Mad Money 7/29/25 | Audio Only

Key Concepts

• Earnings Shortfall: Earnings not justifying the market run-up.
• Tariff Turmoil: Negative impact of tariffs on consumer sentiment and spending.
• Consumer Weakness: Slowdown in consumer spending and confidence.
• Rate Cut: Potential Federal Reserve action to offset economic damage.
• Patent Cliff: Impending expiration of patents for key drugs, affecting pharmaceutical companies.
• HPV Vaccine: Vaccine for Human Papillomavirus, crucial for preventing cervical cancer.
• Deregulation: Reduction or elimination of government regulations, particularly in the energy sector.
• LNG (Liquefied Natural Gas): Natural gas converted to liquid form for easier transport.
• IPO (Initial Public Offering): The first sale of stock by a private company to the public.
• ARR (Annual Recurring Revenue): A metric used to measure the recurring revenue a company generates from its subscription-based business model.
• Rule of 40: A metric used to assess the performance of software companies by adding revenue growth rate and profit margin.
• Forever Stock: A stock that performs well consistently over a long period, suitable for long-term investment.

Earnings and Market Performance

• The market experienced a downturn due to earnings coming up short, despite positive factors like potential trade deals with China and strong economic data.
• The Dow lost 205 points, the S&P dipped .3%, and the Nasdaq declined 38%.
• The consumer sector showed weakness, raising questions about whether the Federal Reserve (Fed) should cut interest rates.

Impact of Tariffs

• UPS reported a dismal quarter, with CEO Carol Toé noting that the US small package segment was unfavorably impacted by historically low consumer sentiment.
• Manufacturing activity in the US remains soft, with average daily unit volume declining by 7%.
• Whirlpool was crushed by foreign competition due to companies frontloading inventory ahead of tariffs, leading to a dividend cut from $1.75 to $0.90 per share.
• Stanley Black & Decker faced an $800 million tariff hit due to imports from China and Mexico, impacting their stock price.
• PayPal reported slower growth in payments, with CFO Jamie Miller citing a slight softening in retail spending in the US, most apparent in areas likely impacted by tariffs.

Company-Specific Analysis

• UPS: Stock plunged more than 10% due to weakening consumer sentiment and the impact of tariffs.
• Whirlpool: Stock down over 13% due to weak earnings, reduced forecast, and dividend cut.
• Stanley Black & Decker: Stock down 7% due to weak consumer demand and tariff impact.
• PayPal: Stock fell more than 8% due to slower growth in payments and tariff concerns.
• Royal Caribbean: Stock declined due to expectations being too high.
• Boeing: Stock got hit despite a great quarter with beautiful cash flow, Kramer considers it a buy.

Takeovers and Mergers

• Union Pacific's acquisition of North Southern faces antitrust concerns but is likely to be approved under the current administration.
• Baker Hughes is buying Chart Industries.
• Potential combination of Palo Alto Networks and Cyber Arc.

Merck Analysis with CEO Rob Davis

• Merck reported a solid quarter with $15.8 billion in sales, driven by strength in oncology and animal health.
• Win River, a treatment for pulmonary arterial hypertension, is reaching a $1 billion sales run rate.
• Gardil, Merck's HPV vaccine, is facing challenges in China due to economic struggles affecting consumer spending.
• Merck is focused on diversifying its pipeline and is excited about the acquisition of Verona for $10 billion, bringing in Otto, a new mechanism of action for COPD.
• Davis expressed confidence in the safety and efficacy of Merck's vaccines, noting the recent FDA approval of kles rovamab for RSV.

Figma IPO Analysis

• Figma, a design software company, is launching an IPO with an initial valuation near $20 billion.
• Figma's software is used by 95% of the Fortune 500.
• Last year, Figma had 48% revenue growth, with over 10,500 customers paying more than $10,000 in annual recurring revenue (ARR).
• Figma's net dollar retention was 134% in 2024, indicating strong customer loyalty and increased spending.
• Figma is profitable, with operating income growing by 369% last year.
• Figma meets the "Rule of 40" due to its revenue growth and positive operating margin.
• Adobe attempted to acquire Figma for $20 billion but was blocked by antitrust regulators.
• Concerns exist about the impact of generative AI technologies on enterprise software and Figma's profitability.
• Most of the IPO proceeds are going to existing shareholders, not the company itself.
• The IPO price range has been raised from $25-$28 to $30-$32, with reports of being 40 times oversubscribed.
• At the high end of the new price range, Figma would have an implied market cap of roughly $19.4 billion.
• Kramer believes that if the stock pops right out of the gate, it will be too pricey.

Waste Management (WM) Analysis with CEO Jim Fish

• WM delivered a healthy top and bottom-line beat, driven by strength in the core business and positive guidance.
• The stock jumped more than 3% following the earnings report.
• Jim Fish referred to WM as a "forever stock" due to its consistent performance.
• The acquisition of Sterycle has been a fantastic addition, benefiting from the aging population.
• Healthcare solutions margins improved by 170 basis points.
• WM has smoothed out fluctuations in the recycling business through contract adjustments and diversification.
• The commercial and industrial businesses, along with municipal solid waste, construction, and demolition on the landfill side, are healthy or improving.
• Construction and demolition business is showing strong signs of improvement.
• California business was up a bit due to fire cleanup efforts.
• Increasing regulatory requirements work in WM's favor to some degree.
• The industry is seeing a decline in landfill airspace availability, but WM is in an advantageous position with longer landfill lives in key MSAs.

Lightning Round Highlights

• Toyota Motor Company: Kramer is taking a pass due to recent price increases.
• Advanced Auto Parts: Kramer recommends Auto Zone instead.
• Fortnet: Kramer suggests waiting for Crowdstrike to decline and then buying it.
• Service Now: Kramer is starting to get away from that kind of enterprise software.
• UGI: Kramer will be a buyer of the stock.

Deregulation and LNG Exports

• Deregulation is showing positive signs in the energy sector, particularly with liquefied natural gas (LNG) exports.
• The US is building massive LNG export terminals to ship natural gas overseas.
• Each LNG train costs $4-5 billion to build.
• The US is the world's largest LNG exporter and has the potential to wean Europe off Russian natural gas.
• The Biden administration imposed a temporary pause on approving new LNG terminals in January 2024, but the Trump administration is fast-tracking pipelines needed for natural gas transport.
• Baker Hughes acquired Chart Industries for $13.6 billion, reflecting the growth potential in the LNG sector.
• Kramer suggests taking advantage of deregulation by investing in anything LNG.

Conclusion

The market is facing challenges due to earnings shortfalls and the impact of tariffs on consumer sentiment. While some companies are struggling, others like Merck and Waste Management are showing strength and growth potential. The Figma IPO is generating excitement, but concerns exist about its valuation and the impact of AI. Deregulation in the energy sector is creating opportunities for LNG exports and related investments. The Fed's decision on interest rates will be crucial in determining the market's direction.