Closing Bell - Closing Bell Overtime: Ford CFO On Earnings, EV Market; Lux Capital’s Josh Wolfe On Investing In America 10/28/24

Episode Date: October 28, 2024

Ford CFO John Lawler joins in an exclusive interview to discuss Q3 earnings, the company’s guidance and what’s ahead in the EV market. Lux Capital co-founder John Wolfe on launching Lux Labs to invest in the next American breakthrough and the rise in defense tech investing. Plus, RBC’s Lori Calvasina on what she’s watching for Big Tech earnings.

That's the end of regulation. Walmart ringing the closing bell. The New York Stock Exchange, Data.io doing the honors of the Nasdaq. Well, the major averages closing higher. The small caps getting a big pop as a huge week of earnings and so much more gets underway. Energy finishing in the red, though, after oil saw its biggest drop in years. That is the scorecard on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, coming up this hour, earnings results from Ford. Cadence Design, VF Corp and F5, along with exclusive comments from F5 CEO before the earnings call. And we will talk to Ford's chief financial officer exclusively ahead of his conversation with Wall Street analysts as well as investors

look for signals on the company's EV strategy and more. But as we await all of those results, let's bring in our market panel, Vital Knowledge founder Adam Christofoulian, RBC Capital Markets head of U.S. equity strategy, Lori Calvisina. Great to have you both here. Adam, I'm going to start with you because I realize earnings are going to really pump up a notch here as the week unfolds. We also get a lot of economic data on all of this ahead of the election next week. What really seems to have moved the markets today was the move higher that we saw in yields in the Treasury market and everything that factored into that, including this fall in oil. It seems like Middle East and Japan, I guess, is the bottom line, that it was global dynamics feeding the U.S. markets. Yeah, I think for today, investors,

so over the weekend, you had two macro developments that were received well on equities, one of which was the Israeli retaliatory strike against Iran, which was considered to be somewhat de-escalatory. And so oil saw a pretty steep decline. And then in Japan, there's the thought that the political turmoil there will make the BOJ proceed and it will temper some of its hawkishness as it considers further tightening steps. So somewhat positive for U.S. equities, but neither issue is really, I think, the central concern for stocks, particularly U.S. yields, which have been moving up largely because of, I think, increased concerns around just some of the giant fiscal obstacles that are lurking on the 2025 calendar. And obviously next week's election will play a big role in to kind of how some of those things unfold.

You also had a couple of underwhelming auctions today that contribute to the move up in yields as well. So, you know, you still have this dilemma on the one hand. Macro conditions right now are very favorable, resulting growth, disinflation, stimulus, and then relatively healthy earnings. But you have expensive stocks, and then you have this yield dynamic that's acting as a headwind as investors kind of really start to really try to figure out what's driving yields up.

If it's just data and inflation and concerns that the Fed will be easing at a slower pace than anticipated, then I think the moving yields is overdone and stocks can absorb that well. If this is concerns about ballooning deficits and debt and the lack of any type of real effort in Washington to tackle either of those, you know, debt ceiling expiration, shutdown risk, all those things, that's what's driving yields and it's kind of a much bigger

concern. And that's where we are right now. We've been moving sideways now for several weeks because of these two countervailing forces. Yeah, it's a real wall of worry for investors to scale here. We have Cadence Design earnings out. We're going through those results and we'll get them to you in just a moment. In the meantime, Lori, we've got, speaking of earnings, five of the seven magnificent seven set to report this week. We know that of those names that are set to report jointly, they account for 23 percent of the S&P 500's weight. So what can we extract so far from earnings season and how much now hinges on results we get in the coming days? So thanks for having me. Look, you know, I'm not going to lie, I didn't love the tone of the reporting season last week.

I think the stats were all fine, but just not quite as good as what we'd seen in 2Q. We got deluged with industrial companies, and maybe I just read too many of those. But things came out as sort of pretty mixed. I think when we think about these Mag 7 names that are coming out, they have two critical pieces of importance. One, just the health of the broader market, but two, the health of the rotation trade. And that's where we continue to see a lot of

investor interest. Those MAG7 companies have been dominant on forward-looking earnings growth, but their dominance has been slipping just a little bit relative to the broader market. But the way I describe it in my meetings is I think the rest of the market S&P XMAG 7 they're just not stepping up they're just not seeing the kind of improvement in forward-looking earnings growth expectations that they need to see to really you know have that rotation be smooth sailing going forward so I'm really going to be looking for kind of the numerator and the denominator how the MAG 7 earnings growth expectations are shifting and how the rest of the market and whether the rest of the market, frankly, is able to, you know, kind of start that process of catching up. So far, you know, to be honest, they're kind of whiffing. Okay, well, one that's

not whiffing, Cadence Design. Those earnings are out. Let's get to those. Julia Borsten has them with that stock up nicely in overtime. John, Cadence Design beating on both the top and bottom line, reporting EPS of $1.64 adjusted versus estimates of $1.44, so a 20 cent beat there. Revenues of $1.22 billion coming in ahead of estimates of $1.18 billion and the company raising the midpoint of its 2024 EPS outlook to $5.90. The company is saying in its release here that their fourth quarter bookings pipeline looks exceptionally strong, saying we are well positioned to deliver a strong 2024. And you see the stock is now up nearly 10 percent in after hours trading. Back over to you. OK, Julia, thanks. Now let's jump over to Phil LeBeau for Ford earnings results. Phil.

John, this is a beat on the top and the bottom line for Ford in the third quarter, earning 49 cents a share, two cents better than what the street was expecting. Revenue coming in at 43.07 billion. The street was expecting just under 42 billion. And then let's look at the metrics. Remember, Ford breaks out the three business divisions, commercial vehicles, internal combustion, and electric vehicles. Commercial vehicles, that's been the profit driver all year long.

They earned 1.81 billion in the third quarter. and electric vehicles. Commercial vehicles, that's been the profit driver all year long. They earned $1.81 billion in the third quarter. ICE, the internal combustion engine vehicles, earned $1.62 billion. And another quarterly loss for the electric vehicle business, this time $1.22 billion. When you break it down, over 32,000 vehicles sold. The average loss per electric vehicle in the quarter, $38,250. That is an improvement compared to previous quarters. Free cash flow of $3.2 billion, Q3 EBIT margin of 5%. And then the guidance, there is a little bit of a change here. The 24 EBIT guide for the full year, earnings of approximately $10 billion. That's on the lower end of the previous guidance, which was $10 to $12 billion. Free cash flow remains the same, approximately $7.5 to $8.5 billion. And the

commercial vehicle EBIT guide is approximately $9 billion. Internal combustion engine vehicle EBIT guide was approximately $5 billion. That's a big cut compared to previously. It was supposed to be $6 to $6.5 billion. And for the full year, they expect to lose approximately $5 billion. That's a big cut compared to previously. It was supposed to be six to six and a half billion. And for the full year, they expect to lose approximately $5 billion when it comes to electric vehicles. Don't forget, we are going to be talking with John Lawler, CFO of Ford. We'll be talking with him in just a few minutes, even before the analyst call, guys, as Ford beats on the top and the bottom line for the third quarter. Back to you. Oh, I didn't forget. Looking forward to that, Phil LeBeau. Meantime, F5 earnings are out and F5 reporting fiscal Q4 results that beat consensus on the top and bottom lines in a Q1 guide that's above the street on revenue

in line at EPS. You can see that stock is up 9% initially. Okay, so Q4 revenue for F5 for application delivery company. It came in at $747 million. That's above the $730 expected, above the guidance range. Non-GAAP EPS was $3.67. That's better than $3.45 consensus. Non-GAAP gross margin beat as well. That's at 83% on a better mix of software for F5. Now for Q1, F5 guiding to $715 million in revenue at the midpoint of a range of $705 to $725. That's better than the $706 million consensus expectation. The EPS guide is to $3.35 at the midpoint of a range of $329 to $341. That's exactly in line with consensus. I did speak with F5 CEO Francois Locodono about these results in a Fort Knox earnings conversation, and we're

going to have some of that for you in just a couple minutes right here on Overtime. Now, Adam, I want to go back to you on some of these results. A couple of strong showings here for technology names.ura was feeling like maybe of the results so far overall haven't justified the uh... fifty eight hundred plus on the s and p thus far how do you feel yet if you're in season uh... you know if it was born on the industrial class that you did see several posts

relatively underwhelming revenue uh... many so i'm going to try some of our we offer that going back to the first year of the season with the banks you know thanks several posts, relatively underwhelming revenue. And you saw a lot of them kind of trade somewhat poorly off of that. Going back to the first week of earnings season with the banks, you know, banks kicked things off on a relatively upbeat note, especially just the qualitative tone from those management teams about what they're seeing, very much kind of a Goldilocks message. You know, these tech earnings that we saw tonight with F5 and Cadence, certainly somewhat encouraging. You know, Ford looks like it wasn't nearly as robust as we saw from GM or Tesla,

but you know, the real test is going to come in the next few days, especially with these mega cap tech games with Apple, Amazon, Meta, Google, et cetera. That's going to be the real tell and will really kind of dictate how,

how tech trades from here. But I mean, aggregate the numbers are coming in decently and companies are providing, you know, again, I think the near term environment is still relatively encouraging. But I did see last week the industrials, you know, some some revenue shortfalls in certain names. So, Laurie, is this some of the breadth? I'm looking at F5, VF Corp on the screen as well as Cadence. Is this some of the breadth that we need to see, if not the overall, you know, earnings results that would have made you feel better about where the S&P is? Is this breadth

a good sign? Well, look, you know, at least so far, right, it sounds like we're getting some good news. And I will say the technology sector, while not cheap, it is starting to look more neutral on my models, areas like software, semis. You know, there is just not nearly the elevated valuations that we've seen in the past. And it has been a sector where we've been consistently seeing some good earnings revision trends. So I think if they can stay the course, it's been sort of a, you know, kind of a quiet, you know, sort of source of strength and resilience in the earnings data. I think that's a very, very good sign if we can maintain that going forward.

All right. Adam and Lori, thank you both for joining us. Stocks and yields moving higher in tandem today. Mike Santoli is taking a deeper look at the relationship between the two. Mike. Yeah, Morgan, this relationship changes based on some underlying conditions and maybe the reason for some of the moves. Take a look at the S&P 500 against the yield on the 10-year Treasury over the course of this year. What you saw in the first quarter is yields going up, stocks going up. There was much better than expected economic performance. That was extrapolated into eventually an idea that the Fed wasn't going to be able to cut anytime soon. Maybe inflation was going to get restarted. And that was just a little too much. You got above about four point three percent on the 10 year and then stocks wavered to some degree. Then yields start coming down and it supports stocks for a bit. So it essentially kind of has

this ebb and flow of a relationship. What I want to point out on the far end, of course, is as yields have come up out of that trough right around the September Fed meeting, right around the peak of the idea that maybe we had higher recession risk and maybe the Fed was even behind the curve in not cutting soon enough. You've been able to kind of tack on some equity gains, even with yields higher. The question is, are we now again near that critical level where it starts to work against stocks? A lot of the sort of asset allocation models would suggest that might be the case. So we have to keep an eye on that for now yields are up mostly for probably pretty good reasons but you can't be sure that's going to remain the case now on a month-to-date basis take a look at the total stock market index that's vti versus the total bond market and what you see

obviously because yields are up values of bonds are down and stocks have outperformed them significantly. So maybe there'll be a little bit of month end reallocation out of stocks into bonds by some, you know, big balance type strategies. I don't expect it to be anything dramatic, even though there's a few days left in the month. Monthly rebalance is not necessarily that powerful, but it's just something to keep in mind as people trade off among these asset classes. John, I'll take it, actually, Mike. And certainly the rebalancing will be something to watch. And we'll talk a little bit more about oil later this hour, too, which has had a correlation there. Mike, we'll see you later. VF Corp earnings are out. Julia Borson has the numbers for us. Julia Morgan, VF Corp beating on the top and bottom line, reporting adjusted

earnings of 60 cents per share, far above the 37 cent estimate. Does the analyst consensus revenues of two point seven six also ahead of estimates of two point seven one billion? The company giving third quarter revenue guidance in a range of between is fiscal third quarter revenue guidance in a range of between two point seven billion and two point seven five billion. That is lower than the consensus expectation for fiscal third quarter guidance. Also talking about how the board of directors declared a quarterly dividend of nine cents per share. Now in other retail news, the boot, excuse me, in other retail news, Boot Barn reporting its earnings and announcing that its CEO, James Conroy, would be stepping down. James Conroy is becoming the new CEO of Ross Stores. So this news out as part of Boot Barn's earnings release that they're having the CEO transition.

As the Boot Barn CEO becomes a CEO of Ross Stores, Boot Barn will have an interim CEO in John Hazen, the company's current chief digital officer. So some musical chairs there in the retail space. Back over to you. All right. You're seeing the stocks. Boot Barn is now down 10 and a half percent on that news. Ross Storrs is up. Julia Borson, thanks for bringing us that retail trifecta. Still ahead, much more on today's earnings action. We've got an exclusive interview with Ford's chief financial officer. That stock has moved firmly lower in overtime.

I just want to say boot barn because it seems fun to say. I didn't get to say it. All right. Later, an analyst breaks down the numbers we just heard from VF Corp. And what the results say about the strength of the consumer. Overtime's back in two. I'd like to see you in a boot barn. Welcome back to Overtime. Ford shares are lower now by about 4% after reporting third quarter numbers moments ago. Joining us now in an exclusive interview before the call is Ford CFO John Lawler with our own Phil LeBeau. Phil.

Thank you, John. John Lawler, thank you for joining us. And I think the question that a lot of investors have looking at the reaction after the earnings came out is, let's talk about your guidance. You beat the street on the top and the bottom line in the third quarter, but you're guiding towards the low end of your full 24 earnings, what you're expecting for the year. What's driving that caution? Well, when you look at the year in total, Phil, our top line is doing better than we had expected on strong volume and mix, especially in Ford Pro. Pricing is doing better than the industry overall. We're also seeing cost reductions come out. We've taken $2 billion of cost out in material,

manufacturing, and freight costs as we committed to do this year. But we are seeing headwinds overall this year in both warranty costs and inflationary costs for our joint venture partner in Turkey, Ford Auto Sound, which raises the cost of our vans in Europe. You mentioned warranties just now, but it's not in your earnings release in terms of how much you lost in the third quarter, or I shouldn't say lost, but what the impact was. Can you tell us if you made progress there? Because you've struggled in previous quarters there. When you look at the third quarter, we had a solid quarter. Revenue was up 5%. It's our 10th consecutive quarter of top-line growth. Costs were down slightly. And so we had a good EBIT at $2.6 billion, up $400 million. And we are seeing traction in the quarter on cost reductions.

They're down slightly. And, you know, warranty is a part of that. And overall, we're working very diligently to improve our warranty costs. We're seeing green shoots from a physical standpoint or those leading indicators that tell you what's happening with your quality. Our three months in service quality has improved 31% since the 22 model year compared to the 24 model year. And then we'll eventually start to see that flow through on the bottom line from a cost standpoint. We haven't seen that come through in a meaningful way yet, but over time, we will see that come through. Hi, John. It's John Fort. I've got some questions

for you about hybrids. That business was up 30 percent for you. It was up a little more than that, I think, last quarter. And especially in trucks, you've got 77 percent of the hybrid truck market in the quarter. Sales up 42 percent there of hybrid trucks. How much can you lean into what seems to be an outsized area of success for Ford there in hybrids? Well, look, that's been a great success for us. You know, it's our customers have choice with us. They can get an ICE engine or internal combustion engine. They can get a hybrid and they can get a full EV vehicle. We're leading in hybrids. We have great products for our

consumers. We're growing considerably, as you said, up 30 percent. And we're going to continue to lean into that space. We had been out in front of it. We've been a leader in hybrid for years. And we're going to continue to do that and offer our customers the choice they want, you know, to find the best powertrain that meets their needs. And I think that's a competitive advantage for us. And it's proving that in the marketplace with the results we have. So, John, it's Morgan. Average loss per electric vehicle, $38,250, which I realize is an improvement off of what we've seen in recent quarters. But what is it going to take to get to profitability in that unit? Like the EV market's a really tough market right now. When you step back and look at it, since the first quarter of 2023, volumes are up 34%,

revenues flat at $14 billion for the industry. So it's a cost game. We're going to take out $1 billion of costs out of our EV business this year, and we're focused on doing that for current models, future models. Look, we're designing our future model EV programs to be competitive with the lowest cost players globally. And that's what we're focused on. It's a cost game. There's over 150 vehicles coming to market, EV vehicles coming to market by 2026. So it's going to be a really tough market and cost is the game that needs to be played. John, it's Phil again, not to belabor

this point about warranty costs, but that really hit your stock in the second quarter. Your stock is down right now after hours. Getting back to warranty costs, it cost you $1.5 to $2 billion in the second quarter. Can you tell us exactly where the warranty costs came in for the third quarter? On a year-over-year basis, warranty costs were a slight improvement for the third quarter of this year. All right. All right. We appreciate that, John, and our own Phil LeBeau, John Lawler, the CFO of Ford.

Thank you for joining us. Well, coming up next, more access you're only going to get on Overtime. The CEO of application security, application delivery company F5, breaking down results ahead of the earnings call as that stock jumps 10 plus percent. Also ahead, oil prices falling off a cliff today after Israel's retaliatory strike against Iran was less intense than some feared, some considering it de-escalatory in nature. We will talk to defense investor Josh Wolf from Lux Capital about how geopolitical developments are impacting his portfolio companies. F5 reporting a beat on the top and bottom lines this hour, a guide above the street. That's why

the stock is initially up 10.5%. Here's what CEO Francois Locodonu told me today about how the multi-cloud reality in enterprise is driving consolidation and outperformance. Increasingly, we're getting opportunity to consolidate these solutions into a single platform that provides all security and all delivery services for applications across all the environments in which our customers operate. He also gave me detail before the call on why the guide is stronger on the top and the bottom. More than 76% of total revenues are now recurring revenues for F5. And the vast majority of our software revenues is coming from subscriptions. And we're seeing very strong predictability of the subscription renewals.

You know, a couple of years ago, you know, when we looked at our software for the year, about half of that software revenue we knew were going to come from renewals and expansion, and the other half had to come from new business. This year, it was over 60% coming from existing business for the full year 2024. And we're projecting that for 2025, over two-thirds of our software revenues will actually come from business that is already contracted at the start of the year. We have all year continued to have very strong cost discipline. As you see, we've expanded significantly our operating margins for the year by more than 300 basis points. And we intend to continue to do that, increasing operating margins next year to 35%.

But in addition to cost controls, our mix shift continues to drive to software representing a greater portion of our total revenues. And this move in the stock, if it opens here tomorrow, would take it back to levels it hasn't seen since the beginning of 2022. Also reminiscent of IBM's strong software performance. Well, let's get another check on shares of VF Corp. That stock is soaring up more than 14% after beating on the top and bottom lines. Let's bring in BTIG Managing Director Janine Stichter. Janine, this is a turnaround story that might be seeing some traction. What do you think? Yeah, I think we are still wait and see on this one. It's very much, as you say,

still a turnaround. But the important thing here, I think what the market's reacting to is that we are seeing some signs of traction, and specifically with the Vans division, where historically that was the biggest piece of the business. It's shrunk over the years. We're seeing that gap moderate, where they were down over 20% last quarter. This quarter, they're down 11%. So you're inching back towards what could realistically be an inflection to positive territory, and that's what the market's really been waiting for for the last several years on this one. So how's Bracken Darrell doing? Here's a guy who started off in consumer products more traditionally, went to Logitech in tech, and now is back trying to tackle this turnaround story.

How much trust does a quarter like this build with Wall Street? How long does he have to start really continuing to show those results you're looking for? Yeah, he's been in that seat for a little over a year, and I think he really has done a nice job at gaining investor trust. He's done everything he said he's going to do. And the beginning of that was really just attacking the cost side and figuring out what needs to be done. The second thing he's done is put really great people around him. So we've had an entire upheaval of the management suite here. We have a new CFO in place.

We have new brand leadership at Vans and at North Face that will start to impact the business later this year. And I think he still has plenty of time because the lead times in this business are long. We know it takes a while to fix footwear and apparel businesses. But he's done everything he said he's going to do, and we'll start to see the commercial impacts of that more as we get into holiday and into early next year. How much is this a Vans turnaround story versus some of the other brands within VF Corp, like, for example, North Face, which has also had its own challenges? I think Vans is really the linchpin. That's been the piece that has been the hardest to fix. And if you look where investors are saying this might not be fixable, that's where the most doubt is. I think with North Face, it's been choppy. And some of that might be a little bit of brand and product. Some of it has been the weather, which hasn't been

particularly helpful. But that's been the side of the business where it's held in relatively well. And I think as long as they can continue to see relatively steady trends, there's just been that kind of piece of worry in the back of investors' mind that what if this is the next shoe to drop and we have two brands that are really not working. But so far, North Face has been hanging in just fine. I think that there's things they can do to execute better there. But it's really about turning bands to turn this business. I mean, it's not shooting higher right now. It's up 15 percent. Obviously, the expectations were kind of low. The bar was set low going going into this report. You've got a neutral rating. Does anything here that you've seen so far and I realize we've still got to get

to the earnings call, but does anything change your mind? I mean, does this potentially become a buy here? Can't comment on our price target or ratings or potential changes, but I would say this is still in our mind what we've said is a show-me story. And we're seeing signs that this is moving in the right direction, but you still have a Vans business that is down 11% on easy comparisons. There's still a lot of work to be done, even with this improvement that we're seeing in the quarter. Okay. Janine Stichter, thanks for joining us. Thanks for having me. Well, it's time now for a CNBC News update with Pippa Stevens. Pippa.

Hey, Morgan. Israeli lawmakers passed legislation this afternoon that restricts the main U.N. agency that provides aid to Gaza, which it has accused of keeping close ties to Hamas. The bill bans the U.N. agency for Palestinian refugees from providing any service inside Israel. Another bill which could break diplomatic ties with the agency is also being voted on today. The bills risk stopping the flow of humanitarian aid into Gaza. Former New York City Mayor Michael Bloomberg recently donated $50 million to a non-profit organization supporting Vice President Harris' campaign. Sources tell the New York Times the donation was made after months of pressure from friends and fellow billionaires, such as Bill Gates, to do more to help the campaign.

Bloomberg declined to comment. And English Premier League's Manchester United sacked its manager Eric Ten Hag today after making its worst season start in 35 years Manchester United is currently in 14th place the club's assistant manager will take over until a permanent replacement is found you know Morgan as a Liverpool fan I am certainly sad to see him go Stephens thank you up, pain less at the pump. Mike Santoli looks at how lower oil prices are translating into more affordable fuel for Americans. And later, investors in pharma stocks are getting set for a checkup on a number of pivotal companies this week,

including Eli Lilly. And Pfizer will tell you what to look out for in those reports when Overtime returns. Welcome back to Overtime. Crude oil seeing its worst day in more than two years after an Israeli attack on Iran over the weekend that spared the country's crude oil facilities. Now, West Texas Intermediate falling below 68 bucks a barrel. Mike Santoli is back to put this latest sell-off into context for us. Mike. Yeah, Morgan, whatever modest geopolitical premium might have been in the oil price clearly coming out of it today. Take a look at a four-year chart. This is of WTI crude,

along with DBC is the broad commodity index exchange- product. And so you see, obviously, oil is pretty much the prime driver of this at the margin. But now down to levels, it's really rarely traded below over the last three years. It also takes both of these back to, you know, pre-Ukraine invasion levels. So from an inflation perspective, this is good news. Goods-based inflation has been really yesterday's problem for a while. Maybe you wouldn't want to see it go too far below this. And who knows, maybe around that mid-60s area for WTI, it ends up being short-term support. Now, take a look at the consumer end of this, essentially how affordable gasoline is becoming on a relative basis to average hourly earnings.

This is the number of gallons of gasoline the average worker can buy with an hour's worth of work. So average hourly earnings for non-supervisory and production employees is a bit over $30 an hour. You have the national gasoline price is a little bit over three bucks. So between nine and 10 gallons is what you can get here. This goes back 20 years. So you see it's kind of in the upper end of the range in terms of affordability of gasoline. Clearly, that should end up being a little bit of a cushion for consumers going into the end of the year, Morgan. Yeah, and it's a good point you make there, especially as we do start to hear all this chatter on earnings calls about the health of the consumer. I want to go back, though, to something you were talking about earlier in the

show, and that is you had the 10-year Treasury yields flirting with 4.3 percent, which is considered that key technical level. What we've seen in recent days and recent weeks of trading is that yields and oil prices have moved in tandem. The fact that that relationship seems to have broken down today, how meaningful is that, if at all? Yeah, it's true. I'd want to see it more than a one-day news reaction move in oil to see if that, in fact, has been a broken relationship. Because you're right, yields, because they incorporate headline inflation expectations and reflation expectations, it should, on a short-term basis, end up being in tandem. So you want to monitor that relationship.

Again, we're trying to figure out all the different drivers of this bond market move. Clearly, inflation expectations is a part of it. Clearly, growth performance is part of it. Clearly, Fed expectations and maybe some Treasury supply deficit concerns are filtering into it. But, you know, it doesn't really tell us why it's doing what it's doing. So it's up to us to figure it out, John. Drivers, gas. I see what you did there, unintentionally, it doesn't really tell us why it's doing what it's doing. So it's up to us to figure it out, John. Drivers, gas. I see what you did there. Unintentionally, perhaps.

Mike Santoli, thank you. Up next, Lux Capital co-founder Josh Wolf on how geopolitical tensions are impacting defense tech investments. And another check on, speaking of driving and gas, Ford here. Down sharply after guiding to the low end of its 2024 earnings forecast. You can see shares are down about 4.5% right now. Over time, we'll be right back. A real strike against Iran over the weekend, showcasing modern defense technology, including, for example, Lockheed Martin-made F-35,

taking out air defense systems around key energy facilities, defense tech. It's a growing theme for investors. It's something Palantir CEO Alex Karp talked about in our exclusive interview just last week. We're commercial companies that are patriotic. And so how do we get the best patriotic companies to produce the most lethal technology in the world for America and not for our adversaries? And how do we get it to the DOD in ways that are cheaper, in ways that the margins are better? Joining us now is Lux Capital co-founder Josh Wolf. Lux Capital has investments in a number of defense tech startups, including Andral and a number of other industries, too. We're going to

get to all of it, Josh. It's great to have you back on the show. But I do want to start right there with those comments from CARP, because we have also seen in the last couple of days the increasing push with the Biden administration putting out this national security memorandum around AI, this increasing push to see more AI in more defense, more national security, more intelligence capabilities. And given what we did see with these targeted strikes over the weekend, I just wanted to start right there with you and the role that artificial intelligence and some of these new technological capabilities are playing on the battlefield. Well, I happen to agree with Alex. He's a friend and a great leader and a great American. You know, the key thing here is scientific and

technological superiority. What Alex is talking key thing here is scientific and technological superiority. What Alex is talking about at Palantir and many of the people that they're partnering with, many of the companies in our portfolio, Anduril and Hadrian and SailDrone and Varda, all the people that are at the cutting edge of aerospace and defense all start with the premise that they have some technological breakthrough, that they can do something that nobody else in the world can do. And we want in our country, companies and capabilities that have things that nobody else in the world can do. That is what Israel delivered. That is what the U.S. is able to deliver. That is what we need against our adversaries, scientific and technological superiority. We see that in hard power,

in the technologies of new ventures in aerospace and defense. We've been putting close to a billion dollars into that field. And we have a new initiative, particularly around the soft power piece, which is the new cutting edge scientific and technological breakthroughs that are coming out of universities, in some cases coming out of big tech, that we can spin out and start brand new ventures on to deliver those kinds of capabilities. And of course, that's Lux Labs, which is the news that you're coming to us with. So how does, what does that entail and how does that help to feed the pipeline for future tech and for future entrepreneurs? You look at even the woman who invented the mRNA vaccine and, you know, she was told that she

wasn't of sort of faculty quality. We have massive institutional bureaucracy inside of our scientific institutions and you need people that are the entrepreneurs and the founders of the venture capitalists like us, not only to fund these companies, but in some cases to help create them, to help incept them. So we love to be there at the founding moment and be the first funder, but we also like to help co-found or create these companies. Sometimes that's coming out of university lab. We've done that out of Columbia and biotech. We've done that out of big companies like Apple and Google and Meta. Out of Apple, we've taken two companies, one focused on 4D LiDAR for autonomous driving,

one that hasn't yet been announced in cutting-edge batteries. Out of Google, we've done two companies, one that we co-founded to digitize olfaction called Osmo, and another that we were the first funders in for physical intelligence, which is their core robotics brain company, basically developing AI for the future of robotics. And then out of Meta, we were the founding investors in evolutionary scale, which was the key team developing frontier models for AI and biology. And we're going to continue to do that, both take advantage of the capital market cycle where interest rates are rising, big companies are saying we're going to shut down some of these groups, and also helping to free up the bureaucracy

from the institutional sclerotic processes that are in university labs where we can take these technologies and deliver them to consumers, to commercial businesses, and ultimately in defense cases, to the warfighter. Hey, Josh, five years ago, the narrative I was hearing overwhelmingly is that China had an AI advantage because of its massive population and communist willingness to use everybody's data for its own purposes. Now that narrative seems to have shifted. I don't hear as often concerns about TikTok and U.S. data getting sucked out to China. What's the right framing of what's changed with open AI and NVIDIA's rise over the last two, three years, and what America's advantage really is at this point? Well, TikTok still is a problem. There's a whole group of us that have

been pushing not for banning TikTok, but for helping to divest it from an adversary to the U.S. I think that's critically important. U.S. technological superiority is the key thing. NVIDIA is a U.S. company. Apple is a U.S. company. OpenAI is a U.S. company. We want to continue to see those likes of those pioneering companies from the Anderals and Saildrones of the next generation to the big tech seven that are really American companies. China is a formidable threat. The AI models that they have, particularly in video, in generative text and images, it's a problem that we're going to face, particularly for disinformation, whether it's in a political year like we have today, where half the world is going to the voting booths or whether it's influencing what people believe going forward.

I will say on the basic science piece, this is even more important. Twenty two of the last 28 years, we have seen decline in basic spending in the United States, whereas China has tripled their basic science spending. So we have to get very serious about long horizon scientific research. That is the basis for the future NVIDIAs and Apples and Andrals. We've got to continue to fund that. That's why Lux Labs is here to help take that stuff and midwife it into the commercial markets and help these brilliant entrepreneurial scientists with everything that they might need. And also back the incredible founders that are coming out of the big tech companies that already have that entrepreneurial energy and just need an early person to believe in them.

The number one quote that I love from Linus Pauling, the most famous Nobel laureate in our world here at Lux, is that I know something that the rest of the world doesn't know and they won't know until I tell them. That is the addictive power of science and from science comes great power. So finding these breakthrough researchers, finding their breakthrough scientific results and funding them and commercializing before anybody else in the world can do it is a critical competitive advantage. Attracting these scientists to our shores and keeping them here is also one. So eight days out from the election, how are you gaming out election outcomes and possible impact, whether it is from a defense contracting standpoint or health care and science or AI and possible impact, whether it is from a defense contracting

standpoint or health care and science or AI and possible regulation there? I find a lot of bipartisan support for both of these issues, whether it's defense or health care. People are going to be fighting. You know, we have a country that is divided in half, and it's a tragic thing in that regard. But I think that post-election, whoever wins, you're going to see a redoubling of intentional investment in the deep sciences, certainly from the private sector like us. It's what we can do. I think that that should be undebatable. Investing in our brightest minds, attracting them here, giving them the fuel and the fire and the funding so that they can go forth and bring advantages to the American people, whether that is inventing new drugs to help save lives, whether that's inventing new things for the warfighter in defense, whether that's inventing cutting edge semiconductors or

the AI software that is powering so much of industry today. I want it here on our shores, and I want to be one of the main funders behind that here at Lux. Josh Wolf of Lux Capital, thank you for joining us. Always great to have you on. Great to see you both. Up next, all of the overtime earnings movers that need to be on your radar as we count down to forwarding Cadence Design's analyst calls. And credit card issuing company Marketo is a big winner on Wall Street today after announcing it's partnering with payment providers Affirm and Klarna and payment platform Branch to embed new buy now pay later options

inside apps and digital wallets. You see it's up 9%, Affirm up 3.5%. Be right back. Welcome back. Let's check on today's earnings movers. Ford hitting the brakes in overtime, coming in above estimates on the top and bottom lines, but getting to the low end of its 2024 earnings guidance. You can see those shares are down about 5% right now. Cadence Design Systems is jumping after beating on earnings and revenue. The company also raising the midpoint of its 2024 earnings guidance. Those shares are up 5%. VF Corp also moving higher after beating on earnings and revenue. And F5 is popping after topping estimates on earnings and revenue and posting solid revenue estimates and authorizing an additional $1 billion buyback program. You can see those shares are up 10 percent.

Should have mentioned for the full conversation with the CEO of F5, you can check on Overtime's LinkedIn after the show. Well, Pfizer will kick off big pharma earnings tomorrow. Up next, what to expect from that industry, including whether weight loss drug sales are showing any signs of slowing down. And another check here on two retailers on the move. Boot Barn saying CEO Jim Conroy is leaving to take the top job at Ross Stores. Both stocks are now moving lower on that news. We'll be right back. Overtime. Tomorrow is going to be an action-packed day for earnings featuring McDonald's, PayPal, D.R. Horton, JetBlue, and Royal Caribbean before the bell. And Alphabet will headline the earnings parade in overtime. Visa, AMD, Electronic Arts and Chipotle, some of the other big names reporting after the bell.

And Chipotle's interim CEO is going to break down those results for us in a first on CNBC interview before he dials into the analyst call. And if that's not enough, Angelica Peebles joins us now for a look at what to expect from these big pharma earnings, which begin tomorrow with Pfizer. Angelica. Yeah, that's right, John. We have a lot going on this week, about 10 pharma companies reporting. And I want to start with Pfizer. This is the first time we'll hear from them since we learned about Starboard's campaign three weeks ago. Remember, Starboard's accusing Pfizer of mismanaging its COVID windfall.

And we'll be watching for sales of some of Pfizer's newly acquired drugs, like Nertec for migraines and Padsev for bladder cancer. And of course, we'll be listening to see how Albert Bourla responds to the activist pressure. Then Wednesday, we hear from Lilly, and it's all about Manjaro and Zepbound. The question, can Lilly maintain its momentum? Lilly has already hiked its full year sales guidance thanks to those GLP-1s, and supply has gotten better since last quarter. And we also might get a better idea of some of the competition. Remember, we're waiting for data from Amgen's experimental obesity drug, Meritide. Amgen reports Wednesday after the bell.

And we're also expecting Merck to field some more questions about how and if it plans to get into the obesity space when they report Thursday morning. So a lot going on here, John. I want to go back to Pfizer for a moment because so much of the story around Pfizer and the investor narrative for the last couple of years has been COVID related. Have we moved past that at this point in terms of what's going to be mattering for earnings for the future? So they would very much like us to stop talking about COVID. They have these newly acquired drugs, Nertec, that came, it's a migraine drug, and that was an acquisition. PADSEV is one of the ones that came from Cgen.

So they want to be talking especially about oncology with that big $43 billion acquisition of Cgen. But interestingly, when you look at some of the analysts' previews for this quarter, they're talking about a possible COVID upside, potentially a COVID vaccine, and also Paxlovid coming in ahead of estimates. So we might hear some talk about that tomorrow, but really they want to be looking past COVID and changing the narrative, saying we still have other things here. Is Lilly the NVIDIA of pharma right now, just kind of like everybody watches that and it's sort of driving sentiment? I think that's really fair to say, people. It's still early for them. Remember, Zephan was just approved a year ago. And so there's still plenty of runway. Supply still remains the story. And interestingly, you have this back and forth between the FDA, Lilly, and these compounders and this big debate over whether or not trisapatide, that's the active

ingredient in manjaro, and Zepound, whether it's actually available or not. And so I'm really interested to hear what Dave Ricks has to say about this on Wednesday and just how that supply looks like and how much more room they see for those drugs. Yeah, hims and hers stock has certainly become the proxy for every headline we get on that. Angelica Peebles, busy week for you. Thanks for TN us up for it. Thank you. Obviously, we also get the hyperscalers and the AI hyperscalers,

which together, Microsoft, Amazon, Alphabet, Meta are set to increase CapEx by 40% this year. That's compared to the rest of the S&P on pace to fall 1% in CapEx. That's according to B of A. Well, on the smaller side, but not small, I'm curious how AMD is going to report, given that the stock hasn't quite performed as well as NVIDIA, but it's got a big story. Yeah, AMD, and then you've got Intel later in the week as well. It's going to be a busy one, particularly on the tech side. That's going to do it for us here at Overtime.