Closing Bell - Closing Bell Overtime: Polar CEO On Big Ticket Spending and Why The Consumer Is Holding Up So Well; Former Uber Exec Emil Michael On Uber’s Huge Stock Run 7/31/23

Episode Date: July 31, 2023

The major averages bounced around on the final trading day of the month, eventually closing higher. That continues the trend for July: the Dow, S&P 500, Nasdaq and Russell 2000 were all higher. Canaccord’s Tony Dwyer breaks down the market action. Earnings from Western Digital, Avis, Yum! China. Polaris CEO Mike Speetzen on the company’s latest quarter, the state of the high-end consumer and the new products unveiled at its investor day. MassMutual CEO Roger Crandall talks the inflation outlook and broader markets. Lux Capital’s Deena Shakir on investing in health care startups. Plus, former Uber exec Emil Michael on the  huge run in that stock so far this year and what to expect for tomorrow’s earnings.

Well, goodbye July, but we're going to get you ready for August. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Ahead this hour, earnings are going to be coming fast and furious this week. Today, we'll get reports from Western Digital, Young China, Avis, and many more. Plus, we'll talk to the CEO of recreational vehicle maker Polaris about consumer demand for high-ticket purchases after that company posted strong results. Polaris is up more than 30% on the year. But first, let's get straight to the markets. Major averages wrapping up

a very strong July in which the Dow notched a 13-day winning streak. That was its longest since 1987. The Nasdaq climbed nearly 4% for the month. The S&P finished nearly 3% higher. Can the momentum continue? Let's bring in Canaccord Chief Market Strategist, Tony Dwyer. Tony, welcome. So my understanding, strategists look at sentiment, technicals, fundamentals. So for Q3 in particular, the rest of Q3, what is each telling you about whether investors should be mostly still buying underperforming equities or selling to free up dry powder? Boy, isn't that the theme lately, John? So as you guys know, in June, we started talking about the hustle, the Russell.

We talked about it, I think, a couple of weeks ago. That has brought the Russell 2000 back up to the upper end of its range. And that was match, you know, called the wow of the Dow when you had that 13 consecutive string. When that's happened in the past, you get some level of consolidation, maybe even a little bit of a pullback. But strength begets strength. So you're in a market that's got a hell of a lot of momentum, even if you haven't had a big change in interest rates. So our call has been to be light and tight, not to fight or bet on the downside, maybe not to chase it up here, given some of the tactical overbought and enthusiastic levels that have developed. But then practically, what does that mean?

I mean, I think you expected a recession to come this year. Now it doesn't look like we're going to get one. But it does sound like you're expecting some sort of a reckoning for equities when you said, I think, for the rally to continue, there needs to be an improved outlook for earnings. A rebound in earnings historically comes from a reduction in rates and an improvement in the outlook for money and profit margins. So what do you think? Exactly, John. To me, again, I still expect a recession. I think I've definitely been wrong and early is wrong in our business. But so far, what you need for me to get really more fundamentally bullish.

Now, you can't, like I said, the technical guys are absolutely winning this tug of war. You've had that really since the October lows. But if you look point to point from last summer to now, you're basically flat, which means you had a lot of downside. And now you've had a lot of rebound upside. The real draw for me comes down to, like, for example, today's Fed Senior Loan Officer Survey that showed a continuation of tightening of the lending standards with weak loan demand across the board, really, with commercial and industrial lending for small and mid-sized businesses. So when I look back at past markets

that just rallied and didn't stop and just kept going, it typically was associated with lower interest rates. Even when I look back at 2019, for example, which has been a topic of conversation today, you had a dramatic drop in rates from the peak in the end of 2018 into, and I'm not talking about Fed rates, I'm talking about market rates on the short end especially, you had a pretty big drop throughout the year 2019. So it's a better outlook for money, which creates a better outlook for lending and obviously economic growth from there. Yeah, Tony, this got my attention today. I was reading that higher interest rates have actually been a boon to some individual

investors that American households are earning an extra $121 billion from income on investments annually versus this time a year ago. That's according to the Commerce Department. I wonder if we're not talking about that enough, the fact that maybe there is actually a positive, and you've had all this additional Capital that's been kind of created by some of these with the higher interest rates and individual investors and that's been coming back into the markets Here too Well, it's very very likely happening Morgan. I think it's a great point a great question now so here's where I think I got it wrong so far is that I

underestimated the amount of debt that was taken out at very low levels and how long when you extend the maturity of that debt, it takes time before you're going to raise new debt. So in other words, my three, two and seven days mortgage I have, I don't have to refinance that for a while, which means I don't have to suffer from having to roll it over at the higher interest rate level. So that I think is happening is that duration where so many businesses and households and mortgages were taking out at historically low interest rates that don't have to refi for a while. They haven't had to refi yet. So you're getting the benefit of that higher interest rate environment and obviously the equity market gains. And that I think at some point, here's a great example,

Morgan and John. We're talking about credit spreads, right? High yield credit spreads are pretty low. One of the guests in the last show talked about how credit spreads, if you told them that rates were going to go up and credit spreads were going to be where they are, they'd be surprised. If you look at actually the high yield market yield to worst. It's at the same level it was a year ago at just over 8%. So you haven't had a dramatic improvement in the absolute returns of the credit market. So if you're a high yield company, you still have to go out and get those higher rates. Now for me, like I said, you know, I love to be bullish. It's kind of my reputation. For me, it comes down to when you start to really drop those rates, when you start to bring down the short end of the curve and you renormalize the curve, this is going to be giddy up.

It's a levered system. And when money's flowing, it flows. And when it's not flowing, it kind of acts restrictive. And I still think, even though the markets rallied quite a bit and couldn't sum the value and certainly the hustle, the rustle again, it's going to take a little bit more time. All right. Sounds good, Tony Dwyer. Thanks for joining us. Hustle and the rustle. It was the best performing average this month is up 5.8 percent. Transports up 7 percent for the month of July. Well, Avis budget earnings, speaking of transports, are out. Phil LeBeau has those numbers. Hi, Phil. Hey, Morgan, this is a beat in the second quarter for Avis budget in terms of the

bottom line, earning eleven dollars and one cent for the second quarter, well above the street expectation, which was $9.45. Revenue did fall shy of expectations at $3.12 billion. The street was expecting $3.21 billion. But one other vector behind why you see the stock moving higher, if you look at the debt profile for Avis budget, they've got about $1.1 billion in liquidity on hand. They don't have any major payments due after they make a payment in September, which they're going to be able to make. They don't have any major payments due until 25. So they're in a pretty good position in terms of their liquidity. And again, shares of Avis Budget up as much as 3 percent, now up 2 percent after hours after reporting better than expected earnings for the second quarter.

Guys, back to you. All right, Philip Bo, thank you. Shares are up 2%. Oil prices on pace for their best month since January of 2022, and both WTI and Brent crude hitting their highest levels since April 17th. Senior markets commentator Mike Santoli joins us now from the New York Stock Exchange with a look at energy. Mike, great to have you back. Oh, great to be back, Morgan. Thank you so much.

Yeah, actually, this rally in crude has brought it up to a pretty interesting level. The two-year chart shows that it's sort of the upper end of what you would call the pre-Ukraine cycle high range. So that was right in the mid-'80s before we got that huge spike with the invasion of Ukraine last year. So you see that it's starting to have a little bit of a run. And the trend by some lights has started to turn for the better. Now, I would argue that if we're here at around 85, 90 in a couple of months in the fall, and you're sort of flat on a two year basis with wages are up more and obviously the economy is bigger, it's not necessarily something that destabilizes the soft landing perspective,

but maybe it puts upside impetus to inflation. It gets the Fed's attention. And those are the things we might be talking a little bit more about as other commodities also follow along here. Also interesting to look at the performance of energy stocks relative to tech. People think it's been all tech all the time with the exception of last year. But here is going back to the peak in the stock market before the COVID crash. It's February 19th of 2020. And you see, here we are. You know, obviously, they diverge for periods of time. But tech versus the equal weighted energy sector have basically come to the exact same spot from

that moment. To me, what it says is that energy companies, the industry as a whole, has been able to maintain a baseline level of profitability, even with oil prices not sort of singing to new highs. And that's something that investors have been willing to to reward, at least on a multi-year basis. Morgan. Yeah. And it's also probably worth noting that you have the supply demand dynamics with OPEC continuing to pull back on production right now. You've had a dollar that's declined something like 10% since the September peak, so that's good for commodities. I think the thing that gets my attention the most, Mike, though,

is that energy was the best-performing sector in the S&P over the past month, and yet, as we see earning season unfurl here, it's actually one of the ones where we're seeing profits decline for the first time in a couple of years. Yeah, it's clearly the market doing a couple of things at once. One is it's going back and grabbing some of those cheaper leadership groups that have not performed in the first half of the year, such as energy and some of the other older economy areas. But the other thing is, of course, it's looking ahead. So the market feels as if we did not have a breakdown in crude oil prices, gasoline prices starting to run again as well.

So, again, it's within this acceptable range, I think, for the broader economy, but to the benefit down the road in the next few quarters, potentially, of the energy companies themselves. All right. Mike, thank you. Good to see you. Western digital earnings are out. Christina Parts Nevelis has the numbers. Christina. Well, we're seeing initially a top and bottom line beat. The company posting an adjusted loss per share of $1.98, which is a little bit better, three cents better than what the street was anticipating on revenues of $2.67 billion. Again, slightly higher than what the street was anticipating for next quarter because this was q4 that i were just reporting on for q1 of next year they're expecting a revenue guidance

of anywhere between 2.55 billion and 2.75 billion so that range in itself is a little bit lower than the 2.75 estimate so that could be contributing to some of that stock drop that you're seeing on your screen right now also some weakness too in cloud business. They did see a decrease in cloud. They saw an increase in client because of gaming. And there's just one important quote here, because I think it's important. With Western Digital, there's a lot of concerns about storage business and memory prices, et cetera. And the CEO says, we're encouraged by several indicators signaling improving flash market dynamics. Our two largest end markets would be client and consumer are returning to growth and inventories are normalizing. So those are

some positive words coming from the CEO. But you're seeing the stock drop, regaining some of those losses down about at one point, one and a half percent right now, probably due to that revenue guidance for Q1. All right, Christina Parts and Avalos, thank you. Let's get some instant reaction. Joining us now is Susquehanna analyst Mehdi Hosseini. All right, Christina Partsenevelis, thank you. Let's get some instant reaction. Joining us now is Susquehanna analyst Mehdi Hosseini. Mehdi, I want to get your response to what we just heard there, especially since last quarter, I believe you said that this would probably be the bottom for Western Digital. Yes. I think what you're saying is the old economy is doing relatively better. It's the new economy, the cloud infrastructure, that is sluggish.

Western Ditch has exposure to both NAND flash that is used by consumer electronics, smartphones, and notebooks. And that's the part of the business that is showing sign of life after a year of going through a nuclear winter. The question mark is on the cloud infrastructure. There's a lot of hype around AI, but we really don't know how AI would impact storage and particularly hard disk drive. This is something that was expressed by Seagate when they reported last week. So all in all, quarterly earnings seem to try to form a bottom, particularly as NAND fundamentals improve. But there's still a question mark as to what happens to hard disk drive. And I realize that we'll probably get some more color where that question mark is concerned from the call, but what's your sense going into it right now about cloud and what we're seeing more broadly in the sector around that weakness?

Is it macroeconomic uncertainty or is this a situation where maybe Western Digital is losing market share? Neither. I think it has to do with the cloud service providers finalizing their CapEx budget looking into 2024 and how AI is going to impact those budgets. I think those CapEx budgets are going to trend higher, but we don't know how much higher and how the mix of the budget is going to be distributed between the traditional servers and AI.

And AI in particular could have some adverse impact on hard disk drive, but we have to figure that out. And that's the part of the business that depends on how Amazon and Facebook and Google and the like are going to finalize their budgets looking into next year. Mehdi, it also looks like the loss per share guidance for Q1 came in light at a loss of $1.95 per share versus $1.40 expected. And does that play into this issue where traditional servers are more likely to use hard disk drives than what the cloud providers are spending money on, the accelerators on NVIDIA? I would have thought that maybe Flash would have made up for that, though. It seems like you need fast storage to do that.

So why isn't Western Digital, why aren't the likes of them getting the benefit to more than balance out on that side? So we were in a nuclear winter in Flash and memory in general for the past year or so. And what memory manufacturers have done is cut back on utilization rate. They have cut back on 30 percent of their production. So utilization rate is 70 percent. That has an adverse impact on margin profile. Looking forward, as NAND prices improve, we expect those losses to be minimized. As to what happens, how AI is going to impact hard disk drive, I think it's going to take a couple

more quarters to figure that out. But what you see reflected in the gross margin is primarily due to defensive action, cutting back on production to get some pricing power back. And I think by December quarter, West Indies, Micron and others are going to have pricing power because they're cutting back on production. Okay. Mehdi Hosseini, thanks for joining us. With a neutral rating on the stock, shares are down about 2% right now in the after-hours trade. Up next, the CEO of recreational vehicle maker Polaris joins us, fresh from his company's investor day and on the back of strong earnings, to talk about consumer demand for big-ticket items.

Plus, we are still awaiting a key read on the Chinese consumer when Yum China reports results. We will bring you those numbers as soon as they cross. Overtime is back in two. Welcome back to Overtime. Polaris shares closing slightly higher today. The company hosting its capital markets day unveiling a new class of vehicles. This coming on the back of last week's Q2 earnings reporting sales up 7% versus last year while saying consumer spending continues to be healthy. The stock has been on a tear over the past two months. It's up nearly 26% in that time. Joining us now is Mike Speetson, CEO of Polaris. Mike, great to have you back on the show. Hi, Morgan. Thanks for having me. So I do want to start with the fact that you gave an update, our first one in about a year and a half, on your six strategic objectives,

your five-year growth targets, and basically said you're continuing to be on track. Walk me through that and why you feel confident with those targets in an environment where we've seen higher interest rates, supply chain issues over the last couple of years, and a lot of question marks, at least for the market, about the consumer overall? Yeah, I mean, we had a great opportunity to talk to investors today, remind them that we're staying focused on our strategy. Last night, we kicked off our first summer dealer meeting since 2019. And one of the things that we talked to dealers about is the maintaining the focus on power sports. And the receptivity around that was just incredible.

The energy, the excitement here on the ground in Nashville, Tennessee couldn't be stronger. Consumers are staying strong. We do see some pockets where things have weakened in our recreational business, but the utility side of our business remains really strong. We were up 14% overall from a retail standpoint. Our on-road motorcycle business continued to have strength with our retail up almost 50%. We are seeing a little bit of softness in our marine business. That's not atypical what we're seeing in the industry. We think that will reverse course probably in the next quarter or two.

But, you know, the strategy is in place. We're executing against it. I couldn't be happier with the team. The dealers are happy, and we've got a lot of great new products that just launched. Yeah. In terms of the softness in marine, how much of that is tied to the fact that we have seen higher interest rates and that has meant a different financing picture for consumers that are looking to take on debt? Yeah, it's definitely playing a part with consumers, especially on bigger ticket items.

The low end of the product range also, people tend to finance a bit more there. The other side of that is that dealers are reluctant to take on inventory. They have to pay floor plan interest on that inventory. And when you think about the volume and size of boats, they're a little reluctant right now, given our supply chain's in a much better spot, we can deliver faster. So I think as the economic scenarios play out, dealers will start to get more confident, and we think they'll start taking deliveries later in the year. Why is Marine different and not sort of a leading indicator of what you expect to happen? Is there something that's just different about the profile of who's buying in recreational and other areas?

Well, you know, we actually saw our recreational side-by-side business start to soften in Q3 of last year and so I think different parts of the business are cycling at different times and I think you know really part of what we're running into this summer with Marine is one the weather caused a late start to the season, two there's plenty of inventory in the channel and consumers are pulling back as it relates to the interest rate burden that some of these bigger ticket items can present. With the Fed looking like they're likely to pause from here forward and the economic backdrop looking as strong as it does, I'm pretty confident consumers will be back buying boats as we get into next year.

Yeah, let's talk a little bit about supply chain, something you and I have discussed much over the last couple of years. Have you seen signs of normalization there? And I guess just as importantly, what has that meant for the pricing picture, especially when I think about the pandemic, which created such a boom for the products that you sell? Yeah, supply chain definitely has improved. Logistics got better and they got better really fast. Supply chain, you know, we've seen the suppliers that are late delivering come down

dramatically. The issue is you still have one or two suppliers that are late and that causes some inefficiencies in the factories. And while we were able to get output out in the quarter, we did it at a higher cost. And so there's still some of that that's lingering. Pricing power remains pretty strong. We're not taking a bunch of new price, but the pricing that we put in place still some of that that's lingering. Pricing power remains pretty strong. We're not taking a bunch of new price but the pricing that we put in place most of that is sticking. We have seen price promotions come back but it typically is in the form of interest rate buy downs where we're trying to help the consumer not have to face some of the high interest rates but you know by and large we've been able to hold on to the pricing. If you remember we were pretty

conservative. We didn't go after much more than just the cost increase that we were seeing, and we hope that that will stick longer term. So final question for you, the fact that you have unveiled some new vehicles, including this Ranger XD 1500, which I think represents what you're calling a new category called extreme duty. Are these going after new demographics for you and new types of consumers or does it speak to the fact that you have a very sticky repeat client base? You know it's a little bit of both. If I think about things like the Polaris Expedition that we launched just a couple of months ago and now the XD Ranger, they will certainly appeal to people

currently in our segments that maybe don't have a vehicle that can do all the things they want, whether that be overlanding or the really heavy duty work on a ranch. But we do anticipate this is going to bring new people into the category. It's one of the things that we've done a great job of. You know, consistently over the past several years, we've got 60 to 70 percent new customers into our business. And by expanding the portfolio with these new category-defining vehicles, we see that as a greater opportunity to continue to grow the pie as it relates to our customers. All right, Mike Speetson, always great to catch up with you. Thanks for joining us

here. Thanks for having me, Morgan. Stock's up almost 35% year-to-date. Yeah. Minneapolis Fed President Neil Kashkari is saying it appears the U.S. will avoid a recession, and it's something our next guest has been saying for months. After the break, MassMutual CEO Roger Crandall gives us his updated view on the economy, his outlook for the market after a strong month of gains. And speaking of a strong month, take a look at the biggest gainers in July in the S&P 500. Zions Bank Corp. finishing the month higher by 40%. That rally we saw in the S&P 500. Zions Bank Corp finishing the month higher by 40 percent. That rally we saw in the regionals. Key Corp also jumping more than 30 percent. Also,

Newell Brands climbing 28 percent. Stay with us. Welcome back. Minneapolis Fed President Neil Kashkari making headlines over the weekend by calling his inflation outlook positive and predicting we could avoid a recession. Back in March, our next guest told us the likelihood of a near-term recession was low considering the tight labor market. Back now is MassMutual CEO Roger Crandall. Roger, thanks for being back with us. So here's the setup, I think. I mean, the equity risk premium is at a 20-year low. That's the difference between the earnings yield and the yield on government bonds.

The S&P at its highest level in a year and a half, roughly. And yet, a whole generation of investors doesn't believe in holding a significant position in bonds anymore. What should they do? Well, thank you for having me. And nice to see you again, John. Yeah. Look, when we were together in March, there was real concerns about what's going on in the banking system. And I think I just made the simple comment. It's hard to have a recession when when most Americans want a job can find a job. And frankly, that has continued.

And, you know, I think for individual investors right now, equities have done great. They're up over 14 percent since we were together in March. I think you really always need to be looking at your asset allocation. And for the first time in a long time, you actually get paid to be a saver. You know, you can earn four and a half, five percent in short term, you know, very low risk treasury bills. Money market funds have a nice yield. I think it's more important than ever for people to make sure they have their asset allocations aligned with what they're trying to achieve. They're working with their financial advisors to do that.

And after periods like this, a little bit of fashion rebalancing is never a bad idea, in my opinion. What impact are you expecting from student loans kicking back in, those payments coming through? And then, yes, inflation growth, that growth is slowing, but costs are still so high for consumers. And we're heading into the back half of the year when spending on products is a lot of what we expect in the economy. Yeah. So when I talk to the Mass Mutual advisors and what their clients are thinking, they are very aware of inflation. And I think you made it, although rates are down, they're still too high. And the Fed has told us

that. The Fed has said they're going to be data dependent. They're going to continue to raise short rates if they need to, to make sure that the inflation months are slain, so to speak. I think there are some things to be worried about. First is, remember, the lags of monetary policy were famously described as long and variable. And this tightening cycle only really kicked off in March of 22, and the Fed has continued to raise. In fact, they've raised three times since I talked with you in March. So the full impact of this running through the economy, you're seeing just today there was a report out on a loan officer survey that the Fed puts out, and banks are tightening credit without question. Higher rates are still working their way through corporate balance sheets. So you're seeing levered

companies have to pay a lot more in interest expense. And these are all things you would expect to slow the economy. And you mentioned an awful lot of folks who haven't had to make a payment on a student loan are going to have to make those payments. And you'd expect that to impact as well. So I think caution is warranted here because of these pieces. We've also seen, unfortunately, a little bit of an uptick in commodity prices recently. Oil's back up, gas up a little bit. The war in Ukraine terribly rages on with the grain deal off. We're coming into the winter again in Europe. We had a very easy winter last year from a weather perspective, a shining week. So I think there's still plenty of warning signs

kind of out there as we look ahead for sure. Yeah, you just mentioned the senior loan officer opinion survey on bank lending practices, the SLUs, showing tightening across all levels, I think, which was very much what Chair Powell had suggested last week. I just want to get your thoughts on how big of a deal that is when banks are still only a fraction. We talk about them as a lifeblood of the economy, but they still only do a fraction of the overall lending into the economy. They're obviously poised to be subject to greater regulations here. But then I think about a mass mutual or other financial institutions, other insurers, very different regulatory environment, also have capital to deploy and don't have the backstops that are associated with the government either. Yeah. Now, look, I think you're spot on. Look, banks are not as important as they were in

the past, but they're still very important. And they're particularly important to smaller businesses. You know, the role that the community and smaller regional banks play is really important. So I think this survey is important to look at. But the banking business is just under a lot of stress. And frankly, that creates some opportunity for us. We're a long-term lender as well. We lend to companies directly in the private lending business. We also buy securitized assets, which includes everything from auto loans to receivables that might come out of any kind of long-term contracts. We're a big consumer lender, too. We're a big residential mortgage lender. And of course, those costs are

higher. I mean, you can be reporting on what's happened. Home prices have stayed high and mortgage rates have more than doubled. So the affordability of homes is kind of a real issue. So although banks aren't as important as they once were, they're still quite important. They're still important to small businesses. And again, these things happen with lags. It means when a loan matures and comes up for renewal, the rate might go up. It might mean that the marginal borrower has their credit line reduced a little bit, for example. So these are these lags that your economist is talking about and why we're we're being pretty

cautious in our lending as well and and and making sure that we're really underwriting what we call through the cycle because when we make a loan we're going to own it through uh through its maturity roger crandall ceo of mass mutual thanks for being back with us thank you goodbye now time for cnbc news update with contessa brewer contessa, multiple life sentences in prison without the possibility of parole. That's from the judge today in the sentencing of Lori Vallow Daybell. The Idaho mother was found guilty in May of murdering her two children, or two of them, and conspiring to kill her husband's former wife. Judge Stephen Boyce noted her last mental evaluation showed she suffered from hyper

religiosity and that she refused to comply with court-ordered screening that may have mitigated her sentencing. The National Institutes of Health are launching mid-stage clinical trials to test treatments for long COVID. Four will test, including Pfizer's antiviral pill, Paxlovid. But right now, there's no proven treatment for long COVID, which refers to symptoms that develop weeks or months after contracting the initial infection. And a semi-truck carrying 40,000 pounds of chocolate caught fire in California. The truck's trailer caught fire and separated from the tractor part. Nobody got hurt, but mounds of chocolate oozed all over the highway.

I want to remind you, nobody got hurt. So I feel safe in saying, where was the tractor trailer with the graham crackers and the one with the marshmallows? Yeah, I don't know if you want to make light of that. It is a sticky situation. Contessa, thank you. Well done. Up next, Mike Santoli returns with a gut check on the economy and if the data is likely to continue to show a resilient picture into year end.

And as we head to break, check out two of the biggest winners in today's session. SoFi surging after topping earnings expectations, upping its full year outlook. Also, electric vertical takeoff and landing company and eVTOL company. Archer Aviation getting a big boost on a new Air Force contract worth about $140 million. Those shares finished up almost 41%. We'll be right back. We've got more earnings to bring you. Yum China.

Those are out. Kate Rogers has the numbers. Hi, Kate. Hi, Morgan. A mixed quarter here for Yum China. The stock down over 3% right now. The company reporting EPS of 47 cents adjusted. That's a slight miss compared to the 46 cents that was estimated by analysts. Revenues are a slight beat, rather. I'm sorry, 47 cents adjusted versus estimates of 46 cents.

Revenues a slight miss here, 2.65 billion versus the 2.68 billion that was estimated. Same store sales increasing 15 percent year over year, increases of 15 percent at KFC and 13 percent at Pizza Hut. But we should note those still remain below pre-pandemic levels. The company's CFO in a statement saying, quote, we delivered record second quarter revenues and profits despite challenging macro conditions and an uptick of COVID infections during the quarter. When customer demand softened in May, we adjusted nimbly to address consumer needs, captured holiday spending and successfully regained sales momentum, adding even though same-store sales remain below those 2019 levels,

our revenue in the second quarter has increased by 25 percent, and operating profits have risen by 26 percent compared to pre-pandemic levels in 2019. But once again, the stock is lower now. We'll get a much deeper read into the Chinese consumer tomorrow when Starbucks reports after the bell, guys. Back over to you. All right. Thank you. And now we're going to get back over to you, Mike Santoli, with a look at the U.S. Economic Surprise Index as data appears to keep moving in one particular direction. Mike.

Yeah, John, the surprises have been pleasant for quite a run now, actually near the highest levels we've seen in terms of the economic data coming in better than economists forecast. Some of the best levels we've seen outside of that huge kind of covid crash and snapback that we saw there. That's what kind of broke the chart. But if you look at today's level, it's basically in the last decade as high as it's been, except for this one time in 2017. And that's after we were coming out of an industrial and earnings recession globally. You actually had some countries in recession this time. It's been mostly building on a slow and steady growth trend in the underlying economy. But interestingly, economists have not raised their outlooks for all these

different data points enough to actually have the real numbers come in on target. So we keep beating. Now, the question is, what does it mean from here? Typically, this indicator is going to go up and down. It's going to oscillate as expectations catch up or the data soften and start to come back. So we'll see if that does happen from here. There's some room in an economy that's been running, you know, two and a half ish percent to have some weakness and still have a soft landing. But I do think that this explains why everybody suddenly is pretty comfortable with the way the economy has been handling what the Fed has thrown at it, John. So, Mike, explain to me how this works. It seems like surprise is relative to expectations, right? Like somebody

says boo, if I was expecting them to say boo, I'm not surprised. So I guess people were expecting a bad start to 2023 and clearly we didn't get that. What does it take to stay surprised from here? It takes, well, obviously the economic momentum has to continue. I think that the consumer has been stronger than anticipated, but also things like, you know, construction of factories, all these things from the fiscal expansion that we've seen. Maybe we're not fully accounted for in the numbers. What I have found interesting, though, is usually this indicator spends at least part of every year in negative territory. That means numbers coming in worse than expectations. We haven't seen that. I mean, if this was an asset

you could buy, you'd say, wow, that's a perfect trend right there. So perhaps it's just that chronic calling for a recession out over the horizon. The inverted yield curve, all the leading indicators of recession is keeping economists from really raising their sights for what this economy can deliver. So it's an upside surprise index, really? Well, down here, it's a downside surprise index. But lately, it's been only upside. All right. We'll see how and if that holds up then.

Mike Santoli, thank you. Health care has been one of the worst performing sectors this year and finished the month of July at the bottom of the pack. But up next, a top venture capitalist explains why healthy returns could be on the horizon. Overtime. We'll be right back. Welcome back to Overtime. Check out shares of Tenet Healthcare, that company beating street estimates on earnings and revenue for the second quarter. The stock moving slightly higher right now in overtime, up about a third of a percent. But more broadly, the healthcare sector, it's been essentially flat in July. It's the worst performing sector on the month and one of three still negative year to date. That said, our next guest is still finding opportunities in the area.

Joining us now is Lux Capital partner Dina Shacker. Dina, great to have you back on the show. I mean, when we lay out the best month or worst month or year to date, that's a much shorter term horizon than how you're thinking about investing in health care. I guess break it down for me right now and where you see opportunity. Absolutely. Great to see you again, Morgan. Thanks for having me. You know, as venture capitalists, our time horizons are a bit longer than folks who are looking at public market or purely growth investments. We look with a 10 plusplus year time horizon, and frankly, there's no better time to be investing in the future of healthcare.

We continue to be incredibly excited, and we think this vintage in particular will likely be one of the most successful to come. The combination of some of the incredible achievements we've seen in AI, the incredible breakthrough science on the bio side, as well as much more interest from the major stakeholders in healthcare in partnering with early stage companies makes us really excited.

All right. So what are some specific areas or specific examples of places where you've been making investments that speak to these new innovations? Yeah. So, you know, one of the areas that we're incredibly excited about is women's health, which is an area that we've deployed over $100 million into, representing a combined value of over $8 billion. And we think this is just the beginning. It's exciting for us for a number of reasons. Of course, the area has been historically radically underinvested in and undervalued. So there continues to be a really exciting opportunity to build value there.

And for us, women's health starts at the R&D side. If you take a look at clinical trials, where conditions outside of oncology represent less than 2% of all R&D for those focused on women's health, all the way through care delivery. Women represent not only more than half the population, but more than 80% of the dollars spent in health care. And it's actually one of the categories broadly within health, even on the private side, that continues to grow despite all the tailwinds. In fact, we see an over 300% increase in deal activity from 2018 H1 to H1 2023 in women's health versus about 15 percent more broadly in health care. So that's pretty phenomenal. Dina, good to see you. So why aren't these companies, these health companies, buying startups like they were last year? I mean, Amazon a while back bought one medical,

but they're actually backing off on Halo, their consumer health device area. Their stocks have been underperforming. So maybe that's part of it. But they arguably need innovation, right? So good to see you again, John. Yes. And I wouldn't say that they aren't. I would say that they aren't right now. I think there's probably some more activity to come. And there's quite a bit going on, certainly on the bio side, with some pretty major acquisitions that pharma companies are making and big bets in this space. I think it's clear if you look at how some of these FANG players have been focusing on AI, that there continues to be quite

an interest here with AWS and Google and even these large legacy healthcare players like Epic really doubling down on AI. I expect that we'll see so much more activity to come. Yeah, Microsoft did that big buy in the space as well. Dina, thanks for being with us. So great to see you. Take care. Still ahead, some of the other earnings movers that should be on your radar. Plus, we will look ahead to Uber's earnings tomorrow

with the ride-sharing company's former chief business officer. And here's a look at the top three Dow performers in July. Boeing, GM, and Goldman Sachs, all finishing higher by 10 percent or more. Stay with us. Welcome back to Overtime. Here's a refresher. Look at some of this afternoon's big earnings movers.

Western Digital moving lower by a couple percent despite beating on the top and bottom lines. Revenue guidance and EPS guidance came in below expectations. Meantime, computer networking company Arista Networks is spiking on, beat on both lines. You can see it up there more than 11 percent. Zoom Info falling hard after missing revenue estimates, down 18 percent, giving a weak third quarter outlook and lowering full year guidance. All right. Well, tomorrow will be another massive day of earnings featuring results from Caterpillar, Merck, Pfizer, Uber, AMD and Starbucks. Up next, Uber's former chief business officer and what he is expecting from the ride sharing company's results.

We'll be right back. It's been a wild ride for Uber so far this year. Shares have exactly doubled. But can that momentum continue after earnings results tomorrow? Joining us now is Emil Michael. He's former chief business officer at Uber, currently CEO of DPCM Capital. Emil, Uber is beating the tires off a lift. It's it's they're faster, they're cheaper. So does this come down to delivering other things?

Food delivery versus DoorDash? Where can Uber surprise to the upside? Oh, there's a couple of places. So, number one, John, I think there's a secular trend that you see in travel generally with the airlines and hotels that's impacting ride sharing in a good way. So even Lyft stock's gone up a couple of points in the last few weeks also. So I think Uber is benefiting from that. The thing I think will be really interesting to hear from Dara tomorrow is, does he think the beating the tires off, as you say, is going to start to show up in even greater proportion than the growth in the next couple of quarters? And if so, there's room in the stock price to go from 50 to 60, in my view, in the next 12 months. And I'm a holder on that, as opposed, when you think about food delivery, it's different. Food delivery is a lot harder. Uber is a clear and distant second place in food delivery in the

US against DoorDash. But there's lots of other regions in the world where they're winning on both rides and food delivery. And when you add it all up, I think this is a stock to buy. And I'm a holder, just to be clear. OK. What are the most important regions to grow in? Yeah. So in the EU, where UK is the biggest market for ride sharing generally and for food delivery, frankly, Uber's beating Deliveroo on the DoorDash side, and they're beating this company called Bolt, which is becoming sort of the lift of Europe, I would say. There was a court ruling today that said that Bolt and others had to pay the 20 percent excise tax that Uber had been paying for years. And finally, now it's going

to be a level playing field. So I think you're going to see even better Uber performance in the EU from that. And in Latin America, they continue to really, really grow against Didi and Rideshare as well. So optimism in three continents is a good thing for this stock. I want to go back to Uber and specifically the Rideshare stateside for a minute because I know you guys are talking about beating the tires off. It's been my experience as of late that, and maybe because it doesn't have the market share that Uber has, that the prices have actually been a little bit more competitive on Lyft. And so I wonder, you have a new CEO at the helm looking to turn things around at that company. Could we see the potential for a new price war to reignite? It is not in Lyft's

interest, despite the new CEO's strategy to match Uber on price. And the reason is that if you try to match Uber on price, their network's so big that if they match you, you could drain your cash balance pretty quickly. And this cash balance is a lot smaller than Uber's. So I don't think anyone wants a price war, especially Lyft. But if there is a price war, Uber will probably win. Should we be talking a little bit more about Uber Freight as well, or is that still just kind of a satellite business? Uber Freight essentially is a different business, runs off a largely different platform, but has a similar concept in that it's a marketplace where those who want to ship things and those who can ship things find each other and try to create efficiency there.

It's essentially a separate company. It has been separately financed. The team has actually moved out of Uber headquarters. So my guess is that company over time, without any knowledge, spins out into its own public entity. All right. Emil Michael, great to have you. Great to be here. Good to see you, John. Good to see you. Another name to watch tomorrow is AMD.

That chipmaker is going to be in sharp focus after Intel's results last week. That surprised to the upside. And Morgan, Western Digital today, a little bit of a downside drag on them, I think for a reason similar to what we saw with Intel, which is that in data center, you're seeing spend go more toward what they'll call accelerators, which is NVIDIA versus the traditional servers. Hard drives go into traditional servers. So AMD's been gaining share in traditional servers on Intel. Intel actually did pretty well, better than expectations in data center. So when you read through all of that, what does that mean for AMD tomorrow, given that AMD has been doing well and investors expect them to do well? We'll see.

Yeah. We also know that Lisa Hsu is going to make a run on NVIDIA in terms of that AI market and has said that we're essentially in early innings. Actually came on our show just a couple of weeks ago to talk about some of those new chips and those new products. Everybody's making a run on NVIDIA. I mean, they're making so much money at such high margins. The challenge for NVIDIA is going to be people don't even have to be as good as them. They can be just, as long as they can just get on the field and offer a product for less, somebody's going to buy it because there's so little supply of AI chips in the market. Yeah, that sort of speaks to some of the talk we've heard from other folks,

maybe saying even that NVIDIA has a potential monopoly, at least as it stands right now, which I think is up for debate. Andy Jassy even is going out, everybody. Yeah. All right, we've also got ISM manufacturing tomorrow. We've got the Jolt Report tomorrow and the start of a new trading month. That's going to do it for us here at Overtime. Fast Money starts now.