Closing Bell - Closing Bell Overtime: Fed-Fueled Rally, Nike CEO Change & FedEx earnings 9/19/24

Episode Date: September 19, 2024

The Fed's 50 basis point cut sparking a major rally on Wall Street and sending the Dow & S&P 500 to record closes. Tech the big winner driven higher by semiconductor stocks. Guggenheim Securities' Sr. Managing Director Eric Mandl thinks there's a wave of M&A coming in tech and explains which industries could be most ripe for mergers. Nike announcing CEO John Donahoe is stepping down and will be replaced by long-time Nike vetaran Elliott Hill who is returning to the company.  FedEx missing earnings estimates and shares under pressure after the bell. Barclays transportation analyst Brandon Oglenski explains why the stock is getting hit so hard. And Hubspot CEO Yamini Rangan discusses her company's new AI tools for small and medium businesses — and what her customers are saying about the state of their spending right now.

Well, that bell marks the end of regulation. Reliance ringing the closing bell at the New York Stock Exchange. Ray Tarr, LogTech Holdings doing the honors at the Nasdaq. And a Fed-fueled rally sending stocks soaring, helping the Dow and S&P 500 close at record highs. The Nasdaq doing best of all, but still about 3.5% away. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, Tech, the big outperformer today today thanks to big gains by the chip makers. The sector is now in the green for the quarter.

Coming up, Guggenheim Securities' Eric Mandel on whether valuations could spark a wave of mergers across tech. And we are awaiting earnings from FedEx and home builder Lenar. Instant analysis of those results is coming up. But first, let's get to our market panel. Ryan Dietrich of Carson Group and Brooke May of Evans May Wealth. Guys, good afternoon. Ryan, stocks were already expensive and they just surged on a 50 basis point rate cut. So why do you think investors can still buy here? Yeah, John, thanks for having me back. Happy all time highs. Happy Happy Talk Like a Pirate Day. And it's also my son's 12th birthday. So happy birthday to Gus. But listen, as everyone's talked about on

your network a lot, the next two weeks are historically pretty weak in terms of kind of seasonality. October is the worst month in an election year. So let's have that kind of out there. But the reality, again, is we're not going into recession. Come on, the all-year saying there's no recession. Slowing down, sure. Look at initial claims, right? Four-month lows just today. That's a good real-time indicator for what's really happening with the labor market. We can get into all the weeds of it, but we'll look at another 20% gain this year on the heels of last year's 20% gain. We do think, John, there's more upside once we get through the election. But one thing to think about, and I sent this to you, when the Fed cuts near all-time highs, within 2% of all-time high like they just did, obviously, yesterday, about 20 times back in 1980,

S&Ps higher about 14% on average, higher 20 times, every single time. So listen, who knows? This is 21. We think it very well could be. Now, I'll be clear. We were about 3% away back in 2007 when they cut. So, you know, you can always add an asterisk to it. But the reality is don't fight the Fed. We're still in that camp here. Okay. Now, Brooke, now that the Fed has started cutting, how do you use fixed income in portfol's a broad spectrum. And when we look at our portfolios,

we tend to buy quality and then we'll supplement it with some high yield, but from a fund or from a manager. So right now we're buying out three to 10 years, diversifying into a ladder and really looking for high coupons, high quality, and just wanting to have that diversified maturity stream. So, Ryan, I mean, worst case, you have a market that's expensive. Best case, fairly valued. We did see this sugar high today from a 50 basis point cut, which is not the type of cut we usually get when we come into in-cycle without a crisis. So does this rally have legs now or are investors due to step back and say, OK, you know, it started here. It's time to sell the news. Well, we could very well see some sell the news again. We talked about the seasonal, maybe back to John's original question,

asked me about valuations. I mean, look what Mike just talked about this, the broadening out. Right. And I know small caps sometimes are a dirty word. We still like small caps. They're at 12% for the year. It's not as much as large caps, no. But if you look at history, it's once the Fed starts cutting is when you see that outperformance of small caps. And we mentioned, yeah, the market is kind of expensive, but small caps are historically cheaper over the large caps. Mid-caps are actually our largest overweight at Carson Group. We like that area also. So SMIT in general, we think it's a lot of opportunity because the Fed's now cutting one other thing. Hey, earnings growth is coming in. If you look at small caps earnings next year, they're like high teens. S&P is not expected to grow that high. We think that could be a little

low. So, we see a lot of earnings growth and cheap valuations in small and mid-caps. So, that's a nice part of the market that you say, you know what, I want to buy something pricey. That's where investors should look. And we think it still looks good the next, let's say, six to 12 months here. OK, great. I'll note FedEx earnings are out. We're going through those results. Stocks popping initially here as we do have that cross the wires. Brooke, it's down. OK, it's down a lot. It's down 12 percent. So we're going to get you those results shortly here. In the meantime, Brooke, bottom up year end target price for S&P based on your calculations, 56 to 5800. We're closing it. We closed here at 5713. You looking to to change that call or are you putting the money money to work elsewhere?

Like, for example, small caps. Yeah, we are. We like small caps. I couldn't agree more. That said, there are quite a few tailwinds right now in the market. We're setting the expectation near term, fully expect volatility. It's an election year. We've got debt ceiling negotiations coming up. September, October tend to be the worst performing months of the market. So in the next six weeks or so, we think the market will bounce around and the risk is probably to the downside. Going forward from there, though, I think we could

see higher levels in the S&P. And I wouldn't be surprised if we revise our price target a little higher. We could raise it to $6,000 for year end. When you've got the amount of cash that we've got sitting on the sidelines and economic data that's coming in pretty favorable. That very well could fuel a leg up in the market. Ryan, are you watching economic data more or are you watching earnings and the micro more at this stage now that we've entered this cutting cycle? Well, I think we're watching both. That's the answer I can give. But I mean, just talk about the economy. I mean, there are parts.

We know parts of the consumer are slowing down. There is some stress there. But, I mean, I guess my question is, do you feel confident that you can pay attention to individual company fundamentals at this point and not have to worry about the macro story taking over? Well, we'd focus probably more on the macro story, to be honest, John. I mean, yes, like you just mentioned, what FedEx just came out,

there's always company-specific things, but just the big macro backdrop to us is still pretty darn solid. I mean, again, I know we've talked about it earlier, but claims at four-month lows, I mean, who was thinking that this time six weeks ago, right? We saw that spike after the hurricanes and things. I mean, there's going to be ebbs and flows with this, but the reality, look at bankruptcies. I mean, bankruptcies are actually trending lower, right? I mean, that's something people aren't talking about. So it's not perfect on the macro backdrop, but all in all, it still suggests, again, no recession in our opinion. And we are still in a pretty strong bull market. One final comment. This bull market's about two years old,

right? We know that. October 22, your average bull market, the last 10, lasts about five years. Who knows if this is going to last five years? I think investors need to really realize that there still could be a good deal left to this bull market is what we're trying to stress. OK, Ryan Dietrich and Brooke May, thanks for kicking off the hour with us with record highs for the Dow and the S&P. FedEx earnings, we mentioned they're out. Frank Collin has the numbers for us. Frank. Well, hey there, Morgan. FedEx shares down double digits, as you can see right there. A miss on the top line, also a big miss on the bottom line. Estimates for EPS 476, it came in at 360. The company also lowering its full year guidance, both for revenue saying they expect its revenue

to be lower, but possibly more importantly, its EPS guidance for the full year, lowering the top end of its EPS guidance by $1. Previously 20 to 22, now just 20 to 21. Looking through the report, we're seeing they're also authorizing a $1 billion share buyback. On the other side of the coin, the company says its drive program, its transformation to cut costs, they say that is on track to save the company $2.2 billion this year. But just taking a look at the report, some big misses in a key segment, FedEx Express, that's their signature air delivery business. The estimate for margin there was 9.6%. Instead, it came in at about 5.2%. So a big miss there. That's a key area for FedEx.

About half of their revenue is coming from that. FedEx shares down almost 11%. A miss on the top line, a miss on the bottom line. They also lowered their full-year revenue and EPS guidance. Back over to you. All right. Frank Holland, thank you. And of course, those shares are down double digits right now, John.

That's a big miss on EPS, especially for a company where cost cuts have been very much in focus. And given the fact that we have seen shares rally pretty strongly since the last earnings report up something like 17, 18 percent before we got these results right now, right here in overtime. Yeah, it seems like this is a stock that was trading on this discipline story, not necessarily on this idea that revenues were going to pop up and be surprising to the upside. So that lower EPS target, you know, the top end of the guide going down by a dollar, kind of surprising. One wonders what, if anything, that presages for the holiday season. Yeah. I mean, we also need to get some of the commentary from them on this U.S. Postal Service contract rolling off, which is going to presumably enable more cost cutting, but also distorts the numbers a little bit here in the near term. You'll recall UPS has picked

up that contract as well. What they had to say about the peak shipping season, the key holiday season, and also at a time where you actually are seeing air freight numbers begin to perk up a little bit here in the last couple of months, what they're seeing out of places like Asia Pacific right now. But the fact that these numbers are soft, the guide is soft, it's going to have read through to global economy. And what they have to say about that is going to matter very much on the call as well. Yeah. And I wonder how much gets said about e-commerce and the absence of Amazon within all of this, because, you know, over the past five years, you know, people looking out their windows can see the Amazon trucks, perhaps more than the FedEx trucks they used to see delivering things.

Yeah. Well, let's get over to senior markets commentator Mike Santoli for his dashboard. Mike. Yeah, Morgan, pretty all inclusive rally today, with the exception of some of the more defensive areas. Thought it was a good time to take a look at where the major Dow indexes stand here. This is since the low last October 27th. It's almost a year that we hit that correction low in 2023. You see the Dow Industrials and Utilities have had a similar run, a little pullback in the utilities,

which have been beneficiaries of the lower interest rate and defensive trade in recent months, have just about matched the Dow, but now turned just a little bit low on some profit taking. Now, the transports, of course, FedEx, a big part of this, have been struggling to break above this range. So you wouldn't say that the transport have been kind of contradicting the bullish message of the industrials, but they haven't been confirming that bullish uptrend in a very strong way. So this is as of the close, obviously. So we'll see how that fares when it comes to FedEx opening up tomorrow and filtering in to all that. Now, you guys are talking about valuations at 21 times

plus forward earnings for the S&P 500 in general, definitely elevated by history. A lot of people say, yeah, but if you eliminate the huge stocks at the top of the index, it's much cheaper. And it's true. It is cheaper, but not cheap. So this is basically the 490 stocks in the S&P, excluding the biggest 10, what their forward price earnings multiple is. And it's actually 18.8 or so. This is from BMO, which, as you see, is well above this average going back to the beginning of the 1990s. And it hasn't been higher that often. It has, obviously, in the late 90s here and then during the pandemic period. So you can say that the market is definitely not as stretched valuation wise as the biggest stocks are. But it's hard to say in absolute terms that they're priced

for really great results looking forward. It doesn't mean the market has to go down. Earnings estimates are going up. The Fed is cutting. Usually stocks can hold their valuation in that type of environment. But just worth keeping that perspective in mind. Yeah, that's a really great chart sort of outlining what we kicked off the hour talking about with our market panel. I want to go back to transports and Dow theory, of course, naturally. But with FedEx shares down and actually UPS shares, and you see this move a lot on earnings days, regardless of the company, UPS shares right now down in sympathy about two and a half percent. What is it going to take? Is there a timeline

for transports to play catch up and actually confirm the trend that we're seeing in the other averages? You know, some people, if they're strict Dow theorists, probably would say that it has to happen by X date, or at least the transports can't necessarily enter a downtrend when the Dow industrials are in an uptrend without raising some flags. But I would say that there's a little bit less of a reason to be too concerned about the lagging activity of the transport in today's economy. Okay. We'll watch it. Mike Santoli, we'll see you later this hour. Thank you. Up next, Guggenheim Securities' Eric Mandel on the outlook for tech deals and whether the Fed's rate cut could spark a wave of M&A.

Plus, an exclusive interview with the CEO of HubSpot, which just launched a new suite of AI tools for small and medium-sized businesses. And we're still awaiting earnings from homebuilder Lenar, which should be released in just a few minutes. Overtime's back in two. We've got breaking news on Nike. Let's get to our Sarah Eisen. Sarah.

This is big news, John. I can tell you that Nike CEO John Donahoe is going to be leaving the company. It has just been announced that by the board and John Donahoe, a mutual decision to retire effective October 13th. Nike is going to name here a brand new CEO. Elliot Hill will be the Nike CEO. Elliot Hill will be the Nike CEO. Not a name widely known to Wall Street and outside of Nike, but very well known inside of Nike. He's a 32-year veteran of the company that actually left in early 2020, just after John Donahoe was announced CEO. Shares are spiking here in the after hours as there were some serious confidence questions on Wall Street and I'm told inside Nike around John Donahoe's leadership. So here's what I can tell you. I do have a quote from

Mark Parker, who is the executive chairman of the board. There are the details for you. Donahoe to retire October 13th. So this is right around the corner. He's going to remain an advisor to the company through January 31st, 2025. So kind of a friendly transition out. From Mark Parker, I'm excited to welcome Elliot back to Nike. Given our needs for the future, the past performance of the business, and after conducting a thoughtful succession process, the board concluded it was clear Elliot's global expertise, his leadership style, and deep understanding of our industry and partners

paired with his passion for the brand and for sport products, consumers, athletes, and employees make him the right person to lead Nike's next stage of growth. So who is Elliot Hill? Here's what I can tell you. He started at Nike in 1988 as an intern, worked his way all the way up in multiple different positions. His last job before he retired back in 2020 is he led basically all the commercial marketplace business for Nike brand and for Jordan brand. He had a good relationship, I'm told, with Michael Jordan and in fact, pitched Jordan on taking that brand global, which is a huge credit to their success. His chops are in sales, which I think is a key distinction from John Donohoe, who Wall

Street knows very well. Donohoe was known for his tech expertise and also consulting, came from Bain originally, then led eBay, then ServiceNow and into Nike with an outsider. So another stark contrast to Elliot Hill being named here the newNow, and into Nike with an outsider. So another stark contrast to Elliott Hill being named here the new CEO, who is very much an insider, and I am told, very, very popular, very well liked, and that this is going to go far when it comes to morale. I also have a quote for you just here for CNBC from Phil Knight, the founder of Nike, chairman emeritus on the board. I want to

express my deep gratitude to Mark Parker, Tim Cook, who is the lead independent director on this board, John Donahoe and the board for their leadership during the transition. Leadership changes are never easy. They test you, they challenge you. But this transition has been handled with remarkable thoughtfulness and an unwavering commitment to Nike. He goes on to say their dedication to the business, its people and shareholders has been admirable. I also want to personally thank John for his leadership and commitment to Nike over the last 10 years. And then he says, looking forward, I couldn't be more excited to welcome Elliot back to the team. His experience, understanding of Nike and leadership is exactly what's needed at this

moment. We've got a lot of work to do, but I'm looking forward to seeing Nike back on its pace. Now, what happened? Well, as we know, Nike's had a number of stumbles lately. Stocks down 25% this year. It's down almost 50% from its peak that it reached back in the end of 2021, fall of 2021, Donoho's tenure started out right in the middle of COVID. And he was the right guy at the time because the whole aim of Nike was to become a digital first focused organization. And the world moved online. And so Nike actually did quite well in the beginning. But then when the world opened back up, it became clear that there were gaps in innovation,

for instance, something Donahoe himself had mentioned and had admitted. There were gaps in terms of the strategy around wholesale. Donahoe had broken some of the relationships with wholesalers to focus on direct-to-consumer, on their own business, online and in stores. And it turns out a lot of the upstarts and competitors, the ons, the hokas of the world were out there innovating and getting shelf space. And so that was seen as a big black eye sort of on the strategy as well, which came to light when Donahoe himself reversed that strategy and said in recent quarters, they were going to focus more on the wholesale business and try to grow and win back that shelf space. Also said that they were going to take a deep look at the organization, announced a 2% workforce cuts

and job cuts, but it just never seemed like the right sort of culture to get Nike winning share where it's been certainly under the previous CEO, Mark Parker. So that's a reflection, I think, of the stock guys, up 8% on this change. I mean, was he the right guy? I'm trying to figure out the most polite way to ask this, but the board could have picked Elliott Hill to begin with. And there seems to be a little bit of a trend in, there was a trend years ago of these companies in certain industries picking tech CEOs to come run them. And now, you know, Starbucks didn't go to tech this time for an operating guy or a leader. They went to Chipotle.

And now you have Nike going back to somebody who grew up in the company to lead it in this next leg. No? No, I think it's a really good, it's interesting to compare and contrast some of these examples. At the time, you know, Nike was so focused on the channels and was so focused on being a digital tech first company that John Donahoe was on the board. He had a relationship with Phil Knight, the founder from his days at Bain. And that was at the time, the thinking was that Nike would that Donahoe would take us into this digital future, which worked really well in the beginning during covid when that was the case.

But then, you know, he didn't have product experience, didn't have retail experience, didn't have experience, innovation. And that is what they are bringing back. I will also note, John, to your question. You know, Nike has had a history of bringing insiders, promoting insiders. Mark Parker was it started as designer and they went outside. They've had one other example of going outside and it didn't work out too well. But Dono was an outsider, didn't grow up in the Nike culture and around the sneaker culture and the sports culture. And I think that, you know, Parker coming in as designer was very successful. And what they see in Elliott Hill is someone who understands the product really well. He had to sell it.

And he also comes from a background of knowing the business and helped grow Nike to a $30 billion business, was responsible at his height for the P&L of all four different geographies, including the Jordan brand. So in a leader, I guess they could have chosen him, and perhaps that's one reason he stepped down after Donahoe was named the new CEO. But they are bringing him back at this time because what's needed is they need to get back to their innovation, they need to get back to the relationships with the wholesalers, and they need to get back, obviously,

to credibility on the street as well. Yeah, big news with a big brand. I mean, stocks up more than 9% as you're breaking this all down for us, Sarah. Mike Santoli, I want to bring you into this conversation, too, because it wasn't that long ago we got the change announced at Starbucks. You had Brian Nicol leaving Chipotle to go there. And you actually came to us with a chart, with a dashboard, and you said, what's another example of another company that could potentially see activist investor pressure? I'm not saying that's happening here at Nike, but where there could be question marks and potential leadership change needed.

And the name was Nike. Yeah. And for some of those parallels that, you know, that Sarah and John have mentioned as well, which is, you know, this storied brand that was always treated getting a premium valuation on Wall Street that had a new CEO, both of them, by the way, from a consulting background, not from the industry. And there was a sense out there that maybe those companies were leaning too much on China growth for years and it was papering over some saturation domestically. And the street kind of progressively lost confidence that they could restart growth in a way that was worth paying up for. And so in a similar position here, it seems like it was a parallel type of a decision to go back to somebody who knows the business. And it does come at a time, I do think, where it's maybe a little bit of a cleaner setup for the new CEO to start, whereas you've already had expectations reset lower.

You kind of know what has to be done to rebuild it. Again, we talked about having lived without the breakneck China growth for a while right now. And then it's much more about kind of reestablishing the brand or at least reinforcing the power of the brand in connection with consumers, both for Starbucks and Nike. So we'll see how it goes from there. All right. Mike Santoli and our Sarah Eisen, thank you. Stock popping about 10 percentoli and our Sarah Eisen, thank you. Stock popping about 10% after hours, Nike is, but still not taking it back to where it was before that late June drop. Up next, Guggenheim's Eric Mandel on whether we are on the verge of mergers in the tech sector.

Plus, we're moments away from homebuilder Lennar's results. What those numbers will mean for housing stocks when overtime returns. Welcome back to Overtime with the Fed cutting interest rates by 50 basis points. What impact will that have on the dealmaking landscape? Well, joining us now is Guggenheim Securities Senior Managing Director Eric Mandel. He advises companies in the tech, media and telecom sectors. Eric, it's great to have you back on. And that's exactly where I want to start, because I feel like all year long we've been saying, oh, pent up demand, M&A, the floodgates are going to open. And yes, it did a little bit. And we have seen some strategics specifically start to dip their toes and make acquisitions. But it hasn't we haven't seen the wave that everybody's expecting.

Does this now with the Fed cutting change things? Yeah. So first off, let me just say, Morgan, John, thank you so much for having me on. Always great to be with you guys. I think you've really hit the nail on the head. So if we take a big step back, this last year has been very volatile, a lot of ups and downs. And I don't want to jinx it, but it does feel like this is the first time where good news actually means good news. And the reason that's so important is there has been a lot of overhang

in the way the market trades, obviously in a broad way, but in specifically tech, which is where we spend a lot of time, of what is actually going to happen with interest rates. And as extreme as inflation has been, no matter which side you're on that trade, it is very healthy for three reasons to see a cut. Number one, it's confidence building. You need people that are going to be leaning in, using financing, and also using the market to their advantage to believe that things are moving in the right direction. Secondly, there's just a fair amount of self-imposed pressure,

especially by the two largest groups that do the M&A in tech, and that's strategics and private equity firms. Private equity, no doubt, has been more affected by higher interest rates, and I think this is now moving in the direction that gives them that comfort. But then thirdly, which I'm happy to say we haven't heard anybody talk about yet, it's amazing it's only been 24 hours since the cut, is when interest rates go down, it actually allows companies, especially in tech, and especially in software,

to be able to take advantage of lowering their interest rate costs, because many of these are levered, whether they're former sponsor-owned assets or they're public assets, and be able to increase their free cash flow without ever actually lowering their top growth rate. And I know that both of you have heard me talk about this Rule of 40 concept. Rule of 40 is very sensitive. Years ago, it was all about growth. Then it was all about margin. Lowering of the interest rates is definitely

going to help, at least from my perspective, what we're seeing so far. Okay. So in light of that, where do you expect to see some of this deal-making bubble up and become more active? I mean, it does seem like a lot of it so far has been driven either by AI and or cybersecurity. Yeah, great point, Morgan. So, you know, I'd say two big factors to unpack. Let's take AI first. AI, without a doubt, is the most central thing that we hear from investors, from companies, from boardrooms, and people looking to do M&A. I think the flip side on it, though, is a lot of the AI that we're most drawn to in the press really is very early stage. It is a component of the technology compendium that does not really generate very much free cash flow at all. So I think we're excited about deal making.

And I can tell you just obviously anecdotal at Guggenheim, I don't think we have ever been this busy with the velocity of conversations that we've been since 2021. That's how long it has been for that type of velocity. It's in the boardroom and it's in the public space. And a lot of that is driven by private equity. So to answer your question, Morgan, we have this very interesting relationship where public companies are trading at a premium for sure. But remember, your average next-gen software company in 2021 is trading at 13 times forward revenue.

Right now, it's trading at seven times forward revenue. So it's really come down. And I think there's a story that can be told to private equity as to why it might be better to be a private company rather than a public company. I can tell you the vast majority of our energy as advisors is spent on that exact topic right now. Okay. We'll have to leave it there. Eric Mandel of Guggenheim, great to have you with us. Lennar earnings are out. Diana Olick has those numbers. Diana. Well, John, a big beat for Lennar in Q3, reporting earnings of $4.26 a share versus estimates of $3.63. Revenue of $9.4 billion versus estimates of $9.17 billion. Revenue higher primarily due to a 16% increase in home deliveries, partially offset by a 6% decrease in the average sales price. That price $422,000. Deliveries came in higher than

estimates. New orders increased 5% but were slightly lower than estimates. The backlog of just under 17,000 homes is down from Q2. Lennar's chairman, Stuart Miller, said in the release that affordability continued to be tested during the quarter. But he also said while strong demand enabled by incentives and mortgage rate buy downs has driven the new home market over the past two years, we fully expect an even stronger and more broad-based demand cycle as rates move lower. Lower rates and controlled inflation will likely boost confidence. Home building gross margin of 22.5%, lower than expectations, and guidance was within expectations. John? All right, and that's stock fractionally higher in overtime. Diana, thank you. Up next, we will look at whether the American energy boom is starting to look tapped

out with production at record levels or if there's still more room to run. Overtime will be right back. Welcome back to Overtime. It's been a rough ride for oil and natural gas prices in recent months, but energy production in the U.S. has never been hotter. Brian Sullivan looks at whether the American energy boom is showing any signs of slowing down. Brian. Morgan, we're showing so much around the election. You hear stat over here, stat over there. I just want to tell the truth.

Here you go. The oil boom, and it has been a boom. Did you know that we are up 50%? Five zero percent per barrel production per day in just a decade went from about 8.7 million to about 12.9 right before COVID. Of course, we know what COVID did. We're now at about 13 to 13 three people ask, can we go higher? Well, we could. sure. There's the ability to pull it out of the ground. We showed you the pipes earlier. We need to permit. There's a lot of stuff that you need to do to do it.

The question is, why would we do it, Morgan? If prices, to your point, have been coming down, you got OPEC ready to add some more barrels. If we start doing 14, 15 million barrels a day in the United States, OPEC may respond with a market share war. That's great news for consumers who might pay $1.99 for gas, but you wonder what it would do to the industry behind us. So can we do it? What we have learned in the last couple days is yes. Will we do it? That's a whole different question of political will. I know I got to go. We got a

bunch of Nike news. I'll leave you with this. Morgan, did you know, random oil facts for 400, the U.S. produces 50% more oil every day than Saudi Arabia does. And that's one to grow on. Right. Yes. And one to drive on as well. Brian Sullivan, thank you.

Up next, FedEx shares. Well, they are getting hit hard in overtime. A top analyst will tell us what he wants to hear from FedEx management as we count down to that earnings call. Stocks down almost 9%. We'll be right back. Shares of FedEx falling here in overtime, now down about 9 percent after missing on both lines, lowering the full year EPS and revenue guidance. Well, during this now ahead of the conference call, Barclays analyst Brian Oglenski, Brandon, excuse me. Brandon, it's good to have you on. And that's exactly where I want to start, because it was a big miss on earnings per share. And they talked about in the release higher operating expenses or excuse me, negatively affected by mixed shift, which reduced demand for priority services, increased demand for deferred services and constrained yield growth.

It reminded me a little bit about what we heard from UPS over the summer when they reported their earnings around pressure in the mix shift shifting. And so I'm curious how much of this is FedEx specific and how much of this is reflective of the broader market and the read through to the economy. Hey, Morgan, and thanks for having us on. And like, I agree, it's just not a great environment for a lot of the transports here. I mean, we're seeing some import activity come into this country via the ports. But on the express side, there's just not a lot of urgency or tightness in the supply chain. And I think we're seeing that in the evidence of FedEx and UPS results, as you alluded to this summer. I think specific to FedEx, though, the problem here is management has been committing to getting cost out of the system. But if we actually look at their non-fuel expenses, because, you know, fuel can be volatile,

but those expenses actually came up as management tries to stay in the same breath that actually, you know, we're committing to getting like $2 billion of cost out of the system here. So I think that's the bigger issue and why we're seeing such a negative reaction in the stock. And Brandon, last quarter, the CEO talked about the challenging demand environment that they faced in fiscal 24. And now just a quarter later to start fiscal 25, they're bringing down the high end of guidance. So it makes me wonder, have they done all they can to focus on what they can control? Are they out of levers to pull? And is that perhaps why we see these costs rising? Well, you know, I'm glad you brought up last quarter, too, because I think we were on here

talking about it then. But, you know, it's been volatile for FedEx. I think three quarters ago, it was down. It was up last quarter. Now we're getting a negative reaction again as the company just didn't hit on cost targets. But, John, I think you're hitting on a great point here. This company, I believe, and I've covered them for 18 years, is just always optimistic on what the market can deliver. And I think they probably over forecast where growth rates would be in the market. I'm sure we're going to hear that on the call today. Let's adjust to the new reality.

You know, we have to take down our top line expectations. But again, the problem is I think investors want to see more core action on cost reduction. Let's not forget they're also, you know doing a strategic review of their freight ltl business i don't know if we're going to get resolution on that today they didn't make any mention of it in the release but that could unlock a lot of value for shareholders here too all right stocks down a little more than eight and a half percent brandon oglenski from barclays thank you thank you up next the ceo of hubspot on how the company's new suite of AI tools can help small and medium sized businesses find new customers and handle tasks like social media posting. We'll be right back.

Welcome back. Let's take another look at shares of Nike. Those are up nearly 10 percent right now in overtime. Sarah Eisen breaking the news earlier this hour that CEO John Donahoe is retiring. He will be replaced by Elliot Hill. Hill was at Nike for 32 years before retiring himself in 2020. He previously served as president of Consumer Marketplace at Nike. Well, we also have a news alert on Chewy. Seema Modi has those details. Seema.

John, shares of Chewy falling here in overtime, announcing a public offering of $500 million of shares of its Class A common stock. Simultaneously, the company also announcing a share buyback of $300 million of Class A common stock. All in all, we're looking at the stock down about 3.4 percent here, guys. Back to you. All right, Sima, thank you. Well, shares of HubSpot joined the rally today after launching its new AI platform, Breeze. New features there at the inbound conference, new suite of tools aimed at small and medium-sized businesses, includes a new co-pilot and AI agent. Joining us now is HubSpot CEO, Yamini Rangan. Yamini, great to have you. So you guys pioneered what's called inbound marketing.

And now there and in customer service, AI usage is ramping. So how are companies using it? How can you tell whether they're satisfied with the results? Hey, John, thanks for having me on this segment. And that's a great question. We launched our set of AI products yesterday named Breeze because we want to make it super easy for our customers to discover, add value, and get consistent value from AI features within the product. That's why it's called Breeze.

Now, this is just the launch yesterday, but we've been launching AI features for the last 18 months, and we're beginning to see usage increase. I would say that marketing is probably the biggest use case. Nearly 65% of HubSpot AI users have already created content with marketing. They're using it to create great content, personalize content, and distribute content, and are beginning to see value. In fact, 91% of our users say that content created with AI performs better than other content. So there is the early stages of adoption there. And similarly, in terms of sales, we've launched a number of features over the past 18 months, and we're beginning to see significant reduction in the time spent in discovery by almost 30 percent and time spent in follow up. Both of those lead to better productivity of salespeople and growth. And

that's what we are hearing from our customers, John. OK, so you also just held an analyst day yesterday connected to inbound 2024. I think you said you estimate your market opportunity is going to grow about 68 percent to 128 billion in the next five years. Tell me what's going to happen on the ground to make that true. Where do you see those opportunities arising? Yeah, that's a great, great point. We said that the whole market for CRM plus commerce focused on the small and medium scaling businesses, which typically have two to two thousand 2,000 employees, will grow from $76 billion to $128 billion by 2029. Now, what that composes of are all of the front office application suites. So marketing, sales, service, operations, content, those are all of the areas. And so in terms of the growth opportunity, we see tremendous opportunity

as small and medium businesses are consolidating on fewer platforms, not just to reduce their cost, but also to improve the visibility and gain better insights about their customers' journey. And that is a big opportunity. Certainly, we continue to expand in each of those markets as we launched Content Hub earlier this year, which again helps with content marketing and with Service Hub relaunch earlier this year. And I would also say that AI, beginning stages of a big transformative shift, is also opening up a huge opportunity for us. Yamini, it's Morgan. It's great to have you on. I want to go back to, because I don't believe you've been on since all this reporting took place over the summer, but there have been

reports that Alphabet was interested in acquiring HubSpot. And then after initial talks, the deal or possibility of a deal was scuttled. So just wanted to get your comments on that and also whether you are open to the possibility of acquisition or collaboration. Look, we are building a long-term business. We are really focused on building a business that serves small, medium businesses. We've really gone over the last 18 years from being an app that offers just marketing automation software to a suite to a full customer platform. And we are committed to the market. We are committed to serving our customers. I won't comment on rumors

that happen in summer. Well, I'm curious how many different tactics, strategies you're willing to employ in this quest for growth. We just had Sasan Ghadarzi from Intuit on a couple of days ago talking about Intuit Enterprise Suite. Part of that through MailChimp is marketing. So he's trying to go after some of that SMB community. And then, of course, Adobe's got Experience Cloud. A lot of the AI startups working in marketing through AI are kind of pricey. To what degree are you interested in acquiring those as you pursue growth? To what degree are you going to continue to organically develop these product capabilities? Yeah, I'll maybe explain it as our product strategy as well as our go-to-market strategy.

From our go-to-market perspective, we want to get, you know, small businesses start as early as possible in their digital journey with HubSpot. And we want them to continue to scale with us. And in order to do that, we're making HubSpot super easy to buy, easy to use, and easy to upgrade. Earlier this year, we actually reduced the price of our entire customer platform. We removed the friction of buying seat minimums, and all of that has helped us acquire customers at scale. Now, from a product perspective, the one and the only way to win within this market is by being super easy to use, really fast to deliver value and providing a unified platform. And we are focused on driving a pace of innovation within the entire front office to help our customers grow, John. Well, I hope you come back and join us soon as we watch this hot space. Yamini Rangan, the CEO of HubSpot here on Overtime. Thank you so much for

having me. See you. Well, our concerns about iPhone 16 demand overblown ahead of going on sale officially tomorrow. Up next here, what the CEO of T-Mobile has to say about that. And CNBC Sport is out with a new documentary, WNBA Rising, on the league's growth and its challenges, including averaging a loss of $10 million per season. Here's Commissioner Kathy Engelbert on whether bringing in more corporate sponsors is reducing the need to raise capital. I think corporates are seeing that, wow, if I want to get with a consumer brand and a growth property, and I want to get to women and women of color, we're 80% women of color, WNBA might be a place where I would allocate my discretionary capital.

I'm not sure if we didn't raise that capital, I'm not sure we would have been ready for this moment. You can watch WNBA Rising by scanning the QR code on your screen right now or going to cnbc.com. Welcome back. Get your phones ready. We've got another QR code coming. The iPhone 16 officially goes on sale tomorrow as Apple shares hover near record highs. And while some data suggests demand for the device is weak, maybe, T-Mobile CEO Mike Sievert told Jim Cramer last night on Mad Money he's seeing enthusiasm from customers. The first week was better than last year. Not only good, but better than last

year. And people are buying pros, they're buying maxes, so they're buying up the food chain, and they're buying at a greater rate than last year. Now, what's interesting is we may actually see that this is better than last year to a slightly greater extent, because I have a feeling this cycle will be lengthened a little. You know why? Right. The AI features don't come out for a little while yet. And so that word of mouth of seeing Apple intelligence on your phone and then telling other people about it, that's actually still in front of us and will take a few weeks or longer. They didn't tell us. So this cycle could actually last a while. Well, here's that QR code I promised.

It leads in perfectly to the latest installment of my On the Other Hand newsletter. This week's debate, will the iPhone 16 spark a super cycle for Apple? You can scan that on your screen or type in cnbc.com slash O-T-O-H to get the newsletter and read both sides. Yeah, really interesting commentary from Siebert on that. You know, we have a record close for the Dow, closing above 42,000 for the first time ever. Record close for the S&P, but we also saw record highs for industrials, financials, materials, discretionaries at a multi-year high. I mean, market really, animal spirits awakening to the Fed cut yesterday. That's the macro at the micro level.

We've got a new CEO coming back to Nike. That's a big deal. And then, of course, FedEx. Boy, rough, rough there on EPS in the guide. Yeah, we'll see what they have to say. Triple witching tomorrow as well and an S&P rebalancing. That's going to do it for us here at Overtime.