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Ford poaches Apple exec, Elliott’s stake in Citrix, Sherwin-Williams supply chain issues

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Brian Sozzi and Julie Hyman dive into some of Wednesday's early market movers, which include: Ford making a move to acquire Doug Field, a member of Apple's car project as it continues to focus on upgrading Ford's EV production, Citrix taking steps to prioritize boosting its valuation after Elliott Management Corp disclosed its $1 billion stake in the company, and Sherwin-Williams along with Pulte Group lowering its guidance after Hurricane Ida put a squeeze on access to raw materials.

Video Transcript

[MUSIC PLAYING]

JULIE HYMAN: We're watching some interesting movers here this morning. And Brian Sozzi, you teased this one a little bit earlier. Paint is what we're talking about. Sherwin-Williams, that company coming out with a forecast and cutting that forecast for its sales guidance for the third quarter. And as I mentioned earlier and as you mentioned earlier, it has to do with supply chain, which we've been hearing from so many companies, including another maker of paints and coatings ingredients, that is PPG, which yesterday warned-- and it was sort of a similar warning, right?

It has to do with raw materials costs, raw materials availability. I do note that Sherwin-Williams CEO John Morikis did say in the statement that all of this is impacting our ability to fully meet the strong demand. So it does sound like this demand side of the equation is still strong. It's just a matter of getting stuff to meet that demand.

BRIAN SOZZI: Do you use Sherwin-Williams paint, Julie?

JULIE HYMAN: Do I use? I think I'm a Benjamin Moore person.

BRIAN SOZZI: Fair enough. Yeah I'm a Polo guy. All right, just curious.

Nonetheless, look, I mean, when you saw Sherwin-Williams post their earnings results a couple of weeks ago for the second quarter, it was a disappointing quarter. And I think this company and many others like it-- I'll leave PPG out of it for a second-- are now dealing with the fact their business is no longer growing at the same rate it was during the pandemic.

We essentially saw a 2020 was a year where people went out and bought 40 cans of paint and slapped it on the outside of their homes and made it look like a new house or they went to a new house of their own. They went out and bought a new home and redid it. That stuff is not necessarily happening at the same extent it was last year or at the same pace.

And I think you're seeing executives here really being unable to predict the growth rates in their business because it is so volatile from day to day. Now, I'm not disregarding or just forgetting that Sherwin-Williams, in fact, is probably dealing with supply chain problems, worker shortages, you name it, higher costs of resin, which they call out here. But again, I mean, to have this magnitude of earnings warning, I'm surprised the stock is not down even more.

I mean, I'm looking at the outlook here. For their Americas group, they're now looking for sales to be up or down low single digit percentage. They were looking for pretty much a high single digit percentage increase when they came out and guided in late July. I mean, that's a big whiff, Julie, that's a big whiff.

JULIE HYMAN: It is a big whiff. And I must cop to missing Myles Udland today and our combined suburban New Jersey anec-data. So I'll just give my own anec-data today, since he is no longer with us. And that is that my neighbor across the street, they're doing a renovation of their kitchen and some other stuff. And the neighbor told me that the contractor who was doing that job is now booked out for the future until next September. In other words, has other contracting jobs from now through next September and is now taking reservations for that period of time, which is visibility, right, that this demand is going to last for a while.

Now, will all those people keep those jobs? I guess we'll have to wait and see. But I just thought that that was a really interesting indicator of enduring demand. I don't know what's happening with the Queens indicator, Brian Sozzi. But that's what I'm seeing.

BRIAN SOZZI: The Queens indicator is off because there's no paint going on outside some of these buildings. But you should have told your neighbor. He could just give me some Cardano. I would have came over and painted his house. Let's get that job done.

I know we're coming up against the opening bell here. But look, PPG also warning supply chain problems. PPG, we've talked to them extensively throughout the pandemic. They've been a very aggressive acquirer of companies. They are seeing sales volumes hit by $225 million to $275 million because of supply chain challenges of their own. So certainly, it's not just a Sherwin-Williams.

JULIE HYMAN: Yeah. And one more thing, one more quick thing. I just wanted to mention, in addition to the supply chain issues that were already happening, Hurricane Ida has now, at least for the short term, exacerbated those issues. There is the opening bell, as you mentioned. Red Wire is ringing it to celebrate its listing. That is a space infrastructure company. We've had quite a few of those as of late, space-related companies coming to market.

Well, we were just talking about Sherwin-Williams and supply chain. Let's talk Pulte Group for a second here. The homebuilder also coming out this morning and cutting its guidance. It's the exact same thing that's going on here. The company says it can't get building materials. It said before, it has said in the past that it has been deliberately restricting home sales because it's trying to get things like lumber, things like windows.

Now it says in the third quarter, it's going to report 7,000 closings. The prior range was 7,300 to 7,600. And it's also cutting its guidance for the full year. So again, it doesn't seem to be the demand side of the equation. It's the problems in getting stuff. And this seems to be a sustained issue.

BRIAN SOZZI: Yeah. And Julie, it's also the worker shortage in the housing market. I think that is a story that has been well told over the past 18 months or so. Just can't get workers to go out there and shovel concrete and pour that into homes and build a foundation for a house.

Or even if a homebuilder like Pulte is able to go out and get the wood they need, can't find the worker to go out and build that structure. So that looks like it's getting worse because at the end of the day, if you're a worker and you can get an office job, whatever it might be, why go out there and lift bags of concrete?

JULIE HYMAN: Yeah, I guess that's right. Although, those do tend to be pretty well-paying jobs. By the way, we're going to get much more insight into the current state of the jobs market, the so-called JOLTS data, the Job Opening and Labor Turnover Survey, I think I've got that right. It's coming out at 10:00 AM today. So we're going to have that data when it comes out.

Another move that we're watching has nothing to do with supply and demand, at least not of the physical type. It's Citrix Systems, the software company. Looks like Elliott Management is getting back involved with Citrix. It had been involved before, now getting back involved. Has a more than $1 billion stake in the company. That's more than 10% of Citrix Systems.

Now, as I mentioned, they had in the past, Elliott did, a board member on Citrix's board. The stock had recovered to some degree. The board member did not stand for re-election. Then the stock has gotten hit again a couple of times by some recent disappointing earnings reports. And Elliott, Sozzi, is right back in there.

BRIAN SOZZI: Yeah, well, I was just so excited about the JOLTS report, I'm hoping we just talk about Citrix and keep it moving. But no, if you're Citrix, you're not having a good day today. You do not want to mess with Elliott Management. I mean, their reputation, they are they are hard core in what they do. And they have historically driven very strong results for their investors. Look at what they have done in eBay. I believe they were also an AT&T a year and a half or so ago too. Drove big changes.

So I think the key takeaways here and why you're seeing Citrix up-- I mean, I think Citrix investors are realizing change is likely to come to Citrix in some form, whether it's cutting expenses, a new buyback, whatever it is. I mean, Elliott is relentless in what they do, relentless.

JULIE HYMAN: Yes. And I should say, we don't know exactly what those changes are as of yet. The reporting that was out there from "The Wall Street Journal" did not yet have clarity on what those changes might be, what Elliott is pushing for this time around.

Finally, want to hit Ford and Apple this hour. As you put it-- how did you put it? That Ford is--

BRIAN SOZZI: It's stuck at--

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BRIAN SOZZI: I mean, Apple's not making any car, come on. Come on, what does it look like, a giant mousepad with wheels on it?

JULIE HYMAN: This whole car project at Apple is a secret one, quote, unquote, secret because it seems to be in an open secret, right? But Doug Field had been helming that effort at Apple. And now Ford is taking it back, by the way. I guess Field worked there very early on in his career then worked at Tesla, helped launch the Model 3, then worked at Apple.

And this is just another sign, it seems to me, Brian, that the establishment automakers are trying to prove their electric bona fides. And again, I'm waiting to see the proof in the pudding. I'm waiting to see how many of these cars they actually make, how many of them they actually ship, and what's going to happen as a result of that.

Likewise with Field, let's see what he actually does there.

BRIAN SOZZI: Yeah, I think it really is becoming clear. Apple has had a lot of departures from its car team. And it's really unclear what in fact they are building. Is it just a LiDAR system to compete with, let's say, Aluminar? Is it an actual car? It's really hard for me to imagine the tech geeks out in Cupertino really wanting to build actual cars and get their hands dirty inside of manufacturing plant. I mean, let's get real. That's just unlikely to happen. They want to cash their big, fat checks by making iPhones and Apple watches.

But this is a big win for Ford. I was talking to a couple of Ford insiders about this move. And they're very excited about Field. He has quite the resume, of course worked on Tesla and the Model 3. So it's hard not to be excited about bringing that institutional knowledge on electric vehicles at a time when Ford's stock, I believe, is up 50% year to date, smashing Apple's year to date gain of about 19%.

And Ford has really started to win over investors, led by CEO Jim Farley, that they can compete, not only compete in electric cars. You have the electric F-150 come out. You have the electric Mach-E Mustang. Not only compete, really take it to Tesla here and carve out a very strong niche in the space.

JULIE HYMAN: We will see. And on the other hand, if Apple doesn't come out with the car, I would argue its investors don't necessarily care. It's got some other products that sell pretty well. You're going to talk more about that in a little bit.