Motley Fool Money - GE & GM Earnings and Deals, Deals, Deals

Episode Date: October 20, 2026

Third quarter earnings reports are coming in fast, but this week kicks off with two Hidden Gem stocks making acquisitions to shore up their businesses. Lou, Matt, and Tyler discuss Salesforce's acquisition of Braze and Tradeweb Market’s Trumid acquisition. Plus, a mailbag about building supply company QXO. Have a question? Email us; [e-mail] Tyler Crowe, Matt Frankel, and Lou Whiteman discuss: - GE’s earnings in a time of high fuel prices - GM’s earnings (also in a time of high fuel prices) - $CRM’s deal for $BRZE -$TW’s deal for Trumid -Mailbag Companies discussed: GE, GM, F, CRM, BRZE, TW, QXO Host: Tyler Crowe Guests: Matt Frankel, Lou Whiteman Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

earnings, deals in a mailbag. Oh my, Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe. And today I'm joined by longtime full contributors, Matt Frankel and Lou Whiteman. So it has been a busy news day. There's been a couple merger and acquisition deals. Apparently merger Monday came one day late, unfortunately. We also, Lou, we got up, we'll call it a fan mailbag that was designed specifically for you. And I'm sure Matt will have his thoughts as well. But we are going to start. It is the thick of Earth. season, and we do want to get into it. We had defense companies. We've got banks, we've got autos, everything, a little bit of smorgasbord, except for maybe the Mag 7, some of the other big chip semiconductor stocks are going right now. So before when we were planning the show, I went to you guys and gave you free reigns that whatever you find, whatever it's Hidden

Gems recommendation, or maybe one of your personal favorites in the area. Basically, I want to say, what are the companies you were looking at and what is the market getting right and wrong about the companies? Lou, I'm going to start with you because you first pointed out GE Aerospace. I think with rising jet fuel prices around the world, everyone's like, well, is that going to change how these airlines are doing what they're doing? Eventually. And I think that's the big takeaway is, I think the market's getting this one right. GE Aerospace beat surprisingly strong and led by engines, 7% above consensus on engine earnings. A lot of that is, Tyler, and we've talked about this a lot. A lot of this is services. It's not exactly new sales, but it's that these engines are being

run hard. They need to be serviced. Spare parts for up 20% on the engine side of the business. Services just GE going in kind of doing some of the maintenance work up 17%. But look, here's the deal. How long will this last? Is, I think, the question that everybody, body's asking right now. I think the airlines have basically said that they're going to be strong through the holiday season, but at current demand trends, schedules are going to fall off a cliff come January. And I think the GE is seeing that too. Interesting, they raised full year guidance for earnings, but they just beat. So if you take that full year guidance and add up the three quarters that we know, their raised guidance implies that the fourth quarter will come in below consensus.

I think the takeaway here is the cycle hasn't collapsed, but we are in the late innings, and you're buying it 40 times earnings right now. I think the market has this one right to kind of yawn at these. You know, it's not the end of the world here, but it does look late in the cycle. One of our deep market sort of like theories has been on like maintenance companies in the airlines that's a discussion you have been having a lot. As you were saying, spare parts are really up. Do you think that we're going to see a lot of that trickle down into some of those, you know,

maintenance service overhaul kind of companies? To some extent, I do think that, look, these companies, the airlines see a great advantage of just taking one cycle out of their existing fleets right now because, again, they are running these planes as hard as they can. If you can just go from, say, four round trips a day to three round trips and some of this equipment, you can delay maintenance because maintenance is mostly by miles or mostly by minutes run. So I think you see a world where demand still remains relatively strong, but not quite as strong. And the airlines get to save on costs by reducing just the maintenance turn, how fast they have to do maintenance. So that's not great news for the MROs. The good news is that

there is still a lot of work to be done. And if we do see a slowdown, we'll see more conversions, because the freight industry is desperate for capacity right now. Even in the worst case scenario, even if planes come out of the commercial, the passenger systems, that becomes the next cargo jet. So there's still work to be done. Matt, I want to turn to you. We'll go from airlines or airborne mobility to on the ground mobility because you wanted to talk about general motors, which at first glance I saw the numbers look pretty good,

but the market reaction was a little bit on the tepid side. So what is the market saying and what are they getting right? And maybe what the market is missing with this most recent earning reports and maybe anything else that came out of the conference call or something like that. Yeah. So I'm talking about the other general here, General Motors. And I feel like it's kind of par for the course for General Motors to do exactly what you said, issue numbers that at first glance look great.

And the market just kind of shrugs it off and said, we're going to value this thing in six times earnings forever and ever and ever. So you're right. It was a very solid quarter on the surface. Revenue and earnings both beat estimates. North America was especially strong margin expansion due to a great product mix. Their trucks and the big SUVs are where they make the most money. And those had best Q3 pickup sales ever. That's a pretty nice accomplishment in the market that's supposedly struggling. You know, automotive free cash flow is almost $6 billion to four-year high. They bought back $2.5 billion. dollars of stock in the third quarter, another billion dollars so far in October, and they just announced a new $20 billion buyback authorization. This is a company whose market cap is about $68 billion.

So a $20 billion buyback is significant. That's a lot. And software and services revenue were especially strong. And their EV cleanup is mostly done. All those charges they're taking to the related to the EVs slid on. So why was the stock down about 5%? Well, a couple of reasons that no guidance raise is a big one. When you beat expectations for the third quarter and fail to raise guidance for the full year,

you're implying that you're going to have a slowdown in the fourth quarter. I think that's what the market's kind of perceiving here. They mentioned commodity inflation that's adding to cost, and that includes memory chips, which are a big component of cars these days. International profits were just ugly. I mean, GM's a North American story right now. They're international profits were not doing well. financial delinquencies on the GM financial side of the business rose from 3.2% to 3.7%

indicating that consumers might be getting strained. They take a lot of credit risk with their loans. And they really used softer language when discussing 2027. So I'm not sure that the market's getting this wrong. There's legitimate reason to worry that they are at the peak of their margins for this cycle. You know, GM financial is certainly a reason to be concerned. But I mean, the buyback math is enormous. trades for six times earnings. Their software revenue is doing fantastic, seven and a half billion dollars of deferred software revenue

and Super Cruise revenue alone grew 60% year every year. So there's a lot to like. Well, I do want to follow up on this because GM has clearly, after they did EVEs, hybrids, wasn't exactly the most successful rollout, you know, really doubled down on the gas engine. With rising gas prices, rising diesel prices, maybe bringing that back into focus,

Is there a possibility that we see General Motors maybe start to pivot back towards the electric vehicle, smaller vehicle, more affordable vehicle? You know, the price tag on an SUV in one of their trucks these days is getting pretty high in affordability has been a pretty big talking point lately. Yeah, no, as somebody in the market for a car right now, you don't have to tell me about SUV and pickup affordability. But yeah, no, GM has pulled, that's a really good question because GM has pulled back on EBs a lot less than most of its competitors. They've all pulled back on EVs to one extent or the other. But for example, the Cadillac brand is still over half EVs in their lineup. So they are still investing in EBs. It's still, Mary Barr has said that's their long-term strategy.

They didn't embrace hybrids and plug-in hybrids as much as some of their peers. So I think that's where they're going to be kind of pivoting a little bit in the near term. But they still have more EVs and more successful EVs. A lot of their EVs are very well received than some of its other rivals. Ford pump the brakes on EVs a whole lot more. than GM did. And I think that could serve to help them in, you know, the affordability crisis. Just a quick, like an anecdote is somebody who lives overseas. The profligation of Chinese EVs is getting louder and louder by the moment. And I do genuinely wonder if in the next

couple of years we do start to see some sort of partnership where it comes that Chinese EVs start working with the Detroit art and pod makers to make it happen. After the break, we're going to jump into a couple of merger and acquisition deals that have been happening this week and give or take on. You just found out that your sales team is at risk of missing quota. Don't panic. Just ask Rippling AI. Since it's built on your real-time people and business data, Rippling AI can pull metrics from Rippling and Salesforce into a meeting-ready dashboard showing quota attainment, headcount plan, and monthly

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entire organization. That's R-I-P-P-L-I-N-G-A-I-S-O-O-L. Sign up for exclusive access today, rippling.a-I-I-S-F-L. Welcome aboard via rail. Please sit and enjoy. Please sit and sip. Play. Post. Taste. View and enjoy. Via Rail, love the way. So as we said, normally we'd like to talk about mergers on a merger Monday. I don't know. I used to some of the alliteration here. But I guess that came a little bit later than expected. But we did have two deals that have come across our desk lately, both of which do relate

to companies that are in, if not Hidden Gems, our recommendation service, one of what we call the Hidden Gems universe of services that we have out there. And I want to start with, I guess, the larger of the two and probably the more recognizable name for everybody that's in our services. and that's Salesforce. Salesforce announced today early. It was a little bit of a news fairy for us that they were buying the company Braise for about $5.7 billion. And guys, I'm going to admit it. I'm not even going to try to hide it in any way. I have no idea what Braise is. So, Matt, can you just explain me what it does and why Salesforce thinks it actually needs it?

Yeah. Have you ever gotten a marketing text on your phone? I don't know if this happens overseas, but have you ever gotten a marketing text on your phone and swear someone was listening to what you were trying to buy or thinking about maybe when your wife were ever having a talk about what you were going to buy and you spontaneously get a marketing text. You ever have that happen? Not recently, but I do get them in foreign languages, unfortunately. So maybe I am. I just don't realize it. Okay. So Braves might have had something to do with it. They are a consumer and customer engagement platform and it lets brands send out personalized real-time text messages based on what their customers are doing. They have about 2,800 customers. The business has been growing nicely,

24% revenue growth year every year, it just turned profitable. And it's really like a personal, like mobile first modern marketing tool. And Salesforce's marketing cloud is a lot weaker than its peers when it comes to modern mobile first engagement. Yeah, that's exactly. Salesforce has a massive marketing operation, but they aren't really good at this AI, driven or the personalized, the tech savvy side of marketing. This is them trying to get good at a core place to kind of support their business. 50% premium in a cash deal. So obviously Salesforce thinks they need to get this done. And the market actually reacted not 100% favorably. I think pre-market stock was down about 2.5%. And we were kind of hinting at it, you know,

whether or not Salesforce needed it. They paid a big premium for this. And, like, like you said, Lou, it's kind of addressing a soft spot in their offering. So just thinking about Salesforce, almost the investment, it's had an up and down journey, but I think right now its stock is more or less where it was six years ago, kind of not exactly been the expectation that people were hoping for with this sort of stock. So what exactly has plagued sales force? And is this really a cure for it? I mean, I point to two things. One is the SaaSpocalypse. That's the more obvious concern, meaning that there are fears out there that AI agents are going to replace human workers. Sales force is largely a seat licensing model. And number two, the business has just

really kind of reach a maturity in a lot of ways in the past couple years. They're only expecting about 10 to 11 percent revenue growth in the current fiscal year. Not that the business is doing bad. It's just a big, big player. And it's transitioning between growth and maturity right now. Right. I think the SaaS apocalypse talk of just like these companies getting blown away is overstated, but I do wonder, do we need these one-stop shop all-encompassing enterprise software packages in a world where AI is making specialists better? I think that's the core question. That is basically what Braves is to Salesforce right now. Salesforce can't be more nimble. They're not in a point where they are going to say, okay, let's break up the company. So the second best option,

or their best option is to be best in class throughout their offering. And that means admitting that they're not best in class in areas and going out and buying he who is. So I do think this deal makes sense for them. I don't know if it solves their problems, but I do think it is the right strategy in reaction to the world around them. Overall, it sounds like it's a relatively favorable deal, if maybe slightly overpriced, but maybe a price that Salesforce has to pay. I want to get our second one, and maybe not the most household name here, but certainly something that it, like I said, is in the Hidden Gems Investing Service universe, and that's trade web markets, kind of an electronic marketplace for a lot of trading of securities, not necessarily stocks,

but more like rates, credit swaps, a lot of the things that maybe institutional investors are doing. So it announced that yesterday, or this morning, I can't remember specifically which one, that they're acquiring privately held fixed income trading company Truman. Now, since it isn't exactly. exactly a household name, guys. Can, number one, explain what TradeWeb does, and then can you give me the elevator pitch of why investors should like this kind of business? You know, I mean, you kind of just mentioned that they do a lot of trading, not necessarily

stocks, which kind of makes it sound like a small platform, but they do treasuries, corporate bonds, mortgages, money markets, some equities. There's over $3 trillion of trading volume per day across asset classes on TradeWeb's platform. So they are a big player in the electronic marketplaces for fixed income trading especially. Now, why we like it, it's a toll road on what is a huge market that has been very, very slow to digitize. It's well known that, you know, equities trading has been digital for 25 years and has, you know, no one buys a stock without doing it digitally. That's not the case for a lot of the markets I just mentioned.

So every trade on the platform pays a fee. You know, it's a slow, steady digitizing process that's going on and more of the bond market is moving online every year. Right. Lou, how does Truman specifically fit into this then as we try to assemble the picture of what trade web is doing and why Truman makes sense at this point in time? Right. So it gets into the weeds a bit, but TradeWeb is mostly focused on the second.

secondary market, bonds that are already issued out there trading. They have tried to become the marketplace for those bonds. They do have a presence in new bond issue trading, but they don't have a big presence. So this is Truman. That's what Truman is kind of focused on and is specializing in and has probably been more aggressive in pricing, which is kind of how they've gotten there better in TradeWeb. So this is TradeWeb trying to create a more end-to-end solution, a one-stop solution, And it's very defensive because they have a lot of competitors who are trying to do this as well. But this is their kind of stab at becoming the answer to a question that has plagued these markets for 20 years or so. How do we get online?

As we kind of like think about this, like you said, it gets into new issues, which is which I assume probably a little bit more lucrative than secondary trading. How do you rate this deal in terms of, you know, the strategic fit, the price? like how does this kind of rate in terms of moving the needle for trade web, which I think is like a $27 billion company as we're taping? Yeah, I mean, I would give the Salesforce deal a C. I would give this probably a B-plus in terms of how strategically smart it is, how, you know, it's an all-cash deal. There's some integration risk, but the deal just makes a whole lot of strategic sense, especially given like Lou said, the kind of competitive nature of the market. This seems to be a competitive move against

market access against Bloomberg, really in the war to digitize the bond markets. And it seems like a really smart strategic play. This is a reaction. I might be a little more, not negative, but cautious about it than Matt, just because, look, they are the underdog here. We gave you the elevator pitch with the problem they're trying to solve. Bigger rivals are also trying to solve this problem. Matt mentioned market access, ice intercontinental exchange, just bought them.

So this is a clear reaction to that. To me, they're overpaying here, but it's a turf war, and this is a business where scale will win. When your biggest competitor is for exercise and aggressive, you have to make aggressive moves. So I think it's the right move, but it doesn't secure success. Yeah. We have had a lot of capital market connections. consolidation over the years, whether it be market trading platforms or selling information services like S&P Global and companies like that. So it'll be interesting to see how many of these actually

end up being value of creative versus just kind of that nuclear arms race of being the biggest one possible. Coming up after the break, we're going to hit the mailback. Welcome aboard via rail. Please sit and enjoy. Please sit and sip. Play. Post. Taste. View and enjoy. Via Rail, love the way. That's two minutes for holding. But you're holding two times the chicken with Bogo box meals from KFC.

Order in and focus on the ice, not what's for dinner. Get game day deals on Uber Eats all season long. Like Bogo box meals from KFC. Hockey is for the hungry. Uber Eats, order now. Terms apply. Product availability varies by region. See app for details. Hey everyone. If you want to get your question read on air, go ahead and email us at

Podcasts at Fool.com. That's Podcasts with an S. I've also left the email in the show description so you can grab it there as well. Today's question comes from Jay in Oshkosh, Wisconsin, and Lou, it's a little bit of fan mail because it's directed specifically at you. Maybe it's fan mail. Maybe it's calling you out a little bit here. So he says, thank you all for your daily insights analysis. I'm a long-time listener and fool. My question is, from Lou, I've heard from him on several occasions talk about his interest in QXO, which is a building supply roll-up company, and it's mainly because of the proven success of CEO Brad Jacobs in other ventures. I don't believe I've heard Lou comment much on the acquisition or his current

thoughts of the company, unless I miss it. I was hoping to hear what he thinks about QXO now, and one of the reasons I think he's out. asking is there was a big acquisition at QXO of TopBuild and ever since the stock has kind of tanked ever since. Yeah, Stock's down 46% of year to date. So I doubt it's fan mail, but that's fine. And look, my answer would be I remain optimistic. The stock has struggled. And I think that's because, look, Top Build was a well-run company. I think there was a narrative in the market that QXO is going to just buy up like poorly performed companies, fix them up, and, get great deals on it. They have done that in the past and other roll-ups, but sometimes you have to

pay up for quality, and they did. I think Top Build gives them a lot that just pre-ready-to-go that they would have had to build on their own otherwise. But fundamentally, this is the same story today it was a year ago. It's all about execution. Brad Jacobs has a great history of doing these roll-ups, finding value and creating value over time. If they execute on their goals here, will be a much larger company and shareholders will benefit. But acquisitions are not easy. The market is looking at rising interest rates, thinking about just kind of the price you have to pay for capital to do deals.

Patience was always going to be required. And I think that this is, it always has been a show me story. It remains a show me story. I'm happy with what they're doing. And I'm, I think, along for the ride. Yeah, for those who may not be familiar, Brad Jacobs was the founder of companies like XPO Logistics, United Rentals, a couple others at, a well that have been acquired ever since.

A bit of a pretty well-known founder, investor in a lot of companies and has created a lot of welfare investors. Matt, what are your thoughts on QXO as well? Well, it's in general, it's tough to buy a company that's levered to a market when every fundamental in that market then goes the wrong way. And I'm talking about the housing market. So having TopBuild is a play on housing. You know, a lot of what QXO does is a play on housing.

They bought a housing, you know, Top build is definitely levered to the house. housing market. Mortgage rates have gone up since they bought it. Housing volume has, you know, existing home sales, new builds. They both trended in the wrong direction. It's going to be really hard to outperform when you see something like that happened. So that's really my take. I think I like the deal. I think they definitely paid up for it and they paid up for it at, I mean, in retrospect, not the most opportune time. One of the things with building products, too, is you can, you can make good deals, but it can still not exactly create value, at least in the short term. with a cyclical industry like housing.

It's certainly an industry that the three of us like to follow a lot, and I'm sure we'll be doing shows on it coming up in the future. But that's all the time we do have for today. As always, people in the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for our guest. So don't buy ourselves stocks be silly on what you hear. All personal finance content follows Motleyful editorial standards, and is not approved by advertisers.

Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to Dan Boyd, rest of the Motleyful team for Matt, Lou and myself. Thanks for listening and we'll chat again soon.