The Rundown - Nike Pleads the Fifth on Guidance, CVS Considers Breakup

Episode Date: October 2, 2024

Stock market update for October 2, 2024.

Public.com presents the rundown. Your daily market update in five minutes. My name is Zadadmani, and today is Wednesday, October 2nd. In today's episode, we recap the stock markets' bumpy start for October and the things impacting the markets all over the world. We also recap Nike's troubling earnings and the challenges that face Nike's new CEO. We also discuss CVS plans to turn around their company. Then stick around to the end of the show to find out how much Tom Brady's sports memorabilia is worth. It's a lot. All right, let's go. Go. Well, we're off to a bumpy start to the month. Stocks were down across the board yesterday. The S&P was down nearly 1% and the NASP drop more than 1.5%. In fact, a stock market literally made me sick.

I don't know what I came down with, but it's something. That's why my voice sounds a little funny. Now, there was a lot going on yesterday. You know, you have the port workers going on strike on the East Coast. You have escalating tensions in the Middle East. And oh yeah, the election isn't a month. The Middle East conflict spooked oil markets. Oil jumped around 3% yesterday to around $70 a barrel. Now, prices are still lower than what they were last month, so it shouldn't have a huge impact on the pumps just yet. And here in the States, the port strike is the big story. No one knows how long the strike will last, but the strike could reignite inflation and

increase prices for everything, including food, cars, clothes. Pretty much anything that gets imported. The strike has cascading effects. Truckers that transport stuff to and from ports, restaurants that rely on port workers for business. I mean, that's just to name a few. There's a lot of industries, local and national, that are going to be impacted by this. We talked more about the port strike on yesterday's episodes,

so go check that out if you missed it. I've been learning a lot about how ports work. We'll have to see how all this plays out, but man, inflation finally is settling into a good spot. And now it might start ticking back up because of all this. Let's run through some headlines. Let's start with Nike. Things haven't been so great at Nike recently.

In fact, it's been so bad that Nike announced a couple weeks ago that they're changing their CEO. The old CEO, John Donahoe, he's out. And the new CEO, Elliot Hill, is in. but he won't officially start until October 14th, and he's inheriting a bit of a mess. Nike reported earnings last night, and there are some concerns. Nike's revenues were down 10% to $11.6 billion, slightly missing estimates. Their net income was down to $1 billion, but that slightly beat estimates.

And Nike isn't really sure how the business is going to do moving forward. They actually withdrew their full year guidance. Nike also postponed their Investors Day, which was scheduled for November. So that's not great either. Nike says they're doing this because the leadership transition to give the new CEO, Elliot Hill, some time to kind of, you know, get acclimated. Now, there were some bright spots in the earnings report. China being the main one, sales in China dropped just 4%, which is better than expected,

and the smallest among all their regions. And now with the Chinese government ready to spend billions of dollars to stimulate their economy, that could end up being an area of growth for Nike moving forward. Ultimately, though, these numbers probably don't matter too much because the new CEO is likely going to change the company's existing strategy. and turning around a company the size of Nike takes time. The CEO that's leaving John Donahoe, he took over back in 2020,

and he totally changed the strategy for Nike. He was a tech guy. He made Nike more of a directed consumer company, selling shoes directly to customers through their websites and their stores, which hurt Nike's relationship with wholesalers like Foot Locker and Amazon. And then he also re-released a ton of retro shoes

and end up flooding the market with inventory. Initially, when these retro shoes came out, like the Air Force once, they were a huge hit, but then they stopped being cool. And now the sales for these shoes are down double digits. You know, the Air Force Ones, the Dunks, the Jordan brands, sales are down across the board for all those brands. So there's a good chance that the new CEO coming in is going to undo some of these

strategies, and that's going to take some time. Still, though, investors seem to be a little impatient. Nike stock is down more than 5% in reaction to these earnings and down close to 20% for the year. Let's shift gears and talk about another company that's trying to turn themselves around, CBS. You know, CVS is low-key, a massive company. There's a 10th largest company by revenue. They have over 9,000 pharmacies that are always slightly understaff. They have over 1,000 walking clinics. And they also own the insurance company, Etna. And their business has been struggling across the board.

Retail locations are struggling, maybe because their shelves are usually half empty. There's also been increased competition in the pharmacy space from mailing options and big box retailers like Walmart. And their insurance company, Etna, is dealing with rising medical costs. So now, CVS is thinking about breaking up the company. This is according to reporting from Reuters. Now, I think when CVS bought Etna back in 2017 for $70 billion, million dollars, they thought that they could integrate the health insurance aspect with their CVS brand and their pharmacy location and it would result in synergies and whatever other corporate jargon

you want to use. It just hasn't worked out that way. So maybe breaking out the company is the right move. Now, nothing officially has been decided yet, but conversations are happening. Now remember, CVS is also facing pressures from an activist investor. We talked about this on Monday's episode. Glenview Capital has over a $700 million position in CVS and in fact, they met with CVS's management on Monday to discuss a way to turn around the company. CVS stock is down more than 20% this year, so they got to figure out a way to turn things around. Let's talk about some stocks making moves today.

Energy companies are up across the board. I'm talking Chevron, Exxon, Marathon, Conical Phillips, are just some of the major oil and gas companies that are up around 2% this morning. And it seems to be in reaction to the increase in oil prices, which was caused by the increase in tensions in the Middle East. And when oil prices go up, these companies tend to do. better. So energy companies seeing a nice bounce today, but if you just take a step back, energy stocks have been one of the worst performing sectors in the markets this year. On the

flip side, shares of Humana are tanking after the insurance company reported a drop in membership enrollments in high rating Medicare plans, which would hurt the revenues moving forward. Now, try to stay with me here. Okay. Currently, 25% of Humana's total members are enrolled in Medicare plans four star and above for 2025. For 2024, that number was 902. So that's a pretty significant drop-off. Then on top of that, the Center for Medicare and Medicaid cut the quarterly ratings of Humana's largest Medicare Advantage plan. Now, if some of that made sense to you, then congratulations, but I'll be honest, I don't

fully understand the Medicare star rating and all that stuff, but Humana investors are kind of freaking out. Shares of Humana are down more than 25% in the pre-market. That is crazy. Humana shares are now sitting at 52-week lows. Let's wrap the show with a fun fact. Tom Brady is looking to cash out on some of his most prize possessions, including millions of dollars worth of luxury watches and sports memorabilia.

Brady's going to be auctioning off 47 items that are in total expected to be worth around $11 million at Sotheby's auction on December 10th. Now, the priceiest item seems to be Brady's University of Michigan jersey that he wore for his last game. That's estimated to fetch between $300,000 and $500,000. But the timing for this auction isn't so great. It's not really the strongest market for luxury goods and sports collectibles right now. I'm kind of surprised that Brady's doing this right now anyways. He signed a 10-year, $375 million contract with Fox to broadcast football games. On a totally side note, I'm a big sports fan, all right?

But the amount of money being spent on sports memorabilia, oh my God. It just blows my mind sometimes. Well, all right, guys, that's the rundown for today. Hope you guys enjoyed today's episode. Thank you so much for putting up with my voice. the markets have a good day today. I'll feel a little bit better by tomorrow. As always, if you guys enjoyed today's episode, consider giving us a five-star rating on Apple and Spotify. Thank you guys again for listening. Shout out to Mike and Connor for all the help behind the

scenes. And we'll see you guys back here tomorrow. This is the rundown. Your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as a recommendation to buy, sell or hold that security. Rounddown guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult, respected professionals, learn more at public.com disclosures. In partnership with Zaidamani, brokered services for U.S. listed, registered securities are offered by Open to the Public Investing Incorporated, member FINRA and SIPC.