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Why Everyone Pays Attention to FedEx

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Plus a look at other stock market news from companies including Adobe, Starbucks, and Twilio.

In this podcast, Motley Fool senior analysts Emily Flippen and Ron Gross discuss:

  • FedEx shares having a historically bad day amid talk of a recession.
  • Adobe spending $20 billion for a start-up software-design firm.
  • Optimism around Starbucks after an impressive (and detailed) investor day.
  • Twilio laying off 11% of employees.
  • Two business leaders and their legacies.

John Ourand from the Sports Business Journal discusses Amazon's investments in NFL programming, Disney's thinking about ESPN, college football playoff expansion, and storylines for the MLB playoffs.

Ron and Emily share two stocks on their radar: Union Pacific and Costco.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on September 16, 2022.

Chris Hill: How bad is it for FedEx? How much does Amazon have riding on Thursday Night Football? And who gives away an entire company? Motley Fool Money starts now.

From Fool global headquarters, this is Motley Fool Money. Some Motley Fool Money radio show. I'm Chris Hill joining me in studio senior analysts Emily Flippen and Ron Gross. Good to see both. Hey, we've got the latest headlines from Wall Street. We'll talk NFL prime time with John Ourand from the Sports Business Journal. And as always, we've got a couple of stocks on our radar.

But we begin with another rough week for the markets, the Dow, S&P 500 and Nasdaq all down again this week, punctuated by shares of FedEx falling more than 20% on Friday. First-quarter profits and revenue for the bellwether company were lower than expected. Ron will get to FedEx itself in a minute. But this was another rough week where it was hard to find optimism anywhere. If you can buy shares of pessimism, I feel like that is a stock.

Ron Gross: That's fair. I didn't enjoy this week. I'll be honest with you. The bottom line is that we got some inflation data. The numbers came in hotter, higher than expected or even hoped for, which caused investors to believe that the Fed would have to continue to aggressively raise interest rates, and that sent the market down. At the same time, as you mentioned with FedEx, the economy's starting to show signs of weakness, which is, after all, the desired outcome of the Fed. We shouldn't be surprised; that's what they're trying to do. I think we're likely to see companies start to miss their earnings estimates or actually bring estimates down over the next quarter or two as the economy does in fact start to slow, and then we'll see if we actually slip into a recession or we manage to avoid one.

Chris Hill: Emily, normally, I get excited for earnings season, and this was one of those weeks that makes me think maybe when earnings season kicks into high gear next month, it's not going to be pretty.

Emily Flippen: Yeah, FedEx is a bellwether stock for the global economy because you can think about the thousands of businesses that use their services to run their own businesses. It's almost like a canary here saying, "Hey, headed into the holiday season, things might not be that great."

Although I will say a lot of the headwinds that FedEx is experiencing in the quarter were things that were very prevalent last quarter as well. They didn't make a lot of cuts decreasing their cost structure in order to meet guidance that they had set out previously. It just got my head scratching about why they weren't a bit more proactive with this last quarter.

Chris Hill: Ron, in terms of FedEx itself, obviously, the profits and revenue were not great. They appear to be taking a pretty aggressive approach to cost savings. They're talking about shutting down offices, deferring hiring, and more.

Ron Gross: Yes, out of necessity, quite frankly. When you have revenue up only 5% and earnings actually down 6% and margins getting smacked around due to weakness. Quite frankly, everywhere they highlighted -- Asia and Europe, but domestically was no treat either -- you have to look at rightsizing the business. They're going to do things like close 90 office locations, close five corporate office facilities, defer hiring, reduce flights, cancel projects. They're going to reduce their capex budget for the year by $500 million. It's still $6.3 billion, but half a billion dollar cut to that.

They're doing what they can. They withdrew their full-year guidance. One of the reasons the stock is down so much because investors and analysts just don't like when companies are forced to do that because it shows that they don't have visibility into their own business. If they don't have visibility than why should an investor feel that they have any visibility?

Chris Hill: I was going to say, is that something we should expect more of as we get into earnings season next month? Or maybe not expect, should we not be surprised if other companies follow suit and just pull back guidance altogether?

Ron Gross: I think it's fair to say yes. The more that do it then it easier becomes for others to do it. Companies are hesitant to do it because even though we'd prefer they worry about their business and not their stock price, they do worry about the stock price and the analyst community, so I wouldn't be surprised if we start to see a lot of guidance being pulled.

Emily Flippen: Oh, here's my confusion. They talk about this impending recession, and certainly they're seeing the impacts in their business today. But everywhere I look. Chris, we're talking earlier, we're seeing lines outside of Apple stores for their new iPhones. We're seeing unemployment still really low. So part of it just has me confused, because we're getting one narrative from companies right now saying look, earnings are going to be bad, headed into next earnings season. Shipments are down. But at the same time, American consumers still seem to be spending money.

Ron Gross: They should do sending money, and employment is still quite robust. But as earnings come down, that's when companies will, you'll see the lag, companies will start to say where can we cut? Just like FedEx is. Then we'll probably see the employment picture change a bit. That's where you probably either enter a recession, hopefully a mild one, or maybe just skirt around it, but clearly the economy will weaken.

Chris Hill: Well, not every company is cutting back on spending money. On Thursday, Adobe announced third-quarter results that got completely overshadowed by their other announcement, which is that Adobe is buying Figma, a software design firm, in a cash-and-stock deal worth $20 billion. Shares of Adobe fell 17% on Thursday.

Emily, safe to assume that absolutely everyone thinks they overpaid for Figma?

Emily Flippen: Well, this is just chump change. Who can't reach into their couch and pull out a good $20 billion and change?

No, this is a huge deal and it led to Adobe's largest drop in over a decade. So investors are very scared. Unfortunately, it overshadowed what was a pretty strong quarter otherwise. Revenue rose 12% for the business. Margins expanded. And while guidance was predictably weak, the business itself still remains very stable.

But there were two main things that were contributing to, I think the investor response to this acquisition. First being, obviously, the price tag; $20 billion is a lot. It's double Figma evaluation that they had this time last year, and that's at a time when other tech valuations have dramatically fallen over the course of the year. It values the company at around 50 times annualized recurring revenue, extremely lofty valuation. Part of the response we're seeing is in regard to the price tag.

But secondarily, it's in regards to Adobe strategy here. I mean, this is a big departure for Adobe in the past. They've always been acquisitive, but acquisitions to this point have largely been tuck-ins and at reasonable multiples. It shows how disciplined the management team has been with capital allocation to this point.

But clearly, there is something about this deal that is reactive and not proactive, in my opinion. They're looking, in my opinion, to take out what is probably a really formidable competitor, which does leave me confused about what potential regulatory impact there could be as regulators take a look at this massive deal. But it's certainly rubbing investors wrong way this week.

Chris Hill: You think if Microsoft made this exact same deal, they would get not the same level of scrutiny? You would like to thank any deal gets scrutinized by regulators, but would they have a better chance of having an approved?

Emily Flippen: I definitely think they would, in part because their offerings aren't as directly competitive as Figma is with Adobe's offerings today. They also have a bit of a better budget, I suppose, for purchases of this size. More importantly, it's not completely different strategy for Microsoft. I still think it'd be scrutinized in terms of the price. There's no reason why a valuation should double in a year when other valuations have come back down to earth. But in this case, I think it's a combination of both that price tag and Adobe's past strategy.

Chris Hill: Shares of Adobe are at their lowest point in almost three years. You'll look at that and think, oh, this might be an opportunity to buy? Or still too many question marks around this deal.

Emily Flippen: I still have too many question marks around this deal. Large acquisitions like this rarely pay off, especially when they're made out of necessity instead of desire.

Chris Hill: Shares of Starbucks up this week. On Tuesday, the coffee giant held an investor day presentation. Among the highlights, the company will be investing $450 million to improve coffee machines and stores with the goal of speeding up the process for baristas.

Ron, when you consider 70% of coffee sales are cold drinks and some of those cold drinks are really complicated to make, that's one of those investments that could move the needle. But there were a bunch of announcements that stood out to you.

Ron Gross: Here, they covered a lot of ground. I think if you're a shareholder, which I am and I think you are as well, there was a lot to like here in what they're calling their reinvention plan. Which emphasize some of the things you talked about, some cost reductions, enhanced employee benefits, which I think is quite important actually, and technology. It's designed to keep that line moving when you're ordering your triple caramel mocha ice latte with one shot of decaf and two shots of regular. We're going to have a better throughput, I think, and that will improve the barista experience as well as the customer's experience.

This plant is going to accelerate gross. They think they'll it'll drive EPS growth 15% to 20% annually through fiscal 2025. Guiding for really strong comps both here and in China. China remains a big part of this story, especially as COVID subsides.

They plan to accelerate their store expansion, growing the count about 7% annually; that'll be 3% to 4% growth domestically, 13% in China. Many of those new stores will be pure drive-throughs or delivery hubs, not the full walk-in cafes that we've become used to. They're going to spend $2.5 billion to $3 billion annually to build these out.

They're on the move in both improving efficiencies, building new stores, improving margins, and that's going to flow down to the bottom line as their new CEO takes the reins from Howard Schultz.

Chris Hill: Earlier, I was talking about pessimism. I think it's worth pointing out the optimism around Starbucks and this event. This is a bad week for the market. Shares of Starbucks are up off of the presentation they made, and I've got to be honest, Ron, my reaction in the moment when they were talking about "and this is what we think it's going to do for our earnings per share," I got a little nervous and I just thought, oh God, don't build up expectations. Don't say that out loud. But when you look at the effect of the new machines, these new processes, and how it really could speed up throughput and boost the same-store sales numbers, maybe it's not that crazy.

Ron Gross: It's not that crazy, and they were quite specific. As you say, they're setting themselves up to have to perform here; otherwise they're going to be taken to task. The business looks strong, and the stock's is not that cheap at the PE of 30 times currently. But the E of that PE, I think, is going to start to accelerate and then so in reality, that 30 times will be lower or come down. A 2.2% yield nothing to sneeze that either.

Emily Flippen: Well, as order of the nonfat mocha, iced extra shot with caramel drizzle drink, I'm personally attacked.

But no, to your point, I'm really interested to see what Starbucks' new CEO has for this company moving forward because the investor day really didn't focus on that leadership transition at all. I think the market is probably going to be asking into next year, what's the vision here and how is it different in the vision that Howard Schultz has already laid out?

Chris Hill: After the break, we've got a closer look at two business leaders and the legacies they are leaving. Stay right here. You're listening to Motley Fool Money.

. . .

Welcome back to Motley Fool Money. Chris Hill here in studio with Emily Flippen and Ron Gross. This week, Twilio announced plans to lay off 11% of its workforce. Jeff Lawson, the CEO of the cloud communications software company, said the decision was extremely difficult but necessary.

Emily, Twilio is not profitable, and Lawson clearly is hoping that this is one of the moves that are going to help them get to profitability in 2023.

Emily Flippen: Laying off 11% of somebody's workforce is certainly no joke, but neither is more than a billion dollars in operating losses over the past year, which Twilio has experienced. Management has been really up front about their goals to reach an adjusted level of profitability over the next couple of years. That's not going to be easy if you have what some believe to be a relatively bloated company.

What you have here is another software company -- I call it software companies in particular, but companies have benefited from the pandemic pull-forward -- looking at their business, how it's grown over the past couple of years, and realizing that they've made mistakes by allowing themselves to get spread too thin and as a result, overhiring in areas that are maybe no longer necessary for the core functionality of the business.

It's a very hard decision to make, and I think there's lots of discussions about how Twilio communicated this decision to its workforce that are worth considering and breaking apart. But it's clear that this was not an easy decision, and more importantly, I don't think they're the only company that's going to be having to make these tough decisions over the next couple of quarters. Because it's clear the economy is not set to get significantly better in the near term, so ensuring that they have the ability to self-fund their operations without the need for outside capital, whether it be from the debt markets or shareholders, is going to be critical.

Chris Hill: It's going to be interesting to see, because you're right, Twilio is not the only company that has basically talked about this narrative. Hey, we hired too much over the last couple of years; we're going to have to be more efficient going forward. It is going to be interesting to see if a few years down the line, these companies -- and you're right, a lot of them are software companies -- basically take a page out of what we saw from the housing market, where they course corrected in the wake of the Great Recession and really just got very lean in terms of the number of houses they built. Long term, Twilio and a lot of other companies may end up being much more efficient as a result.

Emily Flippen: I hope so, and you're giving me the opportunity to get back on the soapbox I was on last week as regards to efficiency here, Chris. But unless you fix the underlying cause that caused the inefficiencies to be created in the first place, you could be looking at a business that is going to be extremely inefficient in under five years. One-time layoffs do not fix the problem. They're the symptom of an underlying problem. I hope that all of these companies -- Twilio, Shopify handful of other software businesses that have laid off massive portions of their workforce -- I hope they take a deep, hard look at their systems and fix what's clearly broken.

Chris Hill: More than 50 years ago, Yvon Chouinard founded Patagonia. Chouinard and his family are giving away ownership of the apparel company. Patagonia will go into a trust, and all of the profits that are not reinvested in the business will go to organizations focused on protecting wildlife and fighting climate change.

Ron, this is about a $3 billion company. I don't recall ever seeing this type of move before. We've certainly seen leaders of companies give away their fortunes. I've never seen giving away the entire company like this.

Ron Gross: Nor have I, and as you say, we've seen things like the Giving Pledge with Gates and Buffett giving large portions of their wealth to charity over time. But this is really putting your money where your mouth is. It's very admirable, it's very impressive, and it's very unique. This is a lot of money. This is his family's wealth. This is a company that has been in the family for quite some time, and they really are committing to climate change and the climate crisis, I should say. It's an interesting structure with trusts, and it'll still be a for-profit corporation. But how to get this done is quite interesting for those that find that stuff interesting, but I'm just very impressed.

Chris Hill: Patagonia is also one of those brands that people who are fans of it are really passionate about it, and it seems like this move will only engender more of that going forward.

Ron Gross: How could you not support a company that you liked, anyway, after you see what they're doing for the environment? Really impressive.

Chris Hill: Pour one out for Fred Franzia. The co-founder of Bronco Wine Company died this week at the age of 79. And of the hundreds of brands of wine Franzia's company owned, he's probably best known for the Charles Shaw brand, also known as Two Buck Chuck, for anyone who's ever been to a Trader Joe's.

Emily, I feel like we need to go shopping after this and just hit up the local Trader Joe's and just fill up the cart with some Two Buck Chuck.

Emily Flippen: I never thought I had a real-life hero. But now when people ask me who my hero is, I think I have an answer for them, because anybody who's aiming to democratize access to wine the way that Fred Franzia has worked is really good in my book.

Here's what I will say as we got into the store, yes, Two Buck Chuck is great. But the thing that came to my mind immediately was Franzia's boxed wine. How is that not more disruptive than Two Buck Chuck? Well, it turns out Mr. Franzia actually sold the name brand to, I believe, Coke back in the 1970s. Despite the name, they don't own the Franzia brand.

Chris Hill: Ron, Emily points to something which is pretty interesting in terms of Franzia's life and his career, which is that he was not beloved within the industry because he was very up front about the fact that a lot of wine is just wildly overpriced. He really did do a lot to essentially democratize what was once a pretty snooty product.

Ron Gross: For sure. The price thing really angered some in the industry, and you could understand why, but they also were a little bit upset because he was trying to say that there really isn't that big a difference between the $2 bottle, a $10 bottle, or a $20 bottle. There are many within the industry who vehemently disagree with that, and they thought he was doing the consumer a disservice by saying that they were all similar.

Emily Flippen: Although the only difference is the labels are cuter on the more expensive wines, right?

Chris Hill: Absolutely. Emily Flippen, Ron Gross, we will see you later in the show.

Up next, what should investors expect from Amazon's investment in Thursday Night Football? We'll talk with John Ourand of the Sports Business Journal. Stay right here. You're listening to Motley Fool Money.

. . .

Welcome back to Motley Fool Money. I'm Chris Hill. More than 120 million people watched the NFL's opening weekend. Here to talk through some of the latest sports business headlines is John Ourand. He covers media for the Sports Business Journal, and he joins me now from Washington, DC. John, thanks for being here.

John Ourand: Thanks, Chris.

Chris Hill: Let's start with the NFL. You and I are recording this on Thursday afternoon. We are just a few hours away from the Thursday-night game between the Chargers and the Chiefs, and what is noteworthy from a business standpoint about this game is that it will be shown exclusively on Amazon Prime.

There are a couple of different ways we can go here, John. But I'm curious what you think this does to the TV landscape. Because as a shareholder of Amazon, I'm hoping this works out for them. But this doesn't seem -- to mix sports metaphors -- this doesn't seem like a slam dunk, and I'm just curious what your thoughts are in terms of what this means for Amazon and what this means for other networks.

John Ourand: What this means for Amazon is they have Amazon Prime, which is a video service, and they're trying to build out the video service. If you have an entertainment-focused video service, you have a lot of competition. You have Netflix, Apple Plus, the Disney bundle, Peacock, Paramount, you can go on and on. Amazon has decided that one way to differentiate itself from all these other services is to go after high-profile sports, and so they got the biggest daddy that there is in terms of the NFL. NFL's Thursday Night Football is going to be exclusive to Amazon.

Amazon is now paying, I think it's a little bit more than a billion dollars a year for the rights to these games. Amazon is spending a boatload to produce these games. They got Fred Gaudelli, who is a famed producer, who has been doing Sunday Night Football at NBC for years, to come over and do it.

Al Michaels is the best play-by-play announcer, I think in probably NFL history. He's been calling the main prime-time games since 1986, is doing the play-by-play. Kirk Herbstreit, another high-priced on-air talent, is doing the analysis.

When you watch these games, when you watch the games on Amazon, it is going to feel like a broadcast prime-time game, and that, for the TV business, is so unusual because when I know this has many years ago, it's like 35 years ago. But when ESPN first got into the NFL, its productions looked and felt like a cable TV production compared to broadcast. They decided to try to grow with the NFL and not immediately start with such a big broadcast.

Amazon is taking the exact opposite approach. It's spending a boatload. I think it has 29 cameras. They're about the same number of cameras covering the game that covers a Super Bowl, for goodness' sake, and this is just a regular-season game. They're taking an opposite approach

And part of what they're doing is they're trying to send a message to other leagues to say, look how well we're going to treat your product if you come to us. Because right now, Amazon is finding even though they're bidding more money than some of the networks, a lot of the leagues -- F1, Formula 1 racing, the Big Ten -- they've decided to stick with traditional linear television at a lower price point because it reaches more people than going to Amazon right now. This is all, everybody, the entire sports media industry is taking a look at not just this game, but the entire season on Amazon to see how it fares.

Chris Hill: Yeah, there are a number of business angles to watch here, so you talk about the ratings, that's certainly a key part of that. And for Amazon, the advertising that flows from the ratings, so their ability to deliver for advertisers.

Do you think this represents an opportunity for other networks? I mean, to your point, Thursday Night Football, if it's on network television, it's probably commanding a bigger audience. Other competing networks may be reluctant to program in a significant way. I don't think there's anyone -- including, by the way, the folks at Amazon themselves -- who believe that the raw number of people watching on Thursday night is going to be higher than what we've seen in the past on network television, and so if you're ESPN, TBS, I don't know. Do you bump up your programming game on Thursdays nights? Because it's a little bit more of a fair fight.

John Ourand: Chris, it's so interesting because if I were running a television network right now, sports television network, that's exactly what I would do. With ESPN, I would put a prime college football game on, because people will watch it. Fox, I might think about taking their highly rated wrestling, which is on Friday, night and put it on Thursday night, because it's much more cumbersome for people, especially older people, to find Amazon Prime and find this NFL game.

What's happened, though, is the networks aren't doing that yet. They're taking a wait-and-see approach, and even the most conservative estimates, which has a game on Amazon getting, let's say, 7 million viewers. That's a very conservative estimate right now. Nothing in TV is getting 7 million viewers. It's the power of the NFL, and so you still have these big linear networks that see that 7 million number and say, well we don't want to go up against that. They're taking a go-slow approach, see how Amazon's doing, and then they're going to make their plans. But I think it would be a lot more aggressive right now.

Chris Hill: One last thing on this topic. Because Fox has the Super Bowl next year, and I saw a story recently that a 30-second ad is going for $7 million. Fox has reportedly sold the bulk of the broadcast. Is this why we're seeing Amazon throw the amount of money that they're throwing at not just the rights for Thursday Night Football but, to your point, the production value behind it? Because nothing really delivers numbers in live television the way that sports does.

John Ourand: The television advertising is worried about a recession. They're worried about inflation, and you're seeing become weak across the business except for the NFL and except for actually really major sports: college football, I think you can throw in there. Fox has had a lot of success with postseason baseball as well, which is coming up. There's a real sense that these big TV networks and traditional linear television, live sports, and live news, and even the awards shows, anything that has a "live" attached to it, that's the last reason for remaining and business. Because anybody that subscribe to traditional cable television or watched prime-time broadcast for entertainment shows have already migrated to Netflix and Apple TV+ and the myriad of series that are being streamed over on those services.

Chris Hill: Let's stick with ESPN for a moment, because last week, Disney had their D23 Expo, the main purpose of which was to show off upcoming movies and TV series for Disney+. Disney CEO Bob Chapek gave some interviews, and the headline that caught my attention out of those interviews was he completely shut down the idea that's been around for years now of Disney spinning off ESPN.

What was your reaction to that? Because Chapek, among other things, seems to have ruffled feathers in various corners here or there. But say what you want about the guy, he seems to be pretty definitive when he wants to be, and he seemed pretty clear that ESPN is staying in-house.

John Ourand: My reaction to that was not quite a yawn. A little bit more than a yawn. I'm not sure how to what the grade is on that. Maybe one arched eyebrow, but not two.

There have been a lot of rumors going around about Disney potentially selling off ESPN. There's been cord-cutting and cable, so ESPN is not going to as many subscribers. They're losing subscribers while the cost of sports rights are going up. It looks like an awful business, right?

It's not. Inside ESPN at the highest levels, while they've looked into it as you would expect, it never got serious, and the talk never got serious, and I think what you saw Bob Chapek say was he came out as forcefully as he could and said, you know, that is not going to happen.

But, Chris, what I found to be particularly interesting about what he said is that he views ESPN as a huge growth opportunity. Here's  ESPN, which has been the best part of Disney's quarterly earnings from 2010 through 2018 or so. It just prints money and goes, and you would have thought that its big growth prospects were in the rear-view mirror. But Chapek still believes, with sports gambling and with streaming, that there are different areas where ESPN can really focus on those and start to grow as big as it had been growing during cable's heyday.

Chris Hill: The college football playoffs are going to be expanding, 12 games -- or 12 teams rather. I suppose this really shouldn't surprise anyone, should it? When you think about the NFL is king when it comes to live sports in America. Is college football second? Does it supplant the NBA and Major League Baseball? Because that would help explain a pretty significant expansion of the playoffs.

John Ourand: It depends on how you look at it. In terms of sheer audience numbers, you have the NFL, and then you have a pretty big drop, and you have college football, and then you have a pretty big drop, and you have everybody else. The reason I'm hesitant to say like, yeah, college football is bigger than the NBA is that college football is made up of so many different conferences: the SEC and the ACC and the Big 10, the NBA, and Major League Baseball come in as big national brands there. It's a little bit difficult to compare those two.

But I think what you're seeing with colleges, the Big 10 just sold their media rights to CBS, NBC, and Fox, and it's the first college conference, one college conference, that's making more than a billion dollars per year in media revenue. And so anybody that's involved with the business of college athletics is taking a look at that deal. They're saying, right now we have a four-team playoff. They also are taking a look at the NCAA tournament, which is for basketball, which is a huge deal there as well. It's like, well, why don't we expand? I think what's going to be particularly interesting and sort of the story that I'm going to be following is how much this is going to bring in.

With the games that they're going to be bringing in aren't necessarily going to be Alabama versus Auburn. I think you're going to see, sometimes, Boise State playing Utah because those got in there as well. These television networks, they're for-profit companies, how much are they going to pay on the Cinderella games like that?

Then if Alabama is playing, we've seen already with the college football playoff, we've seen the semifinals. I don't have the stats on it, but a huge percentage of them have been blowouts. They haven't been good games, and that's not good TV, and it's generally that doesn't bring in a lot of viewers. TV network executives they look at that and check.

There's got to be a lot of interest in it, of course. There're going to be a lot of people milling around to try to get it and including Amazon, I would think, and they're going to get a fine number, but I am a bit of a skeptic when it comes to that. I think that the TV networks in particular are going to take a look at the data and hesitate on going whole hog with the college football playoff expansion.

Chris Hill: Let's wrap up with baseball. There're three weeks left in the Major League Baseball season. When it comes to the playoffs, ESPN has the wildcard games, TBS and Fox have the rest of the playoffs, with the World Series on Fox. If you're running those networks, John, how are you feeling about the teams and the storylines heading into the playoffs? Because this isn't like the Super Bowl, which is guaranteed to get a big number every year regardless of which teams are playing in it. The Major League Baseball playoffs really are dependent on the teams, the markets, and the storylines.

John Ourand: Only in the NFL can a team from Green Bay, Wisconsin, be one of the highest-rated teams around. This is one of the issues that baseball has had to deal with, and if you look at the national ratings over the past several years, you would think that it would be a weaker sport. But baseball locally is so strong, even with the downfall of some of these regional sports networks that are carrying the games locally. I just took a look at Baltimore Oriole ratings in Baltimore this summer. It's the highest-rated show. Every night they play in prime time in Baltimore, it's substantial.

How they can get those numbers and that interest and translate it into the playoffs usually depends on the big brands. Are the Yankees going to get through? I think the Astros have proven to be a pretty good brand as well. The Dodgers, they have superstar players that people know, and they've been around for awhile. What the networks and baseball are hopeful for is that it's less about the big personalities -- like Aaron Judge is a big personality, but he's with the Yankees -- it's more about these big markets. If the Yankees get in, you get the No. 1 TV market that's all of a sudden watching every night and the ratings will be OK. If they end up with Toronto playing Minnesota, it will be a tougher road for baseball, Fox, and Turner.

Chris Hill: You can read him in the Sports Business Journal. You can also hear him every week on the sports media podcast that he co-hosts with Andrew Marchand of the New York Post. John Ourand, thank you so much for being here.

John Ourand: Always a pleasure, Chris. Thanks.

Chris Hill: Coming up after the break, Emily Flippen and Ron Gross return. They got a couple of stocks on their radar, so stay right here. You're listening to Motley Fool Money.

. . .

As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

Welcome back to Motley Fool Money. Chris Hill here in studio with Emily Flippen and Ron Gross. Once again, it's time to get to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week?

Ron Gross: I got Union Pacific, UNP. Operates the Union Pacific Railroad, one of the two largest railway networks in the U.S. they've got a strong, durable competitive advantage. They have pricing power, they're increasing their efficiency. That leads to really strong net margins. I think those will continue to improve. They've paid a dividend on their common stock for 123 consecutive years, Dan, that's a 2.3% yield at the moment.

The reason I bring this up now is that we were on the verge of a strike by railway/railroad workers. That seems to be have been averted partially with the help of the Biden administration, better pay for their workers. Exemptions to attendance policies, allow them to seek certain types of medical care. A lot of good stuff. I'm really glad to see that that was averted. The rails roughly transport about 30% to 40% of the nation's freight, and so that would have been a pretty big disaster.

Chris Hill: Dan, question about Union Pacific?

Dan Boyd: Old economy Ron. Back in the saddle, y'all. That's right. Ron is talking about a company that's existed for what? Thousands of years now, Ron?

Ron Gross: The dawn of time, Dan.

Chris Hill: Emily Flippen, what are you looking at this week?

Emily Flippen: I thought I was going to have the boring stock this week. But leave it to Ron to take the cake.

No, the company I'm looking at is Costco. The ticker is COST. People are probably already familiar with this company. But the reason why it's on my radar is because they report their fourth-quarter results on September 22nd, and I'm very interested to hear what they'll say about the state of American consumers.

Prices for gas have come down last quarter. They saw a benefit of 5% in total sales as a result of just the increase in the price of gas. But even with backing gas out, the business still has performed extremely well. Sales were up 16% last quarter, even as inflation has started to rear its head, so very interested to hear what management says about inflation, how they set up expectations for the remainder of the year.

Chris Hill: Dan, question about Costco?

Dan Boyd: Well, first, I want to point out that Motley Fool Producer Emeritus Mac Greer is probably doing back flips in his house right now to hear Costco mentioned on the show.

Costco, of course, Emily not a wild pick here, very staid, solid company. Is there anything specific coming from Costco that makes you want to put them on the radar other than their report?

Emily Flippen: Here's the reason is because for probably the past five weeks now, I have given investors and listeners for this podcast some crazy, wild picks. I want proof that I can be a diversified, generalist investor who looks at things other than unprofitable Chinese tech companies.

Ron Gross: Costco is one of the best-run companies in the U.S., in my opinion.

Emily Flippen: What Ron said.

Chris Hill: Dan, what do you want to add to your watch list?

Dan Boyd: I got to take a train trip. No seriously, I got to take a trip up to New York for New York ComicCon next month. I'm going to go with trains and Union Pacific.

Ron Gross: Awesome.

Chris Hill: I want to watch a documentary of you and Ron taking a train.

Dan Boyd: It will be awesome.

Chris Hill: Ron Gross, Emily Flippen, thanks for being here.

Ron Gross: Thanks, Chris.

Emily Flippen: Thanks, Chris.

Chris Hill: That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ron Gross has positions in Amazon, Apple, Costco Wholesale, Microsoft, Starbucks, Twilio, and Walt Disney. The Motley Fool has positions in and recommends Adobe Inc., Amazon, Apple, Costco Wholesale, FedEx, Microsoft, Netflix, Shopify, Starbucks, Twilio, and Walt Disney. The Motley Fool recommends Union Pacific and recommends the following options: long January 2023 $1,140 calls on Shopify, long January 2024 $145 calls on Walt Disney, long January 2024 $420 calls on Adobe Inc., long March 2023 $120 calls on Apple, short January 2023 $1,160 calls on Shopify, short January 2024 $155 calls on Walt Disney, short January 2024 $430 calls on Adobe Inc., short March 2023 $130 calls on Apple, and short October 2022 $85 calls on Starbucks. The Motley Fool has a disclosure policy.

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