Closing Bell - Closing Bell Overtime: Honeywell CEO On AI In Manufacturing & Why EVTOLs Will Change People’s Lives; TransUnion CEO On Delinquency Rates; Reddit’s First Public Report 5/7/24

Episode Date: May 7, 2024

Earnings season continues with EA, Wynn, Lyft, Arista Networks and Rivian – plus Reddit surged in Overtime after reporting its first quarter as a public company. Vital Knowledge’s Adam Crisafulli and JPMorgan’s Phil Camporeale break down the action. Honeywell CEO Vimal Kapur talks the company’s plans for AI and monetizing data, plus the energy transition and why he says he expects EVTOLs to change people’s lives like the iPhone – and by 2028. TransUnion CEO Chris Cartwright on the consumer, credit and delinquency rates. 

A tight range for stocks today with the Nasdaq ending up fractionally lower, but the S&P and Dow both eking out gains. The Dow in check after a big drop in results for Disney. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Yeah, and earnings are on the way this hour from EA, Lyft, Wynn, Rivian, and Reddit. That's its first report since going public. We're going to bring you all of the key numbers as soon as we have them. And a rare and exclusive interview with the CEO of Honeywell

on how his company is using AI in industrial applications and the technology they're working on that he thinks could have an iPhone-like impact. And it's not AI. As we await the flood of earnings, though, let's bring in our market panel, Adam Crisfulli of Vital Knowledge and Phil Campreale of JPMorgan Asset Management. Great to have you both here. Phil, I'll start with you because we've seen this rally in stocks. We've seen a rally in bonds. There does seem to be this expectation rebaking into the market that maybe, just maybe, the disinflation narrative is going to pick up

steam again. We are actually going to get rate cuts. Does that factor into your thesis? So we're leaning into stocks, Morgan. We like stocks. We thought that the sell-off from April, given the move in rates, was overblown. And what this all comes down to is what it's come down to over the past couple of years. This is a historically interest rate insensitive economy. So that does two things. That prevents recession because these rates should have bitten already, right? We went from zero to five and a half percent and we're still above trend growth. So that keeps us out of recession. But the second thing that it does is it allows us to stay overweight risk without needing the rate cut to justify it. And one of my

favorite, one of my favorite stats is that this is the first time in 40 years. So since 1984, that the federal funds rate, the risk-free rate is higher than the 3.8% rate that people are paying on their mortgages right now. This is extraordinary liquidity. First time in 40 years that's happened. And we know how much cash is on the sideline. So Morgan, to answer your question, we're avoid stocks. We're overweight 6% in a 60-40 portfolio. So that's 66% in stocks. We're overweight high yield, and we're not holding our breath for a rate cut. Maybe we get one, but we don't need it to justify that outlook.

Interesting. Adam, how do you see this market here? You like equities? You like bonds? You like a little bit of both? Something else? I like Treasuries more than I like equities here. And I think, you know, really it comes down to growth.

In the last several weeks we've seen a multitude of data points both from individual companies as well as, you know, economic releases, whether it was Friday's jobs report, the ISMs, you know, commentary from companies like Starbucks, even Disney today about how they're seeing a moderation in travel demand, whole travel group came for sale. So I think we're at an important inflection point in the economy where you are seeing now a slowdown and that's factoring into the rally in Treasuries. So I think stocks are going to are going to celebrate any decline in yield. And you've seen that over the last several days. But eventually, to the extent you see growth slow further, there will be a disconnect

between Treasuries and equities with Treasuries continuing to rally while stocks get caught up a little bit. Interesting. Phil, going back to what you were saying about overweight equities and just the opportunity to take on risk. What do you think about Warren Buffett saying that he's so comfortable in cash and just sitting on cash because he doesn't see the opportunities, the kinds of opportunities that he wants to see value wise to jump in? Yeah, never disagree with a billionaire, I guess is what I would say. And by the way, when I talk about getting out of cash, I'm a multi-asset portfolio manager. And I talked about the overweight to stocks, but I also talked about the overweight to things like high yield. High yield is out-yielding cash.

And yes, spreads are so tight. You're talking about some historical tight levels on high yield, but it goes back to, okay, if you're 300 over treasuries at these levels, treasuries are 5%. That's different when it's 300 basis points over something like 2% or 3%. So the all-in yield of 8%, the multi-asset opportunity versus cash, I think, is what we're talking about. And I'm not going to talk about reinvestment risk. Maybe the Fed eases once this year. Who knows? But what I'm talking about is opportunity costs more than investment. Hold on a moment. When earnings are out, we're going to get to Contessa Brewer with the numbers.

Contessa. We've got a beat here from Wynn Resorts on the top and the bottom lines. They're coming in with earnings per share of $1.59 adjusted versus the street expectation of $1.27 adjusted. Revenues coming in at $1.86 billion versus the expected consensus $1.79 billion. I got to tell you, it looks like a beat here in Macau. The adjusted property EBITDA is coming in here above expectations. We've got Las Vegas coming in above expectations. And that was against a very tough comp from last year. It looks like we've got first quarter in Vegas up 6 percent. Boston in line with expectations here.

Some inflationary pressures that we're seeing here growing year on year EBITDA. In fact, a record first quarter for that. So for Wynn, it's a beat on the top and the bottom lines. You can see the stock reacting there up almost 3% in the aftermarket trade. Morgan? You said it was going to have to be a big beat for us to see a big move in the stock earlier last hour. And here we go. Contessa Brewer, thank you. We've got a news alert on Meta Meantime. Julia Borson has the details. Julia. Hey, Morgan. Meta announcing it's rolling out some new generative AI tools for advertisers, most notably text-to-image generation tools like Midjourney or Dolly to make it easier for brands

to create ads from scratch, folding these tools into its platform to automate ad buying, targeting, and measurement. Now, this builds on Meta's Advantage Suite. That's what they're calling their generative AI tools that they started to roll out in the fall. Those include the ability to generate backgrounds and text for ads. Now, all of this comes after Meta's earnings was marked by CEO Mark Zuckerberg declaring his financial commitment to investing in AI and large language models, prompting him to increase the company's capital expenditure forecast for the year and beyond. John? All right. Thank you, Julia Boorstin. Lyft earnings are out. Meanwhile, Deidre Bosa has those numbers. Dee? Hey, John, those shares are popping more than

10 percent in the after hours because it's a beat on the top and bottom line, and the guidance looks good as well. Let me give you the numbers first. Lift EPS coming in at 15 cents adjusted versus 3 cents the street expected. Revenue a beat here as well, coming in at $1.28 billion versus the 1.16 the street was expecting. Bookings also higher, $3.7 billion versus $3.58 billion estimated. In terms of its outlook for the second quarter, that's also higher than the street expected, both on the second quarter gross bookings and second quarter adjusted EBITDA. We also saw a second quarter of free cash flow, positive generation. Remember, the company is committed to be free cash flow positive for the entire year. In terms of that gap profitability

target, the CEO, David Risher, just telling me that they're still working towards it. He also says that the consumer to them is looking pretty good. They're not seeing signs of softness. I asked him about the ride mix. He said that premium modes are actually growing faster than the average. So those are sort of like the black rides, the higher end rides. Also, what they call party time. That's like on the weekend after 5 p.m. on Friday and Saturday.

They actually saw that usage increase 26 percent year over year. They're also seeing a bump from the Eclipse and Taylor Swift concerts events. So at least to lift the consumers looking pretty good. Back over to you guys. All right. D, thanks. Adam, Chris, people going outside, you know, and not just to their front lawns. It seems like if if it's not just Uber getting a lift here, but lift as well. Yeah, no, it looks like a pretty healthy set of results from them on both the top and bottom line. You know, this story is very much about cost cutting in addition to revenue growth, but really on a cost front, which they seem to be executing on. Remember, that was a big inflection point over the last couple of quarters.

So, you know, the fact that they are now achieving higher margins as well as higher revenue and letting a lot more that, a lot more of that fall to the bottom line. Certainly an important part of the story. Okay. Well, we've got Reddit earnings out and Julia Boorstin has the numbers. First report we get from this company as a public company. First quarter ever, Reddit reporting faster than expected revenue growth. Revenue beat $243 million in quarterly revenue. That's $30 million more than analysts anticipated. This on a loss of $8.19 per share. So that translates to adjusted EBITDA of a positive $10 million, where the street account estimate had been for a loss of $24 million.

So a surprise beat there. Second quarter guidance also in a stronger than expected range of $240 million to $255 million versus the $224 million estimate. And daily active users a beat. Daily active uniques, excuse me, $82.7 million. Daily active uniques versus the $76.6 million that analysts had estimated. Gross margin also at 88.6%, which the company says was an improvement of 500 basis points from the prior year. Now, average revenue per user is stronger than expected, $2.94, beating the $2.80 estimated. Now, the company also announced a new board member, Sarah Farrell. She's co-founder and managing partner of Waygrove Partnership. Now, the company also announced a new board member, Sarah Farrell. She's co-founder and managing partner of Waygrove Partnership. Now, she had been a board observer since 2021. And with her addition, she expands the board to eight directors. So she's not replacing anyone.

Now, Reddit CEO Steve Huffman will be on Mad Money tonight with our colleague Jim Kramer. Back over to you. All right, Julia Boorstin, thank you. Phil, I'm not necessarily going to ask you about Reddit directly, although I could. It's up 16 percent right now. First time we're getting a report as a public company. It does speak to the fact that the IPO market has been slowly, the pipeline has been slowly thawing here. We're starting to get more of these names. But going back to your risk on comments from before, the fact that you have a company that's

still unprofitable is up double digit percentages and felt comfortable going public in this market. Yeah. And Morgan, I think this goes back to the rate volatility story. I think there were two things that companies were really afraid of last year, inflation, and they were afraid of economic downturn. And one of the things we picked up on in this Q1 earnings season is that those phrases are way down. Now, inflation might be sticky, fine, but it's not nine anymore. It's closer to three, three and a half, something like that. And these are things that companies could deal with. But back to your point, IPO market and interest rate volatility, those things go hand in hand.

And interest rate volatility, we think, is one of the biggest drivers to our risk on view. Okay. Meantime, EA earnings are also out. Steve Kovach has those numbers. Stock down in overtime initially. Steve? Yeah, John, down about 4.5%, 5% on these results. Part of that's a weak guidance here. But let's go over the numbers.

EPS is $0.67. That's on a gap basis. We're not comparing that to estimates. But revenue, we are comparing. And this year, $1.67 billion. Street was looking for $1.77 billion. And then guidance, like I said, a little weak. This is for their fiscal year, which is starting now in the current quarter

we're in. They see Q1 revenues of between $1.15 and $1.25 billion. Street was looking for $1.44 billion. And then for the full fiscal year, they're looking at $7.3 to $7.7 billion, a little below the $7.76 billion the street was looking at for the full fiscal year. And that, of course, is coming ahead of an anticipated big launch of a new NCAA football game this summer, that franchise returning back to Electronic Arts. So a little lighter than expected guidance, dragging shares down 4.25%, John. All right, Steve, thanks. Arista Network's earnings out as well.

Christina Partsenevelis has those. Christina. Well, it's a beat on the top and bottom line for the quarter, $1.99 on $1.57 billion. Even the Q2 revenue guidance actually came out a little bit higher than what the street was anticipating, $1.62 to $1.65 billion. Keep in mind, this is a company that makes data center switches, and there's often compared to NVIDIA's InfiniBand, you know, versus Arista's Ethernet. So there's going to be some, I guess, hope on the call that we're going to hear more about that. But this earnings report, there's really no color thus far, other than we're seeing the Q2 revenue guide a little bit higher. But the stock, though, it's moving around the place, down 1%.

All right. Christina Parts-Naveles, thank you. Adam, I'll go back to you because we've seen the bar raised very high, very high expectations around many of these AI related companies, whether it is Arista Networks right now and the report we just got. And of course, we're going to have to wait and see what kind of color we get on the conference call or even 24 hours ago, Palantir, which put up an incredibly strong report with ongoing growth in the commercial part of its business and yet fell shy of expectations despite the beaten race. Yeah, there's definitely some evidence, especially today, of at least fatigue in certain of these momentum names. The Palantir example that you said also, you know, on CNBC

this morning, you had the drunken Miller comments about how he book profits in NVIDIA after a very strong run. So I think there's a little bit of hesitation in some of these AI lever tech names that have had very big runs. You know, we're kind of we're done essentially with calendar Q1 earnings. And so it's the April 1 season that gets underway next week. And NVIDIA is probably the most prominent April 1 report. And we'll get that in a couple of weeks. And then you have a bunch of really important AI product events over the coming weeks, including the Apple Worldwide Developer Conference, the Microsoft Build Conference.

So there are going to be a lot of very important AI catalysts throughout May and into June that's going to be very important for a lot of these stocks. But in the near term, certainly some signs of fatigue. All right. Adam Crisafulli and Phil Campreale. Thanks for kicking off the hour with us with a mixed picture of four stocks. The S&P eking out a gain of about seven points, 51.87.

Well, Rivian earnings are out. Phil LeBeau has the numbers. Hi, Phil. Morgan, Rivian under a little bit of pressure after the company posted a loss of $1.48 a share on a revenue beat of $1.2 billion, just a little better than expected. The adjusted EBITDA loss of $798 million in the first quarter is an improvement over the first quarter of last year when they lost more than $1 billion. On a per vehicle basis, Rivian lost almost $39,000, $38,764 per vehicle in the first quarter, ending the quarter with $7.8 billion in liquidity. The guidance is what so many people are going to be focused on. They are reaffirming their guidance for a Q4 modest gross profit, 2024 adjusted EBITDA guidance of $2.7 billion, and reaffirming its production guidance of building 57,000 vehicles this year. And the CapEx guide coming

down. Remember, they reported earlier this in the first quarter that they were going to be putting aside the money that they were going to put into georgia plant they're now going to move the r2 into illinois that's allowing them to save 550 million dollars in capex bringing the capex guidance for the full year to 1.2 billion dollars guys i'll send it back to you all right right, Phil, both things. I was trying to translate that $550 million into cars and how many cars given the losses there. Phil, both things. Bank stocks have been big outperformers of late with the KBE Bank Index up around 6% so far this month. That's nearly doubling the broader S&P 500. Now, Mike Santoli is here with

a look at that space. Mike. Yeah, John, and that matches up perfectly with since the Fed meeting last week, because that was on May 1st. And that was a catalyst for this latest little spurt in bank stocks. Here's the S&P Bank's ETF. It's a five year look because we're sort of bumping above these levels that, you know, represented sort of the pre-COVID peak right there, some level of normalcy. And you've seen basically gone positive year to date as well. So the idea of lower bond yields.

Also, yesterday's senior loan officer survey showed still somewhat tighter conditions in terms of lending, but perhaps some thawing out there as yields come down. And just the overall economy seeming to have better prospects for a soft landing. You can see they're still well below the highs from before the Fed started to hike back in 2022. Now, take a look at banks relative to tech. On a one-year basis, banks now overtook the tech ETF, the XLK. Now, one year sort of flatters bank performance because you remember Silicon Valley Bank went down in March of last year. And so you had a huge downturn in the bank, especially the regionals. And this is coming off of that base. But it does show some kind of broadening out of leadership of the market right now and generally a friendly macro message when bank stocks and other financials have sort of participating, at least in leadership. Yeah. And you mentioned the regionals. The KRE is right up there near

50 right now compared to the WCLD, the Wisdom Tree Clock Computing Index, which is down closer to 30. But a lot of those stocks are smaller and higher for longer for those, you know, small. We talk about big tech a lot, but little tech has been suffering relative to banks in this environment. Definitely. You know, little tech could also be known as, you know, subscale or maybe not quite sustainably profitable tech. So, yeah, it has been a more discerning market, especially in the growthier areas right now. You know, it's a question of whether this persists.

That five-year chart of the KBE shows you there have been a lot of false starts along the way. We still, to some degree, I think people feel as if there are late cycle aspects to the macro economy. So you have to be mindful of just exactly how things are going to turn from here. Well, you're always mindful, Mike Santoli. Thank you for keeping us that way. Well, when we come back, Reddit surging after its first earnings report as a public company with strong revenue, guidance, and daily active uniques. I'm going to break it all down with an analyst who says the stock deserves a premium valuation.

Overtime's back in two. Welcome back to Overtime. Dutch Bros earnings are out. Kate Rogers has the numbers for us. Hi, Kate. Hey there, Morgan. And as you can see, that stock is higher by just under 10 percent right now. Very strong Q1 here. EPS nine cents adjusted. That is better than the two cents that the street was looking for. Revenues 275 million, also better than the 256 million analysts were looking for. Q1 performance headline here, 10 percent system, same shop sales growth, the company says, highest quarter since Q4 of 2021. Traffic trajectory was also encouraging, improving for two consecutive quarters, the company said. They also said average unit volumes expanded to 2 million. That's the highest on record.

And they also announced a partnership with Olo so that they can use order and pay to boost their operational efficiency at the drive-thru and streamline the ordering and payment experience for guests, the company says. Very different quarter from another coffee player we just heard from last week in Starbucks, which saw declining traffic and declining same-store sales, particularly in the U.S. Back over to you guys. Yeah, 39% top-line growth. You've got to thank some of these folks that haven't been going to Starbucks. Maybe they're going to Dutch Bros. We'll see.

Kate Rogers, thank you. Well, shares of Reddit are rocketing higher in overtime after the company reported a beat on revenue in their first ever earnings report since going public in March. Strong guide, user metrics as well. Joining us now to discuss is Rohit Kulkarni, senior research analyst at Roth MKM. Hey, good to have you. So about four weeks ago, you initiated Reddit's buy was a buy when it was at 40. Price target at 50 bucks. Here we are in overtime with the stock at 57. What do you need to hear from management to convince you it's still a buy? I think it's still a buy. I think there are a ton of catalysts ahead. I think they are staying prudent and conservative on the guide.

The number of users that they are adding adding accelerating user growth in every quarter over the last four quarters that's the best leading indicator for any social media platform and this company is adding more users than any other platform at their size and scale remember like this company has more users than Pinterest and more users than Twitter in the US that's where they make 80, 85% of the revenues. So still, it has a long way to go in terms of monetization. And plus, they have the AI deals, the one with Google and probably more with others. So we like it.

We like how they are executing. And I think they are being prudently conservative. How much are they dependent on those AI deals really panning out and being a consistent and growing revenue stream for them versus the traditional, more traditional advertising-based models of social media companies? I think over longer term, they still will have maybe 80-20 split. Right now, they are like at 95-5. Longer term, I think majority of the revenues will still come from advertising. Remember, the AI deals are just going to be margin accretive, and they're going to open up new types of customers

that probably are not going to be advertising on Reddit as much, for example, Google. So it's a completely new set of customers, better margins, and probably completely incremental revenues, no cannibalization. So I feel it's a perfect complementary revenue stream. Historically, Twitter had that, but it was a declining revenue stream in terms of data and licensing. This is something with the AI tailwind we have, it's going to be increasing and growing thicker, but probably 20 percent at scale. OK. Net loss driven by IPO expenses. First profitable Q1 on an adjusted EBITDA basis. Also reporting positive free cash flow of twenty nine point two million dollars.

How does this speak to the path to profitability? Are they moving quicker than everyone had been expecting? I would say significantly quicker, Morgan. I think six months back, if anyone would have predicted, I think this company would have been gap profitable by end of 24 would be a positive surprise. What they're doing right now with the way they're adding more users, increasing monetization, and just showing that they're just getting started with monetization is a significant leapfrog in profitability and and and

remember the profitability is also coming from accelerating revenue growth so it's it's not at cutting cost and cutting corners and reducing kind of growth related spend it's more from upside to revenues more from better execution so I feel I feel more bullish on this name, first print out of the gate and significantly exceeded expectations. Okay. Rohit Kulkarni, thanks for joining us. With shares of Reddit up 16.5% right now. Don't miss Jim Cramer's exclusive interview with Reddit CEO tonight at 6 p.m. Eastern on Mad Money. When we come back, the CEO of $125 billion industrial giant Honeywell tells us how his company is using AI and his big prediction about the future of aviation.

And much more on the rest of today's earnings movers in a very busy overtime session. We'll be right back. Welcome back to Overtime. Earlier today, I sat down exclusively with Vimal Kapoor, the CEO of Honeywell, for a wide-ranging discussion about the industrial blue chips portfolio and how, at a time when investors are keenly focused on the AI benefits for the industrial sector, how Honeywell is positioned for this new era. You know, the AI, when we talk about word generative AI, by definition, it's probability based. It means it's directionally correct. It may not be entirely accurate. But in context of industrial world, you cannot be directionally correct. You have to be very precise. So when we

make a recommendation to somebody to use an equipment or a machine or run it in a certain manner, we have to be damn sure about it. And that makes it more deterministic versus probability-based. And that's where our domain knowledge comes in to use a lot of large language model tools, but in context of our applications. And that's what really excites me of use of AI in the industrial world. So at a time where investors are awakening to the AI potential benefits within the industrial sector, how much of this is internal applications at Honeywell and realizing the productivity within the company and across the businesses internally? How much of this is the offerings and the evolution of offerings to those

customers? So it's both. We are a huge adopter of AI ourselves internally because if you have to sell it, I'd rather use it myself. And I personally do a lot of it. I use a lot of co-pilot tools to draft my emails, for example, so that you practice and really see what it is. But we are using it in Honeywell in product development, product testing, a lot of customer service work, as you had heard from many other people. But the real thing that excites me is how we take it to our customers and making the

use cases across the world using our IoT platform, which we call Honeywell Forge, is a massive opportunity for us. Kapoor, who marks a year as CEO next month, has outlined three megatrends that he's aligning the Honeywell portfolio around. Automation, which speaks to sensors, AI, software, aviation, and energy transition, which includes solar and wind, but also green molecules and green electrons. Regulation is going to play an important role. That's a combination of carbon tax or tax rebates because these technologies are in the nascent stage. So returns are relatively lower. So some support is required to this scale and become economically viable.

No different from where wind and solar was in 2005. I mean if you retract back 20 years back they didn't had enough returns and some help was required to scale them which is not necessary today and we are in some of the green molecules in the same phase where our customers want to do it. There's absolute demand for it but there is a some gap between the economic returns. So either regulation comes where the demand becomes firm or but there's some gap between the economic returns. So either regulation comes, where the demand becomes firm, or if that's not the case, then some tax support or tax credit, something like that. And IRA does, you know, Inflation Reduction Act, which happened a couple

of years back, that does support in that, but more things like these needs to get done, not only in the U.S., but all over the world. Which takes us to the future of aviation, where that's headed. Yeah. So future of, but all over the world. Which takes us to the future of aviation and where that's headed. Yeah. So future of aviation is all about electrification. I don't think in our lifecycle we'll see a battery-operated plane.

I mean, it's a nice thing to talk about. But immediately, what excites us is urban air mobility, or eVTOLs. I think it's the first stage of electrification of aerospace industry and Honeywell is actively playing in that. Really excites me on possibilities to be in New York and not get stuck in traffic. How quickly this is going to become feasible. I think all indications are 27, 28 is a time when the rule framing can happen. They can be certified and these can be launched. And I believe, you know, it's like the way iPhones change our lives 15 years back.

We didn't imagine what it will do to us. This is something very similar because it's a different way of life, specifically in crowded cities. It's going to have a huge implication on the social fiber and the social infrastructure. An iPhone moment. Well, he sees eVTOL as a fourth future revenue stream for Honeywell's aerospace unit, which has been leading growth for the company overall. It was up 18% last quarter and broad-based from commercial to defense and space in terms of those sales. That's a long cycle business, though, for Honeywell. And it's the short cycle ones like

warehouse automation that have been challenged. That's the reason, according to some analysts, the stock has lagged. Kapoor says those are inflecting, with the second half of 2024 expected to show more improvement. I would say I've been working for 35 years. The amount of disjointed economic cycle it is probably is a bit unique factor. Some industry may be growing in one part of the world, but maybe shrinking in other part of the world. And broadly speaking, long cycle is performing consistently, whether it's in energy, whether it's in aerospace, process industry, they're performing consistently well across the world. Short cycle depends on inventory stocking, when it happened at a different part of the world, economic cycle for a particular country. And it's very disjointed at this point of time. But overall, we are improving every quarter.

And I see year progressing. Honeywell performance getting better. I also asked about M&A, given the $5 billion deal for carrier security business. Kapoor is acquisitive. And the company's focused on these three megatrends. So perhaps expect more bolt-on type acquisitions or acquisitions that are focused on those trends. Lastly, asked about Honeywell's quantum computing business, Quantinium. It's a five billion dollar valuation. 18 month timeline is what he laid out to establish the commercial capability and then, quote, absolutely take it public.

Assuming that happens so you can catch the entire interview and there is so much more to our discussion on CNBC.com or by scanning that QR code on your screen, following us on LinkedIn, where we post a ton of exclusive content, including the rest of this discussion with Honeywell CEO. All right. A lot of great stuff to unpack. Now let's get back to Julia Boorstin with more on Reddit. Julia. John, I just spoke to Reddit CEO Steve Huffman, and I asked him about the stronger than expected advertising growth and guidance for revenue for the next quarter. He said that their ad growth indicates that their ads product is working and they are delivering more results for advertisers. He also did say, though, that like some of the other players that we've been reporting on this quarter, that they have benefited from improvements in the macro

conditions. So broader improvements in digital advertising. I also asked him about the user growth that was better than expected. He said they have seen consistent growth over the last 12 months, and that is a result of the fact that they've made the product better and easier to use. He saw this quarter as a milestone in that their daily users crossed 80 million for the first time. One other interesting note here, since they talked about licensing streams and developing that in their S1, he said that they are going to be careful about who they license to. It is still very early days as they think about licensing the Reddit data for AI. But he said that he noted that the category that the licensing revenue is in generated just about $20 million for the quarter. So still very early days.

John? All right. Julia Borsten, thank you. And coming up next, Mike Santoli is back with a look at something that's happening in the relationship between stocks and bonds that hasn't occurred in decades and why it could put even more focus on next week's inflation data. And take a look at Sonos pulling back sharply after a miss on the bottom line with a loss of 56 cents per share versus estimates of a loss for 46 cents per share. Sonos is down about eight and a half percent%. Stay with us. Welcome back to Overtime. Let's get back to Mike Santoli with a look at the relationship between stocks and bonds. Mike. Yes, Morgan, and it really has shifted in the last couple of years. Take a look at this chart from Barclays. It's the one-year

correlation between the S&P 500 and the 10-year Treasury yield. So it really quantifies what we've noticed in the last couple of years, which is yields up has meant generally stocks down. This takes us back to the mid to late 90s for having this much of a negative relationship. But by the way, for most of the 80s and 90s, this is the way it was. When inflation was the big threat, higher yields meant either the Fed was going to have to get tougher or inflation was getting out of control. Lower yields meant more accommodation, whereas in this period, in the post-global financial crisis especially, higher yields meant better growth. So this is where we are. And again, it's a one-year correlation, and it has made the stock market

acutely sensitive to inflation reports. We get two of them next week. But look at this chart here. This is the returns over the last three years. VTI is the total stock market. That's 60-40 stocks, bonds. That's the total bond market. So stocks done pretty well, up 16% or so, 17% total. You see that the 60-40 is basically flat. You have income and dividends, 6% on top of that.

Bonds, really weak. One thing I just want to highlight, this up, this down, bonds. So you're trying to detach from higher yields. And as we can see, four and a half percent 10-year treasury yields, John, has not kept the stock market from being up near its high. So there's some hope we can get some new equilibrium here without being so acutely sensitive to every tick and yield. We'll see. I mean, Phil Camporelli is still all in on stocks. We'll see. Nothing wrong with that necessarily. We'll see. All right. Up next, we're going to run through some of the other overtime earnings

movers that you need to know about as the analyst calls from Reddit, EA, and Lyft get set to kick off. And Disney, the biggest drag on the Dow today, down, whoa, 9.5% after second quarter revenue estimates disappointed, issuing disappointing guidance for its streaming and parks business. Overtime will be right back. Welcome back to Overtime. Kindrel moving higher, up about 6%. The IT services provider spun out from IBM, seeing a loss in the quarter, but less than expected. 20 cent loss versus 22 cents expected.

And hiked the growth expectations for fiscal year 2025, which just started last month. Toast also moving higher. Maybe a nice medium brown. Yeah, up 3.5%. Larger than expected loss in Q1, but investors cheering adjusted EBITDA guidance that was ahead of analyst estimates and margin expansion, Morgan. All right. Well, the Fed just reporting that consumer credit increased less than expected in March.

Up next, the CEO of credit reporting agency TransUnion on whether he's seeing signs of stress from consumers. Stay with us. Welcome back to Overtime. More clues on the consumer rolling in this hour. Lyft getting a lift after it saw rides and gross bookings up more than 20 percent year over year. Dutch Bros also jumping after reporting same-store sales growth of 10%, raising full-year guidance. Quite a different story from what we saw last week from Starbucks. Shares sunk after posting weak traffic in its stores. Meantime, Disney fell today after noting Disneyland Resort in California saw year-over-year profit decline.

So, mixed bag from corporate results, but what is the credit world signaling? Joining us now, TransUnion's from TransUnion's 2024 Financial Services Summit in Las Vegas is TransUnion CEO Chris Cartwright. Chris, good to see you. I want to know, you point out here, serious delinquencies this year are far below the all-time high levels of 15 years ago. But how does the velocity of delinquencies look? Things seemed so good for the consumer for quite a while, and now maybe at least at some levels, the consumer getting into trouble? John, good to see you. Good to be back. And yeah, I think that's a good way to open the discussion in that the 2021 period was an especially strong period in consumer finance across all different categories. It had a lot to do with all of the government support of consumers during the

pandemic, as well as debt forbearance. So when you compare current market credit metrics to that very strong, kind of unnaturally strong period, they have deteriorated materially. The net, though, is we're still seeing a lot of resilience from consumers, despite the fact that credit balances have increased and they're servicing debt at a much higher interest cost. And Chris, how much noise do you think is in the data given that 15 years ago we didn't have buy now, pay later, but now we do. And I'm guessing that you don't have as much insight into how some consumers are levered there as you might want. That's another good point. You know, BNPL is a great financial innovation,

and we are currently reporting buy now, pay later transactions on consumer credit statements. However, not all lenders are incorporating that into their risk models. And so it is an additional variable that could account for some of the heightened delinquencies that we've seen in recent quarters. But I think your opening point is heightened delinquencies that we've seen in recent quarters. But I think your opening point is that delinquencies in a historic context are still solid. And our overall credit analytics that we do at TransUnion show that consumers are pretty much performing where they were in the first quarter of 2019, which was considered a strong and stable period in consumer finance.

So you just used the word solid. And I wonder, what would change that prognosis? At what point would delinquencies or behavior that you're seeing from the consumers, and I ask this 24 hours after we got the Fed's latest SLU's report, which showed weaker demand for all residential real estate loans as well as auto and credit card loans. At what point would you say, OK, we're really starting to we're starting to see some signs of concern or stress here? I think the key metric to look at is consumer employment and real wage gains. And, you know, unemployment remains really low. And working class consumers in particular have enjoyed nice pay rises, pay rises even in excess of the rate of inflation. If that were to change, it's going to put more stress on household finance. That said, there are segments of the consumer base, particularly

younger consumers who've taken on more debt, card debt in particular. And with the increase in interest rates, they're paying up to 75% more on a monthly basis to service their card debt. That's a concern that we got to keep an eye on going forward. I don't think we talk enough about home equity. There's a most recent report just yesterday, it looks like from ICE, that U.S. mortgage holders post record levels of home equity. How powerful has that been for

consumers to be able to tap into their home value at a time like now when we are still dealing with some stickiness around inflation and you do have many consumers who do have mortgages that are still very low on their homes? Again, you know, home equity or home prices remain very high, and the affordability index on homes is, you know, less than we would like. That has created an opportunity for consumers to tap the HELOC market. That's a smart and cost-effective way to get credit if you're fortunate enough to have equity, and a lot of consumers are. The mortgage market overall, we know, continues to be, you know, very stressed. And that's a function both of the fact that home prices are high and mortgage rates are high. And, you know, mortgage volumes are about one quarter of where they were four years ago. And so as we head into the back half of the year, Q4 is pretty important,

but it's a weird year. We got an election going on and everything. What are the most important metrics to watch? It sounds like employment, perhaps even more than usual, is a key here. Yeah, certainly a weird year. And we've had a lot of weird in the credit markets since we hit the 2020s. Again, I think the key metric is consumers that have jobs typically pay their debt. And even though delinquencies have increased, overall, 98% of consumers are paying their debt on time each month. If we were to see a material uptick in unemployment or a diminishment of consumer purchasing power because of inflation, if that were to persist or even grow up, that would be a concern, I think,

for the credit markets. Chris Cartwright, CEO of TransUnion, thanks so much for joining us. Pleasure. Well, tomorrow will be another massive hour of earnings on overtime. Up next, we've got the key names investors will be focusing on. And don't you dare forget, you can catch us on the go, yes, by running fast. No, by following the Closing Bell Overtime Podcast on your favorite podcast app. We'll be right back. Welcome back. Tomorrow is going to be another busy day of earnings. In the morning, we're going to hear from TripAdvisor, which was supposed to report tonight but pushed their report back. We're also going to get Affirm, Shopify and Uber before the bell.

And then right here on Overtime, we're expecting results from Arm, AMC, Airbnb, Robinhood, and many more. FedSpeak will also be a hot topic, too. You've got Fed Vice Chair Philip Jefferson, Boston Fed President Susan Collins, and Governor Lisa Cook all speaking throughout the day tomorrow. But wait, there's more. I will be in Las Vegas at ServiceNow's Knowledge 2024 event. ServiceNow has been aggressive about rolling out AI-enabled applications to fuel growth and about being a platform where customers can build

industry-specific models. We're going to have ServiceNow CEO Bill McDermott with us here on Overtime and hear from NVIDIA's CEO Jensen Huang from Vegas as well. Yeah, don't want to miss that. And as if it's not enough, we're also going to be speaking with J.P. Morgan, Global Chairman of Investment Banking, Jennifer Nason on the outlook for dealmaking in the IPO market and more. So it's going to be a jam-packed hour. That's going to be a big show. Yeah. We've got a little time, which gives me a chance to talk about Apple's iPad event today.

Isn't it amazing? We haven't talked about it up until this point. I know. M4 chips. And for investors, I think the chips are a big piece of it here because early on for the iPhone, they designed their own sort of vertically integrated chips. Now they're showing off what sort of AI features that chip allows and doing it partly with Final Cut Pro, right, multicam stuff.

But really, I mean, I like to produce a little music in my spare time. You know, my son, my oldest son, also likes to do that in Logic Pro. And there's this AI feature now where if you have a recording, it'll separate out the bass, the drums, the vocals from the rest of the instruments and sort of allow you to sample that way. That's a really interesting use of AI. That is a really interesting use of AI. It's going to raise questions about, you know, creative process and make that much more productive, I would imagine, as well. So one of the things I'm watching is, is this disinflation narrative starting to pick up pace again? I mean, certainly the market seems like it is. We're going to get some of those

key inflation reports next week. But in the meantime, Disney's acknowledgement that travel is starting to cool and normalize after this post-pandemic boom, arguably encouraging on that front. You also had the latest Mannheim index use cars staying firmly in deflationary territory last month. Those are just two readings today. So that's one to continue to watch as we do have that debate as well. And as we do continue to see companies reporting earnings and telling really a mixed picture in terms of what a higher for longer interest rate environment looks like for them and for their businesses. Wonder if it's unique to Disney because booking was pretty strong. Lyft was pretty strong. So maybe people not going as far as Orlando, but still going out.

Yeah. Premium tier for Lyft, I thought was interesting, too. It sort of speaks to this bifurcation in the consumer. All right, well, that's going to do it for us here at Overtime. Fast Money starts now.