Closing Bell - Closing Bell Overtime: Interactive Brokers Founder On Retail Activity; Value Investor Bill Nygren Gives Top Picks 4/16/24

Episode Date: April 16, 2024

A volatile session for stocks as investors weigh more comments from Fed Chair Jay Powell and tensions in the Middle East. Earnings from United, Interactive Brokers and JB Hunt. Interactive Brokers founder Thomas Peterffy on the latest quarter and what it means for the broader economy. Oakmark’s Bill Nygren on his top value picks. Plus, Jon Alterman, Center for Strategic and International Studies Director of Middle East Program, on the latest signals from Israel and Iran.

Well, another choppy session as Fed Chair Powell injects uncertainty to the rate path. The Dow, though, snapping a six-day losing streak. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And earnings from big banks and UnitedHealth driving the early action today. And just minutes from now, we're going to get results from United Airlines, Interactive Brokers, and J.B. Hunt. We will bring you those numbers, plus an exclusive interview with Interactive Brokers chairman Thomas Pederphy before his company's earnings call. And noted value investor Bill Nygren opens up his playbook with three picks to ride out this bout of volatility in the market.

As we await earnings, let's get to today's action with our market power panel. Barbara Duran of BDA Capital and Terry Wiseman of Macquarie Group. Barb, I'll start with you. Mixed session for stocks. The S&P finishing slightly lower. The Nasdaq as well. The Dow, though, eking out a bit of a gain here. We've got the push and pull between all of the Fed speak, including Powell, you got the backup on rates, but you've also had the beginning of earnings. And at least even just looking at what we've gotten so far this morning from some of the big health care names and some of the financials, it hasn't been as bad as feared. What drives this market from here? Well, I think it will. I think it will continue to be earnings. I think what we heard from Powell today was really a little bit more jawboning. What I heard basically is saying, hey, the economy is

so strong, we're not in a hurry to cut rates. Yes, you know, we're not sure what's happening with inflation. But if you really look at what is behind the recent CPI. We've already got our first earnings report. So hold on just a moment. Phil LeBeau has United for us. So we're just going to get those numbers as quick as we can here. Phil. Morgan, take a look at shares United. The reason they're moving higher, this is a beat by a big, big margin in terms of a smaller than expected loss for the first quarter. United losing 15 cents a share in the first quarter. The street was expecting a loss of 57 cents a share. Revenue slightly better than expected at $12.539 billion. Revenue per seat mile and cost per seat mile excluding fuel, that's where they made the big move in terms of doing

better than the street. The cost, the revenue per seat mile up 0.6% compared to the first quarter of last year. Cost per seat mile up 4.7% versus Q1 of 23. Then there's the guidance for Q2. United expecting to earn $375 to $425 a share. The street's at $376, so that's above what the street's expecting. The full year guidance remains the same of earning between $9 and $11 a share. A couple of important notes regarding the fleet. We knew that United was in the market to get Airbus A321s because they are essentially not counting on getting the 737 MAX 10s. They are going to be leasing 35 Airbus A321 Neos. Those will enter into the fleet next year and in 2026. United now expects delivery, however, of 61 narrowbody planes this year.

To give this some perspective in terms of how they're going to have fewer aircraft, at the beginning of this year, they were expecting 101 new narrowbody planes. So that's basically been cut by a third. Don't forget tomorrow morning on Squawk Box, we will be talking with United CEO Scott Kirby, not just about these better than expected numbers for the first quarter and much better than the street was expecting, but this leasing of Airbus A321 Neos, as well as their plans for their fleet, since they were going to have fewer aircraft, Morgan. Lots to discuss tomorrow morning. Yeah, it's a big deal. Stocks up about 4% or better. Phil will continue to watch that. Of course, look forward to that interview. Now, Interactive Brokers results are out as well.

Kate Rooney has those numbers. Kate. So a beat on the top and bottom line here for Interactive Brokers. The company also upping its dividend. We'll start with that adjusted EPS number, $1.64. That was a beat by a penny here. Adjusted revenues coming in at $1.22 billion, also stronger than expected. I mentioned that dividend increase. Looks like they are raising the cash dividend from $0.10 per share to $0.25 per share. And then we've got some growth numbers here as well. It looks like this was driven by pretty strong customer account growth, up 25%, $2.75 million. Darts, daily active revenue trades, that's sort of a metric of trading activity, up 14 percent. Customer credits, up 9 percent.

Margin loans also increased 30 percent to 51 billion. You can see shares here slightly lower after hours, but a beat for inactive brokers. John and Morgan, back over to you. All right. Kate Rooney, thank you. Shares, as you mentioned, marginally, fractionally lower, but we've got Thomas Pederphy, the founder and chairman, joining us here in just a few more moments before he dials into the conference call with Wall Street. All right, Barb, I'm going back to you. I know I just cut you off basically right

off the top of this discussion, but now that we've gotten two more earnings reports, in particular, when I look at United and the fact that they have fewer aircraft that are joining the fleet this year, this to me sounds like at a time where the market's so focused on inflation and how sticky it is right now. This sounds like the type of thing that could continue to at least add a floor, if you will, to airline pricing, which is part of that services piece of the inflation that's been so sticky. Yeah, no, I think you're right. I think what you're seeing, obviously, their demand is very strong because you're seeing continued rebound of the business traveler. It's probably back to like 96, 97 percent. The domestic leisure travel is strong and international travel strong. I mean, X, probably China. You know, but I think you're just going to continue. And that'll be interesting to see

what their guidance is, because sounds like, you know, that's a very similar path to Delta. And as we know, a week or two ago, Delta reported very good numbers and had a really strong guidance going forward. So it looks like that can continue. Consumer is still allocating their their dollars toward leisure, travel, entertainment, restaurants, this sort of thing. All right. Now, Terry, were you surprised at all by Fed Chair Powell's language today when some folks thought he was just going to be talking about Canada? But he talked about, hey, higher for longer, no immediate reason to cut. And there was some reaction to that. But how does that factor into how you're looking at bond yields and where it's safe to be?

Yeah, well, first, thanks, John. Thanks, John, for the questions. It's a great one. What happened here with Powell? Well, he had to join effectively the other 18 Fed officials who have not been nearly as dovish as Powell was on March 20th. I think he's coming to the realization that, yes, there is a problem to some extent with inflation. But more importantly, he was an outlier among the 19 Fed officials and probably an outlier among the FOMC as well. Based on the speeches that were given by the Fed officials over the last two and a half weeks and continuing into this week, they certainly did not follow his his lead into the into dovishness and i think he just didn't want to be that outlier anymore i think it was to some extent um you know unusual that he'd be the only one

granted he's the chairman but to be the only one to to to argue in favor and to militate in favor rate cuts uh seemed unusual and out of step having said Having said that, he didn't give the market anything they didn't already know, which is that rates are not going to go down nearly as fast as the market had previously thought, let's say, back a month ago. And I think the implication here is that yields are going to creep higher across the curve in the U.S. Remember, the 10-year yield was as high as 5% back in the fourth quarter of last year. And that was not at a time when the economy was not nearly looking to be as strong and inflation was on the way down. If we now have a situation where the economy is doing well and inflation seems to be trending higher, why not see 5% yields again on the 10-year? I think that's

conceivable over the next few weeks. And when that happens, I think there will be multiple pressure on multiples on the stock market. And we could see stocks sink lower, despite what the good news might be on the earnings side. I am curious, though, Terry, I mean, it sounds like you're a bond bear here. Does the geopolitical landscape change that investing thesis in any way, depending on how things play out in the Middle East here in the coming hours, in the coming days? I think if you are long bonds, if you're a bond bull as opposed to a bond bear, you want to see two things, really two extremes on the axis of war and peace. You want to see total peace, which is good because it's disinflationary,

or you want to see total war, which will cause because it's disinflationary, or you want to see total war, which will cause a massive flight to quality outside of stocks, outside of commodities, and into the bond market, into U.S. Treasury bonds specifically. So you would have a bond rally under total war, and you'd have a bond rally in peacetime as well. Unfortunately, we have neither right now. We have a situation where we're stuck with shadow wars and proxy wars and wars on borders, but not necessarily including the superpowers. I think that situation is a situation that just promotes a lot of uncertainty, puts a geopolitical risk premium upward on things like oil. It keeps inflation higher than otherwise would be. It keeps insurance rates higher than otherwise would be.

It's not a good situation if you're holding bonds. Okay. Thanks for joining us. To kick off the hour here, Barbara Duran and Terry Wiseman. With a mixed picture today, four stocks and treasury yields touching fresh five-month highs. Well, J.B. Hunt earnings are out. Kate Rogers has the numbers. Hey, Kate.

Morgan, hi. A miss on the top and bottom lines for the transportation company. Earnings amiss here, $1.22 per share for Q1 compared to estimates of $1.52. Revenues also amiss, $2.94 billion lower than the $3.12 billion that analysts were looking for for the quarter. Its intermodal revenues also amiss, $1.4 billion lower than the $1.51 billion expected. Demand also flat here. Domestic, though weaker than expected in terms of demand. Also, the company's pricing, its revenue per load down 9% in the quarter. And as you can see, the stock is down by more than 4% now, guys. Back over to you. Yeah. Kate, thanks. And now let's bring in senior markets commentator Mike Santoli for a look at the key levels to watch as the market remains on shaky footing. Mike?

Yeah, a little bit, John. We've kind of cracked through the sort of easiest downside target, still only down 4 percent in the S&P 500 from a record high in about two, two and a half weeks time. But this is a two year chart. The reason I I wanted to put this one up here. This is the ultimate low in October 2022 for that cyclical bear market that we had. And, you know, as the rally got going in the early part of of this year off the the October of 2023, I was sort of pointing to this 50 50 area. If you kind of looked at the trend from back then, from just before the low, it brought you there. There was a lot of technical folks who were saying that seems like a pretty good upside objective. Now, we obviously overshot it by about 200 S&P points, so we'll call it 4% or thereabouts. Not to say that that was unjustified, but at least we've kind of come

back to this level. And now we're sort of seeing if it's going to be relevant at all. Another one I'm looking at is about 1% down from here. That was February 21st into the 22nd of this year. It was the NVIDIA aftermarket earnings pop. Next day, the NASDAQ was up 3%. NVIDIA was up 100 bucks. And the overall market got another burst higher. And that sort of seems to be something that is at least in sight of the downside right now.

Now, stocks and bonds, a big upturn in bond market volatility and a climb in yields has been coinciding with this recent backoff in stocks. This is the 60-40 portfolio, or proxy for it. It's an ETF. AOR is the symbol. And I just thought it was interesting that we've kind of gone back below the prior all-time peak, which was right at the market high in January of 2022. So this strategy is giving you nothing in two years. It's giving you almost nothing, like a percent and a half annualized total return over three years. But on the long term,

it's like a 7% or 8% earner, at least it has been historically. So if you believe in reversion to the mean, it looks like you got not the worst maybe entry point at this level. Okay, Mike, going back to that first chart, and you mentioned how much of a catalyst earnings were. We're back in the earnings cycle, right, four weeks away from the three-month anniversary of that NVIDIA run. What kind of setup is that for earnings to matter to where the charts lead us from here? I think it eventually is what does matter. The issue is, now remember, of course, NVIDIA itself is, what is it, on a January fiscal year. So it's out there in the future in terms of when it's going to report.

But I do think once we accumulate into next week a critical mass of earnings reports that give us a sense that the overall estimates are probably too low. I think FaxNet is suggesting we'll end up at about a 7% annualized rate. It's hard for the market to really fall apart in a lasting way when you do have that kind of fundamental support. Of course, assuming bond market calms down and we don't get any other cross-asset surprises like oil. Okay. Mike, we'll see you later this hour. Thank you. Coming up next, a breakdown of earnings from interactive brokers. And a look at where investors are putting their money to work right now.

When we're joined by the company's chairman, Thomas Petterfink. And later, we're going to talk to an analyst who's bullish on United Airlines about that company's quarter and why he says United and one other carrier pulling ahead of the pack. Overtime. Let's get another check on Interactive Brokers. It's about even slightly higher right now in Overtime after beating estimates on the top and bottom lines. Joining us now for an exclusive interview is Thomas Pederphy, founder and chairman at Interactive Brokers. Thomas, good to see you. So tell me, how much

did higher rates actually help? And I'm looking at net interest income here and also customers' willingness to get out there in risk and do some margin trading. Well, we had a terrific quarter. Our revenues are all-time high, over $1.2 billion, and our pre-tax profits are also at all-time high, at $879 million adjusted. It's up 22% year-on-year, and our pre-tax profit margins were 72%, which is quite high in the industry. It's probably the highest. So the earnings were $1.61 a share, adjusted at 1.64 cents. And so it was a fantastic quarter. As far as commission revenues, they were increased by seven percent and interest

revenues as you said increased by 17 percent so it's it's it's been a great quarter yeah but then specifically on the customer margin loans the credit balances what sort of behavior are you seeing from your customers when it comes to risk in these markets where people seem to be excited about the continuing strength in the economy and what that suggests for equity you know so so margin loans you may think of this as a warning sign. Margin loans were up 30 percent at $51.2 billion, which is an all-time high. That usually foretells a market that is going to slow down. That's what we're probably going to be seeing. Average number of trades were 2.35 million trades a day, which is very high. And customer accounts grew up 25 percent.

And customer equity was up 36 percent. But that is, of course, at the end of the quarter. So since that time, we have seen a downturn in the market. So these numbers right now would be somewhat lower. Okay. That's kind of exactly where I was going to go with you, Thomas. And that is the fact that you saw 25% growth in customer accounts. And you've seen strong growth for recent quarters in general. So I do wonder how sustainable it is at these levels. Yeah, but I'm not saying that customer account growth is going to go down. It probably will not. But as far as account equity, that fluctuates with the market. And margin loans usually go down, although this time,

even though the market has been down for several days this week and last week, margin loss hasn't really come down much, just barely. How are you thinking about the portfolio? I know you recently rolled out this high-touch prime brokerage and global outsource trading. You've been expanding your product offerings in general. You've also in the past talked about being acquisitive and the possibility of M&A. Is that still on the table? Well, that is on the table, but, you know, we don't see anything that a reasonable price yet. But should the market really go down, I think

opportunities will emerge. So if you have a lot of cash on your hands, that's always a good situation to be in. I want to go back to what you said about this level of margin trading being a bit toppy. How does this compare to what we saw a couple of years ago when the market was a bit toppy? Why do you think? What are the other signals that you're seeing that suggest to you that we might be in for a breather or a sustained dip in what equities do? So I generally get the feeling that the market is somewhat exhausted. Margin loans keep rising, and that's never a bullish sign. And so we saw that two years ago, margin loans hit a high, an all-time high, right before the market collapsed.

So that's a possibility. Although I think that on the long run, the market is going to rise because I think inflation is going to rise. And I don't think interest rates will come down much. They may come down a little bit, but I think 5% looking forward is probably a good guess. So no landing camp, it sounds like you're in? That's right. Definitely. Thomas Petterfy of Interactive Brokers, thanks for joining us on the heels of earnings.

Thank you very much, Morgan. Good to have you. We have a news alert on software company Autodesk that's moving lower after hours. Kate Rogers has the details. Hi, Kate. Hi there, Morgan. Yes, that stock is lower by just under 5% last I looked. So the company is out with a press release here regarding a current internal investigation by the audit committee of its board regarding its free cash flow and non-gap operating margin practices. Autodesk says it doesn't believe any of the matters that are currently under investigation affect previously

issued financial statements. It also adds it will not file a Form 10-K for the year ended January 31st, 2024, within the 15-day extension period given by the Nasdaq, and it expects to receive Nasdaq notice that it's not in compliance. Also adding it intends to take steps to regain compliance with NASDAQ's listing rules as soon as possible. And as you can see, that stock is lower by around 4.3 percent now, Morgan. Back over to you. OK, Kate Rogers, thank you. When we come back, value investor Bill Nygren tells us the three stocks he likes right now, including one energy name that's down double digits this year. We're going to get those picks and more when Overtime returns.

Welcome back to Overtime. It was another down day for stocks, for the S&P at least. The S&P posting its third negative session in a row. So where do you find value opportunities during this bout of volatility? Well, joining us now is Bill Nygren from Oakmark Funds. Bill, it's always great to have you on. And I think what's so interesting to me is the fact that amid geopolitical circumstances, amid stronger than expected economic data here in the U.S., we have seen this run up in oil. But energy stocks, while higher

and certainly performing well in terms of sectors for the S& seen this run up in oil, but energy stocks, while higher and certainly performing well in terms of sectors for the S&P this year, haven't had the same type of move. Do you still see value there? And if so, where? Well, thanks for having me, Morgan. Always nice to be on with you. Yeah, we see a lot of value in the energy area. People talk about the S&P 500 trading at a low 20s multiple of earnings. With oil at $85 a barrel or so now, most all of the domestic E&P companies sell at single-digit PE multiples. One that we especially like is APA, the old Apache Petroleum. This is a stock that is among a handful of names that we would say have been left for

dead. It's less than half the price it was at a decade ago. And unfortunately, at Oakmark, we've owned it for a long part of that decade. But we see important changes now. In addition to selling at a mid-single-digit PE multiple, the stock is down this year because they announced the acquisition of Callen. And what we really like about that acquisition is most of Callen's wells are adjacent to existing Apache wells. And Apache believes that they can dramatically improve the efficiency of those wells.

If they're dead wrong, then the acquisition was done at about the same multiple as APA stock was selling, and it shouldn't be either value additive or destructive. But if they're right, then this acquisition will be a significant boost to APA earnings. And we don't think we're having to take any downside risk in the hope that that actually does happen. Okay. And a day where we've had a lot of Fed speak, including Fed Chair Powell, that I would argue has been tilting a little more hawkish in light of the sticky inflation data that we've been getting in recent weeks and recent months. Financials are also in focus. It's been something of, dare I say, a mixed bag for the banks that have reported so far,

in part because of the hire for longer scenario. Your fund has quite a few financials, not just banks, but quite a few financials as holdings. And just get your thoughts so far what we've heard in earnings season and whether there's still compelling opportunities there. Well, Morgan, as you know, at Oakmark, we're not too worried about what happens in the next quarter or even the next year. We try to think about a much longer timeframe than that.

And if you look at the banking industry, over a long period of time, it's not viewed as being as good a business as the average S&P 500 business, typically selling at maybe two-thirds of average S&P 500 business, typically selling at maybe two-thirds of the S&P 500 multiple. Today, that would be about a 15 times earnings multiple. But if we look at another one of Oakmark Holdings, another that I would say left for dead, Citigroup,

sells it less than it did a decade ago. It's in the midst of the most significant reorganization they've ever had, sold off a lot of businesses where they weren't competitively advantaged, have now restructured into five silos that will run almost with the accountability of separate businesses. And they're targeting a return on equity

as an intermediate term goal, 2026 of 12 to 13%. Book value should be about, tangible books should be about $100 a share by then. So that would be $12 to $13 in earnings, less than five times where Citi is selling right now. So we think Jane Frazier has done a great job. And one of the things we like to look at at Oakmark, you know, the market typically gets really excited when a new CEO steps in. But it takes that CEO a couple years to get the team in place, get the strategy in place. And by the time everything's about, by the time the table's set, Wall Street's giving up on the idea. Jane's been there for a little over two

years now. So we think we're finally ready to reap the rewards from the policies that she's put in place. Okay, Bill. So you sold Amazon, Meta, and Hilton a quarter ago, took some profits. They all made nice moves. You already like Citigroup, General Motors, APA. I think you've been in those for a while. What are some of the new bets that you're making with those gains from Amazon Meta and Hilton? Yeah, what we've been doing, John, on a stock by stock basis is names have appreciated and hit our sell targets, we recycle that capital into what we think are the most undervalued names in the market. And today we think those tend to be the very low PE names.

I noticed United just reported a few minutes before I came on air, we think the airline industry is really attractive, probably in its best competitive position ever. And a company like Delta, which is in our portfolio now, sells at about six times earnings and I think would arguably be called the industry leader. Very small premium to the PEs of the other names in the airline industry. But when the starting price is six times earnings and management is giving that capital back to shareholders, that can cover up a lot of problems. And we think the risk return tilts very favorably because of the low price. Well, apparently some people listening to you, Delta, getting a little pop

here in overtime. Bill Nygren, thank you. Thank you. Time now for a CNBC News update with Seema Modi. Seema. Hi, John. So far, six people have been selected as jurors in Donald Trump's hush money trial. Earlier, the judge warned Trump for seeming to say something while a potential juror was being questioned, telling the defense he wanted to be crystal clear that no jurors were to be intimidated in his courtroom. The House delivered two articles of impeachment against Homeland Security Secretary Alejandro Mayorkas to the Senate today. The move forces

the Senate to hold a trial on allegations that he willfully and systematically did not enforce immigration policies. But the Democratic-led chamber is expected to be able to table or dismiss the charges before the trial begins. And 2023 was a record year for wind turbine installations, a 50 percent increase over last year as the world ramps up on clean energy. That is according to a report from Global Wind Energy Council. The report also finding that China was number one again in installations followed by the U.S., Brazil and Germany accounting for over 75 percent of new global installations. So it's slowly happening, guys. John? Yeah, it's a big win for wind. Seema, thank you.

Healthcare was a notable outperformer today after UnitedHealth jumped on earnings. Up next, Mike Santoli's back with a look at investor positioning in the space and if it's starting to get crowded. And another check on United Airlines. After results earlier in the hour, we're going to ask an analyst what he wants to hear from management on the call. And you can see those shares are flying high, up about 4.5% right now. Welcome back to Overtime. Mike Santoli returns. He's got a closer look at the health care space, which was one of the few sectors to actually finish in the green today after that big earnings pop from UnitedHealth. Mike. Yeah, Morgan, you know, fresh out this

morning, the Bank of America Global Fund Manager survey actually showed health care as a pretty popular overweight among professional investors. You see it here. This is the general categories where they ask if you're overweight or underweight, the group. Among the individual sectors, health care is the most popular overweight, well ahead of tech and industrials, at least by this global group. It was, I think, a consensus pick heading into this year, in part because of the mix of growth and value. It underperformed last year. Hasn't fully played out, although if you look at the valuation specifically for health care services, which is the part of the group that UnitedHealth

does belong into, the valuations have moderated quite a bit relative to, let's say, on a 10-year trailing basis. It's pretty much at the lower end of its range. Medical cost expenses obviously are much higher than had been anticipated. So there are these fundamental headwinds. But right now, the market is not really paying up, at least for that sliver of health care. It seems like all the excitement is on the GLP-1 drugs and things of that sort. All right. All right, Mike. Thanks. Thanks once again. Now, up next, we're going to discuss what it might take to de-escalate the crisis in the Middle East and how it could impact other geopolitical tensions. And as we head to break, take a look at some of the top aerospace and defense companies which were outperformers today.

Welcome back to Overtime. NBC News reporting that U.S. officials expect Israel's response to Iran's attack over the weekend to be limited in scope and likely to involve strikes against Iranian military forces and Iranian-backed proxies outside of Iran in the region. Meantime, global leaders are urging restraint to avoid a deeper conflict in the region. And joining us now is John Alterman. He's Center for Strategic International Studies Senior Vice President and Director of the Middle East Program.

It's good to have you on, John. And that's exactly where I want to start with you. And that is limited. When we talk about limited, I mean, we're talking about two countries and all of the relations and coalitions around those countries really walking a tightrope right now to try and not escalate the situation. So would limited in scope, as we just laid it out, according to NBC's reporting, actually be enough to keep this situation from not escalating further? The intention from the Israeli side, it sounds like, is just to send a message. We heard you. We're responding.

The Iranians immediately sent a message as the rockets and missiles were flying. We don't want to escalate this at all. As far as we're concerned, this is done. So you seem to have an effort by both the Israelis and the Iranians not to have this blow up. That's the calculation. But the possibility of miscalculation is still there. A missile goes astray. People get killed who nobody expected to be killed. You have a mass casualty event. And suddenly, you're in a whole different situation. It can be completely out of the blue. It can happen. And suddenly, in five minutes, you're in a totally different world. The fact that Iran launched this attack, or parts of its attack over the weekend from inside the country for the first time ever,

it's been called an unprecedented attack. Up until this moment, it's been categorized as something of a shadow war. Does this represent a new chapter that we're entering in terms of this dynamic between these two countries and throughout the region? I think the Iranians were trying to thread the needle. They wanted to respond to what they saw as an unprecedented Israeli attack on Iranian officials in Damascus, a building associated with the Iranian embassy in Damascus. So they felt the Israelis had escalated. They had to find a way to escalate. And I think they wanted a show of force, but not a huge amount of death and destruction. So they seemed to telegraph when this would come, how much they knew we were watching and the Israelis were watching, how much it was because to me a total coincidence that the Iranians launched more than 300 things and 99 percent of them were shot down.

The Iranians said, OK, we're done for now. And so I think the Iranians were trying to just ratchet it up a notch. I think the Israelis want to say, we see you. Don't do that again. But I don't think either side really wants to tip over into the abyss in the Middle East. And they certainly can. Hezbollah in southern Lebanon has about 150,000 rockets and missiles. They can go into all of Israel. They can overwhelm Israeli air defenses. 150,000 is a lot different than 300. They would be much closer. And I don't think anybody wants

to go there. Right. John, you mentioned Russia and China are happy to see the U.S. preoccupied in the Middle East. At the same time, though, it seems like Congress, perhaps by this Iranian aggression, being prompted to perhaps free up funding for Ukraine as well, which Russia wouldn't like. What further developments would you expect to see out of Russia and China as they try to nudge this situation to their advantage? Well, I think that to me, the interesting thing about the Chinese is a year ago, the Chinese brokered that agreement between the Iranians and the Saudis, and everybody said, wow, the Chinese are the big diplomatic

players. They're pushing the United States out of the Middle East. Look at what the Chinese were able to do the United States wasn't able to do. But since this war broke out in Israel and Gaza, six months, we've seen the Chinese do nothing effective in terms of diplomacy. We've seen them do nothing to secure free passage in the Red Sea, where a whole bunch of Chinese trade goes through. The Chinese have been investing in a relationship with Egypt. It's getting creamed by the Suez Canal being closed, essentially, because people don't want to transit

the Red Sea. The Chinese don't really do much of anything. I think the Chinese are happy to be in the backbench on this. They're happy to see a lot of people in the world get angry at the United States. But I think this sense of the Chinese being the new power in the Middle East has really been been dealt a blow. And what we see is the Chinese action in the Middle East is really directed at curbing U.S. global influence and power and not at asserting Chinese influence and power. I think from a Russian perspective, they're delighted that the U.S. isn't rallying the world around Ukraine. Instead, the world is getting angry with the U.S. for supplying weapons to Israel, which is using them to attack Gaza. And from the

Russian perspective, this is a great distraction from what Russia is doing in Ukraine. Okay. John Alterman, thanks for joining us. Thank you. Up next, the CEO of Commvault on his big deal in the ransomware recovery business and rival Rubrik's upcoming IPO. And later, an analyst with a buy rating on United reacts to the carrier's results and what he wants to hear during tomorrow's earnings call. Stay with us. Welcome back to Overtime. Data backup and recovery player Commvault closed higher today by about a percent and a half after the $4 billion market cap company announced.

It's acquiring Boston-based Apranix, which helps customers get back to work after a cyber attack. I spoke with Commvault CEO Sanjay Merchandani. that make up an application in the cloud, and then constantly backs it up in a way with all its state, with everything that goes to make up that application and what makes the application run. It constantly backs it up. And then if you ever have to bring it back or you want to practice bringing it back, you just hit one button and it rebuilds the entire application

with the state, with the data. Time and predictability. Okay, today it's a very manual process. You need experts. It's complicated. What we predictability. Okay, today it's a very manual process. You need experts. It's complicated. What we're doing is we're making it reasonably foolproof. And because you can test this over and over again in good times, it makes it predictable. And we believe it's going to be super quick for customers to come back. I also talked to Merchant Dining about Rival Rubric, which is expected to IPO as soon as this month.

I did send a note to Bipol and the team, you know, wishing the best of luck. It's a big moment. I know how hard they work to get where they are. You know, the natural things in this IPO, at least the one thing that I'm looking at, OK, is, you know, is it growth at all costs? Is the market going to value growth at all costs or responsible growth the way we've built the business over the past five years at least? We'll see if the market starts valuing both companies different when the new one comes public. I feel like I'm talking so much about this part of the market as a secular growth story too. It's not just the NVIDIA AI

story. It's also this part of tech. One to watch. All right. Well, up next, all the overtime movers that need to be on your radar, plus a top analyst on what he wants to hear from United's executives on the call tomorrow morning. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. J.B. Hunt under pressure right now. That's after missing estimates for earnings and revenue.

Shares are down about 5.5%. Earnings per share missing for a sixth quarter in a row. A lot of talk in the release, too, about weak demand on the macro front as well. So this is always the first freight company to report and certainly seen as a bellwether for this ongoing freight recession. Autodesk, meantime, lower as well. The company's saying it will not be able to file its annual report on time because of an ongoing internal investigation,

but did say it does not expect the probe to impact its prior financial statements. Nonetheless, those shares are down 3.5%. And another after-hours mover, United. Those shares ahead of schedule and over time after the company reaffirmed its full-year guidance. And joining us now is Conor Cunningham, Mellius Director of Research covering airlines and travel. Conor Cunningham, Mellius Director of Research covering airlines and travel. Conor, welcome. So I wonder here what you need to hear after this move takes them back above the level where they were before the news that they were delaying or canceling that investor day. Are they comparable to Delta really in their potential to move higher?

Thanks, Sean, for having me. Yeah, this was a nice release. Good to see. You know, over the past couple of months, I feel like we found ourselves talking a lot about the noise around United and not necessarily the solid financial footing that these guys are on and really heading towards right now. I know from a comparison to Delta, you know, I don't necessarily love doing that, but I would just say that they generated a lot of free cash flow, very similar to Delta. You know, the things that are really humming in this industry right now are premium products, improvement in corporate trends and international trends that are all in the sweet spot of what United is positioned right now.

So, yeah, you know, I still like the stock. I think that it's got a nice runaway pun intended on that one. And so I think we're going to hear some really positive comments on the call tomorrow. How likely is it that they get tripped up operationally? I mean, we're at a time when they're asking some pilots to take unpaid time off. Yeah, you know, I think more of that move from a pilot standpoint is just around the fact that, you know, Boeing has really struggled to deliver. You know, they revised their order book with this release as well. They're moving to about 65 aircraft being delivered this year, down from over 100. So, you know, they're going to need

less pilots. That doesn't mean they're necessarily going to shrink. We expect them to get back to hiring again in the future. They're just trying to, you know, use productivity. You know, they just had a really nice first quarter. You know, it always gets a little bit more challenging as we head into the spring and summer. So that is definitely something that these guys need to prepare for. They've done a really good job of that, though, I would say, you know, over the past couple of quarters. So I expect that to continue in the near term. So hopefully blue skies ahead from an operational standpoint. Okay. So the fact that

they're expecting fewer aircraft deliveries this year and the fact that they're now going to lease more Airbus 321 Neos into 2025 and 2026 in part because of these issues they've been having with Boeing, is this actually good news for the company? Because it's going to potentially mean they can keep pricing higher and they can make more with what they have? Or is this actually bad news because potentially higher costs and they're not able to expand as much as they had hoped? It's a bit of both. So I would say in the near term, you know, there will be a there is continued capacity constraints out there. It's not just at United. It's kind of across the whole industry. So this isn't necessarily a United-specific problem. It is really across all of everyone. United

does want these planes. They have their big goal of improving a lot of their domestic product and up-gaging and so on. So eventually, they do want them. This is good from a standpoint of we are going to see them clean up the balance sheet, I think, a little bit over the next couple of years as they kind of moderate their growth. So I'm not necessarily worried as much about their growth potential. I do think that they're going to get there. A lot of the constraints that are out there are more industry related than they are United specific. So, you know, CapEx is coming down, cash flow is going to go up as a result. And that will ultimately be a pretty good thing for them, I think, in the near term. So again, I think that they're setting themselves up to

smooth out their CapEx budget over the next call through the end of the decade. And I think that's going to ultimately be a rewarded long term as they generate strong free cash flow and so on. OK. Conor Cunningham, thanks for joining us. Shares of United up 6 percent right now in overtime. And do not miss United Airlines CEO Scott Kirby in an exclusive interview during Squawk Box tomorrow morning at 8 a.m. Eastern time. Choppy day of trade today, especially after Fed Chair Powell made those comments saying, hard to find reasons to cut, but we ended near the lows. Yeah, tomorrow, Beige Book. And then in this hour, you've got a number of industrial companies that are going to be reporting, including Alcoa, BHP, CSX, to get more

of a sense of the industrial part of the economy. That's going to do it for us here at Overtime. Fast Money starts now.