🎙️ America's Shipbuilding Problem

In yesterday’s intro, we wrote about how the IPO market was slowly thawing. Progress can’t come fast enough for investors in venture capital funds, though.

Payouts from VC funds hit their lowest level last year since the 2008 Financial Crisis.

💭 For VC funds to make payouts, they must have a way to cash out their investments in startups, which usually come through M&A or IPOs.

Our Chart of the Day shows more.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• Earnings round-up with Coca-Cola, Hasbro, and Restaurant Brands International

• Why China’s shipbuilding industry dominates

• The booming Patrick Mahomes economy

All this, and more, in just 5 minutes to read.

Chart of the Day

In The News

👉 Earnings Round-Up

Coca-Cola:

“Is Pepsi okay?” No, it’s not. Investors tuned in on Tuesday to hear specifically how Coca-Cola was doing, and the results were mixed. While revenue came in strong at $10.85 billion, profits per share didn’t exceed expectations.

And higher revenues weren’t because they sold more cans of soda. Instead, higher prices helped offset sales volume declines in North America.

• Still, Coke products fared better than Pepsi, with volumes dropping only 1% in North America versus 6% for Pepsi.

Worldwide, Coca-Cola’s “organic” revenue — stripping out sales from acquisitions — grew 12% last quarter, and executives think organic growth will continue to increase by 6-7% this quarter.

After rallying, Coca-Cola shares reversed and fell over 1% following the report. (Shares are up roughly 30% over the past few years vs. 78% for the S&P.)

Hasbro:

The toy business isn’t as great as Santa makes it out to be. Leading toy company, Hasbro, also reported earnings on Tuesday, revealing a 20% hit to its fourth-quarter revenue.

• For the full year, revenue fell 15% while the company slashed its inventories by over 50%.
  

• Profits came in at nearly half of Wall Street’s estimates, pushing the stock 7% lower.

While the sales outlook for 2024 isn’t inspiring, Hasbro is trying to squeeze more profit out of those dollars by dramatically cutting costs. Cost cuts are expected to hit $750 million by the end of 2025 — the company already laid off 15% of its workforce (1,100 employees) in December.

Restaurant Brands International:

Keeping the focus on consumer spending, Restaurant Brands International, the owner of Tim Hortons, Burger King, Popeyes, and Firehouse Subs, beat both earnings and revenue estimates.

Net sales climbed 8% to $1.82 billion, led higher by Canadians buying more coffee from Tim Hortons, which saw sales at existing stores rise 8.4%.

Burger King also reported strong same-store sales growth at 6.3%, marking a successful turnaround plan to remodel restaurants and spend more on advertising.

• Yet, its stock dropped over 3% after reporting earnings.

Read more

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🚢 China’s Shipbuilding Industry Dominates the World

One of America’s great strategic assets during World War II is long gone: its shipbuilding industry. Like many great powers before it, the U.S. was a world leader in churning out ships for commercial and military purposes.

Now, it contributes “next to nothing” to global shipbuilding, per the WSJ, with China producing over 50% of all new commercial ships in 2023.

• Adds one expert, “The degree to which (Chinese shipbuilding) dwarfs American shipbuilding is just unbelievable.”
  

• At 5% of global output, Europe hardly moves the needle, either. Production outside China is concentrated in Japan and South Korea.

In peacetime, robust shipyards support global trade. In war times, they’re an invaluable tool for replacing and repairing damaged military vessels.

• Niharika Mandhana of the WSJ writes, “In a protracted conflict, China’s shipyards would give its navy a significant upper hand.”
  

• China’s shipbuilding industry increased output by 12% year-over-year in January. The country has also surpassed Greece as the world’s largest shipowner, capturing almost 16% of global market share.

Why it matters:

As U.S. Navy Secretary Carlos Del Toro puts it, “History demonstrates a clear pattern: No great naval power has ever existed without being a dominant commercial maritime power, encompassing both shipbuilding and global shipping.”

A lackluster commercial shipbuilding industry in the U.S. isn’t just an economic problem; it’s a national security problem.

Read more

More Headlines

👀 Over 123 million viewers tuned into the Super Bowl, a record

🔥 Inflation data for January comes in hotter than expected

🛫 Carl Icahn buys large stake in Jet Blue

🍾 OpenAI is on a record pace to hit $2 billion in revenue

⛳️ Tiger Woods launches partnership with Taylormade after 27-year deal with Nike ends

🏈 The Incredible Value of Patrick Mahomes

Superstar quarterback Patrick Mahomes added to his resume last weekend, securing his third Super Bowl and third Super Bowl MVP, all before turning 30. 

It’s a good time to understand the Mahomes economy, or how much he earns as the most valuable football player on the planet. After Tom Brady retired with seven Super Bowls, Mahomes became the face of the NFL. 

• In 2020, Mahomes signed the biggest deal in NFL history: 10 years for about $450 million. That comes out to nearly $140,000 daily, every day of the year, for a decade.
  

• He restructured the deal in 2023 to reach roughly $52.65 million annually. (He also just earned a ~$1 million bonus for the Super Bowl victory.) 

That’s just his on-field earnings. By some estimates, he earns over $20 million annually off endorsements with companies like Adidas, State Farm, Oakley, and DirectTV. 

• Mahomes is also invested in several sports teams, sports technology, and restaurants.
  

• Mahomes owns a fraction of MLB’s Kansas City Royals and is the youngest owner in MLB history. His wife, Brittany, owns a share of the city’s pro women’s soccer team, the Kansas City Current, and they have a stake in Kansas City’s MLS team. Mahomes also invests in pickleball, Formula 1, golf, and Whoop, a wearable tech company.
  

• He also owns several multi-million dollar homes in Kansas City and Texas.

Why it matters:

Mahomes embodies how big sports contracts have grown and how valuable top players have become. 

Billionaires’ row: Several athletes have already become billionaires, and Mahomes could be next, joining Michael Jordan, Tiger Woods, Cristiano Ronaldo, Magic Johnson, and Lionel Messi, among others. 

• Although they play(ed) different sports, they share one trait: They’ve earned most of their wealth off the field by monetizing their image and likeness through endorsements, royalties, and investments. 

Could Mahomes be next? He’s on track to become one of the wealthiest athletes ever: Forbes also placed Mahomes, only 28 years old, at No. 23 on its 2023 list of the world's highest-paid athletes, and his image is only growing.

Read more

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Quick Poll

Yesterday, we asked: Do you think the office commercial real estate market nationwide will bounce back within the next two years?

— One No voter wrote, “Who wants to go BACK to the office...COVID proved we didn't NEED to go into the office every day. The office commercial real estate will need to drastically shift the next 2-10 years.”

— Another commented, “I think smaller to medium-sized companies will embrace the Remote work model. It will be a “perk” in the hiring process, so they can potentially hire away talent from the large-cap companies.”

— And, “It will take longer than two years to bounce back, but it will certainly happen. (3-5 yr timeframe).”

See you next time!

That's it for today on We Study Markets!

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