span and kind of looks pretty similar, doesn't it? So I don't

mean to say that it's sort of the currency markets are completely wagging the dog of the equity markets or vice versa, but it just shows you how there have been these persistent patterns and popular trades that perhaps got overdone in the short term and are now correcting pretty hard. So it's not the same as saying, oh, we have some kind of macro systemic crisis. It just shows you there's a little bit of a stampede out of some areas of the market. Morgan, this is really fascinating to me, especially since we're very focused on how much data we're going to get from a macro perspective for the U.S. next week, including a Fed decision. But we also get decisions from the Bank of Japan, the Bank of England and another number of other key global data points that, to your point, could support this thesis. Without a doubt. So the idea that maybe there's going to be more aggressive easing by the Fed than we've thought previously would, in theory, be dollar negative, therefore rally in the end, therefore kind of continue this whipsaw trade. But it is pretty noisy in terms of this relationship here. Of course, the Bank of Japan had been trying some

rate hikes. They're kind of mismatched with the rest of the central banks in terms of their policy. Then you want to overlay what might happen if, in fact, under a Trump administration, there were more aggressive tariffs and also a weak dollar policy. So I think there's just a lot of narrative flux in here. And that's caused the market to get a little bit uneasy. All right, Mike, thanks to see you again in just a bit. Well, hookah shoes are for running and right now. So are Decker's outdoor shares. Decker's outdoor shares. Yeah. Stevens has those numbers with the stock higher almost, well, 5%. Yeah, that's right, John.

It is a top and bottom line beat for Decker's in Q1. EPS of 452. That was more than a dollar ahead of estimates. Revenue at $825 million, also beating expectations. Now, both Hoka and UGG saw better than expected revenues with gross margins also ahead of estimates. Year over year, direct-to-consumer revenue was up 24 percent. Now, in terms of guidance, the company reaffirmed its full-year revenue guidance, although the full-year EPS guidance was a little bit light of estimates, 29.75 to 30.65 versus Wall Street's estimate for $31.07. You see, though, their stock up 4 percent.

Morgan? All right. Pippa Stevens, thank you. We've got more earnings to bring you, too. You see, though, their stock up four percent. Morgan. All right. Pippa Stevens, thank you. We've got more earnings to bring you to this time. It's defense contractor L3 Harris. Those results are out. And similarly to what we've seen to the other primes this week, it is a beat and a raise for L3 Harris Technologies. EPS three dollars, 24 cents per share. That was better than the 318 adjusted expected by the street. Revenue, 5.3 billion. That represented a 13 percent increase. Operating margin of 9 percent. Adjusted segment operating margin of 15.6 percent. 2024 revenue guidance range increasing to 21 to 21.3 billion. Adjusted segment operating margin guidance also increasing. And non-gap EPS guidance for the full year also increasing to twelve eighty five to thirteen fifteen per share.

It also notebook to bill of one times in the report. Chris Kabasic, the CEO, talking about the fact that this is the fifth year anniversary of the L3 and Harris merger, and that improved margin. They saw improved margins in the quarter. And I would suspect as I go through these results in real time, too, we're going to see some commentary about strong broad-based demand, which is what we heard from Northrop Grumman this morning, Lockheed Martin earlier this week, and a number of others. You can see those shares are up about half a percent, one percent right now. All right. Yeah, well, that's pretty good. But a bad day for Alphabet shares after OpenAI announced a Google competitor called SearchGPT. We're going to talk about how big of a threat that might be to Google's bottom line long term after a rough week

for that stock. Plus, much more ahead on all of today's After Hours earnings action, including a closer look at the defense stocks as a number of names in the space hit new highs in trading. Overtime's back in two. Welcome back to Overtime. Alphabet shares under some pressure late in the day, down 3% when all was said and done after OpenAI announced it's launching its search engine, SearchGPT, at least in a beta test form. It's going to use information from its business partners

like News Corp and The Atlantic. Joining us now is Ben Reitzes. He's head of technology research at Mellius. Good to see you, Ben. So, I mean, we saw OpenAI announce this search competitor, but more than a year ago, Microsoft tried to use AI to compete with Google and the needle didn't move. Why should we think it'll move this time? Well, a lot of subscribers for OpenAI right now, John, and good to see you. I think that OpenAI has quite a bit of following right now, but also people are using it for different things. And if they're able to merge the functionality, you know, there could be a little bit of a threat there. A lot of folks talk about perplexity, which is kind of gives you

a glimpse on what AI-infused, quote-unquote, search may look like. But when OpenAI does it, it gets to a heck of a lot more people, and they're very well-funded. And, you know, Microsoft benefits the better OpenAI does, too. So Microsoft's motivated to help. Also on AI, but from a different perspective, I want to ask you about enterprise software. ServiceNow ended the day quite a bit higher after earnings. I think it was around 15%. But so did Pega Systems. That's an interesting company, a lot smaller, and it's in the business process automation. I spoke with the CEO and founder, Alan Trefflerler today about what it is about AI that's leading people to use more of Pega's software. Here's what he said.

Others have said, well, if Pega is on this journey, they're clearly going to be highly capable in AI and is going to be the company that we want to bet on when we think about optimizing our processes. And process optimization and improving the efficiency of businesses is a huge goal for most companies who are both trying to save money and do a better job for customers. With their Blueprint product, Ben, Pega is trying to develop some industry-specific kind of customized AI-driven tools for that optimization. Reminds me of what ServiceNow appears to be getting some traction doing. Do you think this perhaps has legs for some of these software names? For some of the names, yeah. Like, we don't cover Pega and we don't cover ServiceNow, but we really follow it closely because it is an AI play.

And what we're picking up is that ServiceNow makes it easy for people to use AI. And they also could be even cannibalizing some of the consulting. We previously thought that consulting would do pretty well in AI because people needed help. But some of these tools that are industry specific are doing a pretty good job of penetrating certain industry specific use cases. So I think in short for your viewers, it depends on the company. It depends on how they're going to market. AI is not helping everyone. You certainly see some companies getting crowded out, some spending getting crowded out. And those that are solving real problems that make it more easy to use and implement, like a ServiceNow and I assume Pega, you know, then you're seeing where the barbell is here and certain winners are really standing out. As you do talk about the fact that it's company specific, I do wonder, though, Ben, does it mean that it's time for investors to stop putting so much money to work in this first stage

of AI, AI infrastructure, picks and shovels, if you will, and start putting more to work in some of these software names in what is going to be considered more of the application layer? Has the time come yet? Have we found an inflection point? Well, you're seeing some companies like ServiceNow and I guess Pega do pretty well. You're also seeing infrastructure software hang in there, and then the applications are touch and go, to put it nicely. I really believe that an AI factory is really what is a software factory. It's not an AI factory. It's a software factory that's creating applications. It will not happen overnight. But in a 10-year view, it is a threat to those that make applications if they don't hustle. And we're seeing right now even the impact of cost

inflation, price hikes, and whatnot as people evaluate AI. Some companies are having a little issues. And AI coding assistants are arguably making it easier for new competitors to come in. And the clouds are making it easier to host. So I think over time, picks and shovels, and even some of the old IT hardware folks that do data management solutions are going to do well. And, of course, rotations like this happen. Things don't happen overnight. So, you know, I understand what's going on, but I do think over the long term, AI eats a lot of software. OK. Ben writes us. Thanks for joining us. Hey, thank you. Great to see you.

I might steal that line. Boston Beer earnings are out. Contessa Brewer has the numbers. Contessa. Morgan, we're seeing a miss here on the top and the bottom lines. We've got Boston Beer coming in at $4.39 per share adjusted versus the estimate on the street of $5.02. And then revenues missing as well, coming in at $579 million versus the estimate of $597. They said that shipments were off by 6.4 percent. The number of cases sold by distributors down as well. Gross margins improved by six-tenths of a percent.

They said they were seeing some growth in Twisted Tea and this newly launched Sun Cruise is the title of it. But they said they're seeing some problems with truly that seltzer that they sell here as well. Really, it looks like it was a problem with the distributors, the wholesalers, not having enough product on hand and not shipping into growing demand at the end of June. They said they're going to work on that, and they expect that to prove they're raising their volume guidance for this year. You can see the shares are down almost 5%. The news coming to you, by the way, from a brewer. John.

All right. Sounds like we need to have a taste test with a brewer. Indeed. Dexcom earnings, thank you, Contessa, are out, and the stock is getting slammed. Kate Rogers has the details. Kate. Hi, John. That's right. Medical device maker Dexcom earnings, thank you, Contessa, are out and the stock is getting slammed. Kate Rogers has the details. Kate. Hi, John. That's right. Medical device maker Dexcom, as you can see, down by more than 30 percent on its earnings report. It beat estimates here for EPS 43 cents adjusted. That's better than the 39 cents that analysts were looking for.

Revenues a miss here. One point oh billion lower slightly than the estimate of $1.04 billion for the quarter. But it's the guidance here that is causing that big drop. Now down 32 percent. Annual revenue forecast cut here by Dexcom. Basically now expecting 2024 revenue in the range of about $4 billion to $4.05 billion. The expected number was $4.33 billion. So lowering it significantly and the stock is taking a hit on that news, guys. Back over to you.

A big hit, down 33%. Kate Rogers, thank you. Former New York Fed president Bill Dudley saying the Fed should consider cutting rates in July, joining other voices like Goldman's Jan Hatsias, who has made a similar case. Up next, Morgan Stanley, chief economist. Seth Carpenter, he going to weigh in on this debate

on how tomorrow's inflation print could impact the Fed's timeline. Welcome back to Overtime. We've got a news alert on Southwest Airlines. Leslie Picker has the details. Leslie. assuage Elliot, which has a significant stake in this company, about $1.9 billion worth of economic interest in Southwest Airlines. Elliot responding with a statement saying, quote, this failed leadership team's announced initiatives, obvious attempts at self-preservation are simply not credible. Too little, too late is not a strategy. It is time for new leadership. So, Elliot, coming out with a statement in response to those Southwest initiatives today, shares increased 5.5 percent during the trading day, guys. All right. Leslie Picker, thank you. Helped propel the transports higher today, too. We've seen a mixed bag of economic data with the latest coming from this morning's GDP results, which beat expectations.

Tomorrow, we'll get PCE numbers for June. That's the Fed's preferred gauge for inflation. All of this coming just days before the Fed's meeting, where they're expected to hold rates steady. Joining us now is Seth Carpenter. He is Morgan Stanley's chief global economist. Seth, it's great to have you back on the show. That's where I got to start. How much hinges on this inflation reading we get tomorrow,

given the fact that, yes, GDP was stronger than expected this morning, but there was a lot of inventory noise in that first read. And a lot of the other key data and even some of the earnings tied to consumer facing companies have been showing the economy slowing. I think we're having a technical difficulty with audio. We're going to fix that and get back to Seth as soon as we can. And in the meantime, while we work on that, let's get a CNBC News update with our Bertha Coombs. Bertha. The Senate just passed a key procedural vote on a pair of children's online safety bills. It's the first vote on the online safety packages, and it's expected to pass in both chambers in a rare moment of bipartisan support. The bills require social media platforms to provide children under 17 with better protections and create strong online privacy protections for them.

The Justice Department today sued National General Holdings, which is owned by insurance giant Allstate, alleging the company falsely added insurance to at least 856,000 vehicles financed through Wells Fargo in a scheme that went on for more than a decade. Allstate was down about 4% today. And a man is under arrest on suspicion of starting the Park Fire in California. But the county prosecutor's state, state arson investigators made the arrest after a man was seen pushing a burning car into a gully Wednesday afternoon. The Park Fire is currently California's largest wildfire of the year and is only 3 percent contained. Morgan. Bertha Coombs, thank you. Okay, we just talked about it with Seth Carpenter. We're

going to go back to him now because we have his volume up and we can hear what he has to say. We just talked about this mixed bag of data, GDP better than expected, but some noise there with inventory builds up. We've seen some other key points that have suggested the economy is continuing to slow down. How does this tee us up for PCE tomorrow and a Fed decision next week? I think the PCE inflation data are critical. We've got a forecast of just under two-tenths month-on-month. It is going to be one of many data prints. Remember, this is not going to be the first data print on inflation that has showed that all of the inflation scare from the first quarter was noise, not signal. We've had now several months in a row of falling inflation. I fully expect that to continue tomorrow, and that's going to be important for the Fed. I think in terms of slowing in the economy,

it's a big debate in markets. But yes, the economy is slowing, but it is not slow. The GDP data admittedly lagged, showed that the economy was just fine in Q2, showed that the consumer, which is 70 percent of the economy, was just fine in Q2. We got retail sales for last month. Those came in a bit ahead of consensus. What we've been saying is inflation is coming down. It's coming down demonstrably. But the economy is holding up. It's going to slow down, but by no means slow. OK, so what does that mean for this growing gaggle of economists who are saying, hey, wait a second, realize we might not get a cut next week, but everything's going in the Fed's favor and we should at least they should at least consider it. The most recent

being Bill Dudley earlier this week, who said if the Fed waits too long, they risk a recession. And I mean, I think it's absolutely right. If they wait too long, they'll they'll risk a recession. I have to say my job when I was there at the Fed overlapped with Bill a lot for a long time was to argue over what they should do. Now it's to argue over what they're likely to do. I mean, I think they have been pretty clear that they're probably not going to cut next week. We think they will cut in September. We think they'll cut three times this year, which is a bit more than what the market's pricing in. I think for Bill's op-ed, though, the one place where I would disagree is I don't actually think the facts have materially changed. I think it's been clear for a long time, at least to us at Morgan Stanley,

that inflation's been trending down demonstrably, that the economy is slowing, but not disastrously slow. And so, yeah, I think there would have been a reason for the Fed, had they got themselves comfortable to cut at the July meeting. But, you know, they're doing what they're doing. Seth, I'm wondering about implications of all of this for smaller businesses, the kinds that tend to use debt in their operations, because that potentially impacts the small caps as well. I mean, how much pain do you see overall in the economy for those businesses dealing with these higher rates? No, I think the higher rates really are inflicting some pain, some restraint on parts of the economy. I think one point we have to keep in mind is that that is very much by design from the Fed. What they're trying to do with rates as high as they

are is to engineer some of the slowing that we're seeing in the economy. Now, inflation is coming down, which is on the one hand for consumers a good thing. But for the same businesses that you're talking about, it brings into question where is their pricing power. So I don't think the pain for some earnings is over by any stretch of the imagination. And even when the Fed starts to lower interest rates, I think they do it fairly gradually. You've got them doing it once every meeting through the middle of next year. But again, that's not fast enough to really take away the kind of pain that you're talking about. I guess we'll see if it's fast enough to keep this rotation going.

Seth Carpenter, thank you. Thanks. Well, coming up next, the changing winds on Wall Street. We're going to look at the recent dramatic shift in investor sentiment and how that might impact the market's next move. And later, the hot trade behind cold storage. Lineage completing the biggest IPO of the year at the Nasdaq today, finishing up slightly, about 3.5%. We're going to talk about the debut with top venture capitalists. And if the floodgates are now open for more public offerings.

Stay with us. welcome back to overtime mike santoli returns with a look at investor sentiment during this bout of volatility mike yeah john one of the jobs of a market pullback is to drain away some excessive investor optimism and maybe relieve some overaggressive positioning. That's kind of getting done, at least in a modest way. This is the spread between those who say they're bullish and bearish in the weekly survey from the American Association of Individual Investors. Very longstanding survey. Now, in bull markets, it kind of hovers in the positive territory here.

But you see it's declined down to about a spread of 12. So a pretty big drop in one week's time, but still above where it was, let's say, at the bottom of the springtime market pullback, which got to about 5 or 6 percent in the S&P. That was in April right down here. So arguably a little more to go if we're going to have maybe a better fresh buying opportunity. Here is the equity exposure gauge, also weekly, from the National Association of Active Investment Managers. It shows their average equity exposure can go above 100 when they're leveraged. And that's taken a sharp drop, too. But similarly, you know, not where we were near the lows back in the spring.

So the process is underway. You don't always have to get to the same levels of oversold, so to speak, in sentiment. But this is where we sit right now, two weeks into it, Morgan. OK, Mike Santoli, thank you. A nice pop for the largest IPO of the year. We're housing and logistics giant Lineage. Up next, the founding partner of the Female Founders Fund on whether the IPO market is starting to heat up. Welcome back to Overtime. Cold storage, warehouse REIT, and CNBC disruptor Lineage launching the biggest IPO of the year today at the Nasdaq, finishing the day higher by more than 3%. That's after a solid debut yesterday by software firm OneStream.

Joining us now to talk about the environment for IPOs, the capital markets, so much more, Anu Dougal, founding partner of Female Founders Fund. Anu, it's great to have you on the show. Welcome. Thank you. Thanks so much for having me. I do want to start right there because I want to get a sense of the funding landscape right now in startups. I realize Female Founders Fund tends to be an earlier stage, but you're invested in dozens of companies. Are you having more of these conversations with those startups about the possibility of exit strategies right now? So, I mean, I think, you know, just going back to today's IPO, obviously any type of liquidity right now for investors is very helpful. But I do not necessarily think that this is a sign that the IPO markets are

back and open for business. And so the advice that we continue to give our founders is that really to be conservative around cash management runway and just generally thinking about, you know, raising growth rounds. You had the Female Founders Fund camp last week, which I actually was able to attend for a bit. One of the things that struck me were how many companies that you're investing in that are focused on women's health care. Why is it so important to be investing there, especially given the political landscape, the election cycle, everything else we're seeing in terms of broader health care dynamics? Sure. So as an early, well, first of all, thanks so much for attending. We loved having you. I think as an early investor in Maven, which was our first women's health care business, I'm really passionate about women's health issues and the importance of bringing this to the

forefront of the political agenda, particularly as it really does relate to both sides of the aisle. I think there's so much opportunity to develop better solutions and experiences for women, ranging from menopause and fertility to hormone health, the birthing process, and so much more. And I definitely think that having government support behind this is imperative, really, to see large scale change. So very hopeful that, you know, this will continue to be part of the agenda in next few months to come. Anu, great to have you with us. I'm wondering your perspective on a couple of things. One, I've seen a pulling back in funding for health care startups, including women's health. I wonder if that's evening out at all.

Also seen some prominent VCs who happen to be male coming out in support of former President Trump, arguing that the Biden administration has been really negative for crypto and for potentially AI regulation, that it's an existential threat to tech and innovation. I'm wondering if your community of investors feels differently or similarly. So I think, you know, just going back to your earlier point, we are seeing a pullback more broadly as it relates to funding. So I'm not entirely convinced that it's just specific to women's health. You know, one of our most recent investments was was in the women's health care space. And, you know, the founder had four term sheets from some really top firms.

So I think there's definitely still an interest there. But I think your point around the pullback is more reflective of just generally where the market is today. And then the second point on the VCs and Trump? Yeah, I mean, I think, you know, you're definitely going to see a wide spectrum of political views within venture capital. I think within, you know, kind of the female founder community, particularly in the last few days, there has been incredible excitement to have someone like VP Harris, you know, coming to the forefront and just even just looking at the amount of, you know,

fundraising that she's been successfully able to pull off in the last few days is really inspiring. You're not buying the AI hype. Why not? You know, it really feels very not dissimilar to where we were in the early days of crypto, where, you know, I do think there is, you know, you often see VCs really gravitating towards one particular sector and, you know, putting a lot of money behind it. And ultimately, I think a lot of money can be lost in the same way. And so I think as a seed fund where, you know, we aren't necessarily able to get to peak valuations, it's a really tough proposition to really be competing at valuations, which, you know, quite frankly, I don't think are necessarily worth the hype.

And given the fact that Female Founders Fund is marking a decade in existence. You started this firm to dedicate venture capital toward female entrepreneurs and founders. Where are we at? Because we've had these conversations across CNBC for years about how small a piece of the pie that actually is when you talk about those venture dollars. Is it changing? Yeah, I mean, I think we're at a pivotal point for female founders. And, you know, 10 years ago, many of the names, you know, that we, that our household now were really in kind of the early innings. And, you know, recently at Camp, we actually focused on how you think about kind of generational change. So, you know, we had Kyle Leahy, who is the new CEO of Glossier. We had

Liliani Jones, who's the new CEO of Bumble, as well as Seema Sistani from Weight Watchers. And really the idea was that, you know, you're starting to see these companies now evolve to kind of V2 or really, you know, kind of look forward towards what is the next stage of growth look like. So I think that's really exciting. You know, other other ways to answer that question. I mean, you know, when we started Female Founders Fund, you know, they were so few companies that that actually female founded unicorns. You know, there were four when when they started. And now, you know, you have over 140. OK, Anu Dougal, thanks for joining us. Great to have you.

We've got more major earnings movers just hitting the tape and we've got them for you. Your overtime rundown. That's next. And cue the QR code because it's Thursday. You get the latest installment of my On the Other Hand newsletter. This week's debate is the process that led to Vice President Harris becoming the likely Democratic Party nominee for president. Fair. week's debate is the process that led to Vice President Harris becoming the likely Democratic Party nominee for president. Fair. You can scan that or type in cnbc.com slash O-T-O-H

to join and share the conversation. Be right back. Welcome back. Let's get another check on glucose monitoring company Dexcom, shedding more than a third of its market cap in overtime after issuing full-year guidance below estimates. Online course provider Coursera, on the other hand, up more than 16% despite a wider loss than expected. Current quarter guidance missing estimates,

but revenue coming in above projections in all three of its segments. And Norfolk Southern now solidly higher, about 7% after matching revenue estimates and affirming full-year operating ratio guidance. Morgan? All right. Well, the aerospace and defense ETF hitting a record high today. Up next, a top analyst on whether the sky's the limit for these stocks. And check out Ford, posting its worst day since 2008. Today, up next, a top analyst on whether sky's the limit for these stocks.

And check out Ford, posting its worst day since 2008, closing lower by 18% on the back of last night's results, which we brought you here on Overtime. We'll be right back. L3 Harris shares down a fraction here in overtime after beating on the bottom line, matching revenue expectations, also raising guidance. This morning, RTX Northrop Grumman reporting beats and raises, sending those shares of those defense primes higher, following a similar earnings outcome from Lockheed Martin earlier this week as well, domestic and international spending has grown. And Northrop Grumman's CFO telling me that the maker of the B-21 bomber and Sentinel ICBMs is seeing strong demand across the board. That's a dynamic likely to persist regardless of election

outcomes since, according to Northrop's CFO Dave Koeffer, quote, what continues to be the key driver of demand in our business is the global threat environment. And that is politically agnostic. But joining us now is Jeffries Aerospace Defense and Airlines analyst Sheila Kayalu. Sheila, it's great to have you on. I got to start with we just got another beaten race this time from L3 Harris here in overtime stocks fractionally lower. But the story here, whether it's L3 Harris or some of these others, to me seems to be the fact that not only is the top line growing, but now profit is starting to grow, too, as margins begin to expand. And it seems like the worst of supply chain challenges are behind these companies. Is that the way to see this?

Exactly, Morgan. I think you got it right. The top line is definitely beating expectations. So overall for the group, the group average is coming in up 8%, double what we expected, which we expected about four. The backlog isn't growing so much, but you're really seeing it come through across the board, whether it's General Dynamics, their weapons business grew 53%. Honeywell, their defense systems business's short cycle, that grew 19%. Northrop with their B-21, that grew 14 percent in that segment. So really good growth coming out. But some of these companies aren't executing on the margin, and that's where they're seeing the hiccups. LHX is a different story after the close today.

Their growth was only 1 percent organically, but they did have a big beat on their segment EBIT, and they raised the guidance on that. Okay. So how does that speak to, I guess, the policy and geopolitical environment that we're operating in right now? Because we know there's a lot of demand for these companies' weapon systems, but to your point, if the backlog's not growing as much, how does that position us for 2025 and beyond at a time where we are domestically in an election cycle? Yeah, I think it's about who could outperform on not only the top line,

but the profit line. So when we look at the fiscal 25 budget, we're capped at up 1%. That's not really great growth. But you're seeing outlays coming in up 8.6% this quarter, supplementals on top of that, and the global threat environment being additional on top of that. But you really need to see the companies that are executing on that operational leverage. And that's why we have a buy on LHX. That's what they're coming through with today, as well as general dynamics. And so it's a bigger picture. Not only who could do the top line, who could do earnings as well. And Northrop was trying to change that narrative today. And I think they did a pretty good job. And that's why you saw that reaction from the stock so positive, because they're trying to say that their program that's problematic,

which is the B21, is less than 10 percent of sales and it won't impact margins as much as people think. And I think that's why the stock soared. And also this group is on luck. They're spending at a 15 percent discount to the market. Sheila, I want to talk to airlines. Well, one in particular, I think you got a sell on Southwest, but they're making some changes. The activist is still active in it. You sure you can't buy it here? No, no. I think our target price is significantly below. We have about 25 percent downside, although we appreciate what management is doing, adding premium seats. If you look at their ancillary revenues, they generate about a billion dollars from it. That's early ticketing.

So I'm not sure what the net benefit of premium seats will be. But, you know, I think that'll take less capacity as a market. They'll have 15 less seats for aircraft. So that'll be helpful to this capacity issue we have, which is what's driving airlines in this problematic area. There's too much capacity. Yields are down double digits, a high single digits in the back of the cabin. And that's really why we have a negative call on the airline space at the moment. Okay. Sheila, thanks for joining us. Thank you. I mean, tomorrow morning, yes, we get more earnings.

Certainly Dexcom, huge move in that glucose monitoring name right there. But PCE tomorrow and also consumer sentiment. As you might have noticed, I'm most curious about the small cap implications of the language around rates. We don't actually expect rates to come down in the near term, but can the rotation continue based on what gets said there? All right, well, it was a mixed picture for the major averages, S&P and NASDAQ, both tracking for losses for July.

But that's going to do it for us here at Overtime. Fast Money starts now.