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Almost threw a brick at the TV this morning. But I was on the treadmill. I don't carry a ton of bricks when I work out. If I had one though, I would have chucked it at the screen when I heard again for the umpteenth time the same skepticism that's kept people out of the very technology stocks that keep leading this market higher, including today where the Dow gained 612 points, the S&P jumped 1.47%, and the Nasdaq, where tech hangs out, vaulted 2.02%.
Now, sure, some of these gains might have come about because of still one more possible end of the war in Ukraine. So I'll put it that way. This time aided by the Chinese government's brokering of some sort of peace. Oil plummeted, taking interest rates lower, creating a cozy backdrop for a lot of stocks to go higher. But much of the gain still came once again to those who own tech hardware, not software, but hardware. Things like storage, memory, that process that further artificial intelligence dreams of giant companies that sense huge returns are starting to happen. While the stock market is the greatest wealth creator in history, I often feel like people will miss out on the biggest gains unless I beat them over the head with a stick multiple times, as I did with Nvidia. I had to rename my dog Nvidia. Look out. I might have to rename Ragu and Tony. Yeah, I know, Ragaton. Someone's really funny at home. Anthropic and OpenAI one day. Imagine Anthropic, come over here. He'd come over with a piece of steak in his hand right here. But right now, I think some people are getting the message at last that the computing AI revolution represents perhaps the greatest single trend of our lifetimes.
Yet, all I ever hear is people trying to talk you out of participating in this money-from-heaven machine. It's too hard to stick with the winners long enough to make yourself rich because the critics always talk about how ephemeral the moves are, how dangerous they could be, or how much you're going to lose if you don't trade in and out. Only a few can really catch those moves. I say no way. Consider this: if you put 10 grand into Nvidia a decade ago, it'd be worth roughly, I don't know, $2.4 million. How about that? But who had the fortitude to stick with this one for an entire decade? Sandisk, Western Digital, Micron, and they are all making us so much money. So was the redoubtable AMD, up 66 points today. Yet there's a whole cottage industry that exists just to scare you out of these winners. Today was a discussion of the gains in the data center stocks and how ephemeral they'll be. The guest that I wanted to throw the brick at said, 'This rally proves if you build it, they will come.' Which is a minor misquote from the movie Field of Dreams. If I hear that and I own tech, well, it would make me want to sell. You make a Field of Dreams analogy when you're trying to explain that this whole move in tech stocks is just a fairy tale. This kind of doomsday statement, possibly uttered really subtly or maybe even without a thought about it, could mean to people at home, time to get out now. It's a major reason why investors have such a hard time sticking with winners. You see, the whole point of this data center rally is that it's not a fairy tale because the data centers are being built and the customers really are coming in. They're on the playing field. They're in the seats. They're paying big bucks and the momentum is building for every seat to be filled. Go back to what we learned from Amazon on Monday on the show. The age of compute domination based on AI is already well underway. The guest this morning was begging for a brick. He had it all backward. See, they, meaning big-time paying potential customers, are already here. And unless you spend the money to build the infrastructure, they'll go somewhere else. Amazon Web Services is racking up big client wins at an accelerating pace because it's committed tens of billions of dollars to get the right plant and equipment in place. Because it's spent, not in spite of it. Because of it, Amazon is winning and it's winning big.
That's an incredibly important thing when you have companies like Anthropic or OpenAI or Meta or TikTok or so many other key clients making decisions about where they should go, which web service should they use. If you don't build the stadium, they're going to go elsewhere and you'll leave a lot of money on the table. CEO Andy Jassy made it clear that there could be an existential problem if Amazon doesn't spend enough on infrastructure. Doesn't, unless you build it, they won't come to you. And that's just one example. There are similar canards I hear all the time about this seismic shift in the economy. Oh, here's another one. We hear that there's FOMO, fear of missing out, which implies that you have these tardy money-losing investors or fools actually coming in and picking up the trash. I come back and I say, 'You bet I had FOMO.' And that's what got me into so many incredible stocks for my charitable trust on the way up. You can see them join CNBC Investing Club. They're all there. I plead guilty to FOMO. I pulled in some great winners at terrific prices even though I was worried about paying too much at the time. Fortunately, I was more worried about missing out. FOMO can be right. You know what else? We hear it can't continue to run like this. The other day, I talked about how stocks gallop to where they have to go. There are times when the market's so out of whack with the potential of a company that its stock just has to blow through level after level after level. There's no such thing as perfect information, people. These valuations change correctly overnight because the facts change, too. As AMD's Lisa Su explained on this morning's Squawk on the Street in November, she thought that her CPU market would grow at about an 18% clip. Turns out here we are in May, it's growing at 35%. That's AMD's core business. So that stock's not going to want to, they're not going to take, wait, take weeks or months for AMD stock to go higher. It's going to happen now. Hey, speaking of AMD, which shot more than 18% today, there was a piece of research that came out the day before this extraordinary quarter. A downgrade from a buy to a hold by a prominent investment house. That's right. Buy to hold AMD. I said on air, I told you I thought it was fanciful and would be wrong. In the meantime, I'm sure it scared a lot of people out of the stock because it came out right on the eve of the quarter. When an analyst downgrades right before earnings, people assume they must know something. This time that was very wrong. Very first sentence in the piece was about as wrong as you can get. Quote, 'First quarter results and second quarter guidance to be in line with our estimates and consensus as possible upside is limited.' Oh man, they know nothing. In fact, AMD blew away the estimates, which is why the stock jumped so high. Their next point: 2026 server CPU upside cap due to foundry capacity constraints. Okay, I asked CEO Lisa Su directly about this issue. She told me it's simply not a problem. Stop worrying about it. I felt stupid even asking. Finally, the piece suggested that AMD had already been rerated, meaning that the big buyers have already pushed the stock up aggressively, so there isn't enough juice left to keep it running. Once again, dead wrong.
Throughout this entire magnificent rally in AMD and other stocks that are part of the AI revolution, you had to do the opposite of what this analyst said. You have to think big, big, big, because the evidence is already in that these stocks can't stay this low given the circumstances. There's just too much money already dedicated to getting in. The AI stocks are simply trying to catch up to overwhelming levels of demand from their customers. Don't get me wrong, I get where these analysts are coming from. I too figured these stocks would have stopped going up ages ago, but they haven't. The analysts, including this one, were wrong, and we need to understand why. On the one hand, I won't excuse these mistaken calls either. I'm a journalist, not some big-time hedge fund manager or research analyst. Yet, after spending one day at Amazon, I learned that the money's flowing in incredibly fast for each facility they have, for each part of their data center network, and for so much of their logistics platform. If any of these people were to spend time with Amazon, they'd know why this company feels compelled to keep spending fortunes on building new data centers. If they didn't spend, they'd lose these gigantic customers who can't wait. We're now at the point where if Amazon doesn't put money in, their numbers actually have to go down, not up, because that business and its billions of dollars in payments will go to Alphabet or Microsoft. The opportunity in this fourth industrial revolution, this compute AI economy, is simply much larger than anyone thought, with the possible exception of, yes, you know, Jensen Huang at Nvidia. Here's the bottom line. Forget the ironic reference to Field of Dreams. When it comes to the data center, if you build it, they really will come. And if you don't build it, they will simply go to the other guy who did build it, to the other stadium. And you know why? Because right now there is so much flowing to those who build it that, well, let's just put it this way: Amazon built it and the place is packed. Nico in Illinois. Nico, Jimmy Chill and our investing club. Hey, shout out Carly Garner, I'll say, for being awesome on the charts last week.
Thank you. Yeah, thank you. What's up?
Booyah, Jim. So, as we know or see, the market has reached a phase in denial. And maybe I got the nail on the head here. So, if we're back at or on a trading desk, like the idea I realized to innovate the trading floor some time ago, or a data center, what are one or two fundamental catalysts for a concentrated market such as tech that we can look into to start gearing past denial? Shout out Benny off stock CRM. Thank you, Jim.
Okay, CRM is very tough. It's one of my smallest positions. It's tough because the market hates software. Whether it be Palantir, whether it be ServiceNow, whether it be Salesforce, whether it be Workday, it doesn't matter. It hates, it hates Adobe. It hates software so much that it even has gotten to Microsoft. I'm not going to push anything that's software. All right. When it comes to data center, it's true. If you build it, they're here. I'll make money tonight. CVS Health just reported a huge quarter, solid beat and raise. I'm learning all about it with the company CEO, David Joyner. Stock has been a real hot dog lately. So, could their latest earnings be the positive signal investors are looking for? I'm checking in with the company's formidable new CEO. And Honeywell spun off its specialty chemicals business through an IPO called Solstice. I'm learning all about the company and its quarter and its plans for the future with the CEO, not talked enough, talked about enough. That's what I say about that company. SC.
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In Friday night's game plan, I told you to expect a great quarter from CVS Health. And that's exactly what we got this very morning. CVS also owns Aetna, a huge health insurance company, and Caremark, the number one pharmacy benefit manager. Today they reported a magnificent 39-cent earnings beat off a $2.18 basis with higher than expected revenue and management raised their full-year forecast pretty substantially. As a result, the stock shot up 7.7% today, reaching a three-year high. So can the stock keep running? Is it finally coming all together? Earlier today we sat down with David Joyner. He's the turnaround artist, chairman and CEO of CVS Health, to find out. So take a look.
Mr. Joyner, welcome back to Mad Money.
Yeah, thank you, Jim. Thanks for having me back.
I'm thrilled that you're here. It's been now a little bit over 18 months. It's been a bit of a journey, an amazing quarter. Before we get into it, what have you learned and what are you starting to really work on?
Well, the last 18 months has been about, you know, mostly a recovery and focusing on the basics. So when we looked at specifically in our Aetna organization, it's a really great and well-run business. Unfortunately, they kind of got off track. So we spent a lot of time focusing on culture, focusing on the right team and focusing on execution. And I think what you've seen in large part this past quarter has been, you know, what is now five quarters of improvement in the Aetna business. And it's important the rest of the business, we couldn't take our eye off the ball. So whether it be our pharmacy business and our PBM or our clinic business, it's all about making sure we stayed focused on delivering on the basics and focusing on the consumer experience.
Now a lot of people don't realize that one of the major jobs you have is actually pricing, pricing of Medicare Advantage, pricing of reimbursement. Worried about that. It looks like everything came together though. How did that happen?
Well, if you go back to what we've been working on on the basics, we spent a lot of time making sure that we had the right actuaries. We had the right forecast. We had the right kind of look in terms of where we thought the marketplace was going. And a large part is how the government chooses to price its business. And we have to then build a product that actually can perform within that framework. So this is two years in a row of which we've actually demonstrated that yes, we can. We see where the marketplace is going. We see what we need to be building and ultimately it's been able to deliver again above our expectations for that Medicare Advantage product.
I hope people realize at home how hard it is to be right for two years. I mean, it's amazing and one of the reasons why I think your stock went up is that people say, hey, this guy can figure it out. But you also are a demon about recognizing a word you used five times in the call, the friction in the system. There's tons of it.
Yeah. Yeah. I think that is probably the most frustrating part of healthcare. One, it's too expensive and people have a hard time navigating and when they do navigate, they feel like there's just friction. So we have spent a lot of time in our organization trying to rethink and reimagine what a consumer experience would be like and ultimately this is being done at Aetna. We've led the market in terms of prior authorization, reducing the number of prior authorizations, connecting more effectively with the provider. So we're doing real-time integration so it's being done without the patient in the middle. And ultimately we're going to try to standardize that so that it works more in real time. And also same thing on the pharmacy side. We spent a lot of time, you know, between our PBM and our retail pharmacy, what are the pain points and what are the friction points that the consumers really find unattractive and or frustrating. And so that has allowed us again to focus on the things that we know will actually improve the consumer experience. So a lot of it is technology and a lot of it is working, you know, more effectively with the prescribers and with the actual pharmacist.
It's detail, detail, detail. Now the emphasis here is on the latter word. A lot of people know the middle as being the place, meaning the front of the store. The front of the store has not been emphasized in any of the documents for the quarter. I know that must be for a reason. What can we say about that? People who are thinking about the stock, maybe they shouldn't be thinking so much about the aisles they get to to get to health care, but that health care is primary for this company and that that's the way it should be.
Yeah. So I look at the transition of our company. So we started as a pharmacy and you would actually look at it in terms of the front store and the back store. With the acquisitions of Aetna and Caremark, we became a health solutions company and ultimately we're moving the business into a healthcare services technology focused on the consumer experience. So we believe that at least from a health standpoint that we have all the assets to be able to manage the total cost of care and ultimately make the healthcare experience better so that we can lower cost, take the friction out of the process and improve their overall experience.
If I had to go into, if my CVS, which I like very much and I buy stuff for Halloween and I buy my candy and everything, if I had to reimagine the store, some of those things I'd still want. How do you satisfy both?
Yeah, it's, we're constantly working on, you know, the local markets and figuring out what that consumer and what that demographic actually finds attractive because we still need to be a destination. We want to be a healthcare destination, but we also in some cases, as we talked about, we're also a convenience location. So we have to have the appropriate assortment of products so that people are actually able to get those on demand or in a convenient mode but also then lead to the health care solutions that we're driving in the back of the pharmacy, which is really elevating the role of that pharmacist to become that clinician to provide more care to the individual.
Well, let's talk about that. We spent Monday at Amazon. Amazon's got a terrific health initiative and I like a lot of it. But at the same time, I like to talk to my pharmacist. My Rite Aid closed. My pharmacist Jerry knew me. He knew my wife. I want to know my pharmacist. How much of an advantage is it to have that pharmacist at the store versus online?
Yeah. So, I'm a big believer of meeting the customer where they are. So, I think that there is going to also always be somebody that will want to have medications delivered to their home. We have same day delivery in our stores. We have a drive-thru as a matter of convenience. But still the consumer, you know, on the vast majority of the occasions still chooses to come into our pharmacy because of that connection that you mentioned. We think our pharmacist, and we've invested in that colleague experience. We've invested in the technology to allow them to engage and or work with the consumer differently. And that is what I think creates the loyalty. It creates the trust and then it becomes the gateway for us to be able to pull through the other services that we want across the enterprise.
And how about technology, the app, the things that you're doing to make us more informed?
Yeah, I think the tech, this is probably where I'm most excited about in terms of where we're going as a company. Today we talk about all the frustrations around it's hard to navigate, it's too expensive, all the friction. We now are actually launching Health 100, which is our new app and it's going to become the host and or what I would call is the gateway into our own company. So we're building an experience so that people can anticipate the prior authorization so it doesn't happen to them. It actually, we can solve it beforehand. They know what things are going to cost. They know how to navigate the system. And we're doing this across our own ecosystem. So whether you're an Aetna member, a Caremark member, or a CVS member, we're trying to create an experience through technology that allows them to be able to have a much better experience. And then we're opening it up to the rest of the market. And this is where the interoperability comes in. Because if you look at where the administration is right now, the reason that healthcare is so fragmented because you still have, you know, everything kind of hosted inside of each one of the doctor's offices or hospitals. Hardly anybody talks to one another.
And that's part of what we're trying to solve. We're trying to figure out how we become the connector across the entire ecosystem, opening it up to anybody who wants to come in and ultimately the consumer will actually own that data and own that experience. And with the new agentic AI and other tools that are available, we think there is going to be a transformation when you combine AI and the interoperability to serve our consumers more effectively.
Well, I think that'd be great. We want to be in control of our health and control our healthcare. And I think you're going to make it so we can. It's good for everybody. It's good business.
Well, anyway, I want to thank David Joyner, chairman and CEO of CVS Health. The stock went up a lot, but the earnings went up. So it's not more expensive. I would argue that it's cheaper. It's the right thing to do. Mad Money's back after the break. Coming up, was Kraft Heinz able to squeeze out a strong first quarter? Cramer's digging in with the company's top brass to find out next.
All right, something happened this morning. I couldn't believe it. I thought my eyes were playing tricks on me because Kraft Heinz, the packaged foods powerhouse, reported a much better than expected quarter. The stock actually popped today, rallying over 2%. Keep in mind, this thing's been drifting steadily lower for four years. It's been not a great stock to the point where Kraft Heinz decided to break itself up, bring in Steve Kline, the guy who orchestrated the Kellogg breakup that was so smart as its new CEO. And all the way the stock kept getting clobbered. But today, Kraft Heinz posted a clean upside surprise, albeit versus low expectations. Could this be the beginning of a larger run? Let's dig in deeper with Steve Kline. I regard him as a friend of the show. He's the new CEO of Kraft Heinz. Get a better sense of the quarter, of what comes next. Mr. Kline, welcome back to Mad Money.
Jim, great to be with you.
All right, Steve, I remember when you came in on Kellogg, I was doubtful. I didn't know what you could do. I figured it's going to be too hard. You handled it with a plum. You had two different buyouts, made a fortune for people. You're in Kraft Heinz. Is it a tougher thicket than even Kellogg was?
You know, it's very similar, Jim. I mean, they're both iconic American companies with great brands that needed to be relevant to the next generation of consumers. And you know what I found when I came inside Kraft Heinz is the same thing. Outstanding brands been underinvested and with investment, focus, attention, good customer plans, good consumer plans that they can grow again.
All right. So, what happened? I remember when Berkshire Hathaway put this together. It was one of the most exciting deals ever because we really felt you got a couple great brands. You kind of had this great international footprint. What occurred and is
Berkshire still in board or not? Where where are things?
Yeah. So I think the industrial logic of putting the two companies together was sound. Where we missed the mark, where the company missed the mark, was all the cost savings that were generated, which were quite substantial, flowed directly to the bottom line. I mean, the EBITDA margins went up to close to 30%. There was not enough investment put back in the brands to attend to the top line and grow the top line. There was not the revenue synergy. There was just the cost synergy. On the Berkshire Hathaway front, they're big share owners. They own almost around 27% of our stock. They're no longer on the board, but they're supporters. They're investors and very important investors, obviously.
All right. So what did you do to take already obviously in the right direction? 29% of your portfolio is gain. Your holding share of the first quarter to 54% in March. What are you doing? This is a radical gain for this company.
Yeah, we still have a long way to go, Jim, but we're pleased with the results that we've had so far. You know, the top line this quarter was flattered by an Easter shift, then by some pantry loading, but there's no denying that the share performance improved as you just outlined. It improved because we invested behind the brands that we have the right to win in, you know, our sauces, our spreads, our mac and cheese. We innovated really well. You know, I found inside the pipeline some exciting things like Kraft Power Mac. We put substantial incremental investment behind that. Because of that, we got 35,000 stores, substantially more than we would have. So it's the blocking and tackling and the investing, handling this business like a consumer goods company with lots and lots of treasures behind us. And so that's what happened. The other thing that I'd say is, you know, when I came in, obviously the company was very focused on the separation. You know, when you take 36,000 people and redirect them towards a maniacal focus on growing the top line and not in separating the business, it's amazing what you can achieve with that type of human capital against a much more, I would say, aspirational goal, a more constructive goal, something that they could really get behind.
Yeah. And that was, you know, from my take, that had been lacking till you got there. Whether it was being split or not, frankly, I think that what you've done with hold, win, and win big again has everybody understanding what could go on. How did you pick those buckets and how do you know that win big is where you can put the most money in?
Yeah. So we started by examining all of our brands and where we felt like we really had the right to win, where we had competitive differentiated advantage versus our competition. One of the single clearest examples of that is the brand Heinz. I mean, Heinz is one of the most recognizable consumer brands in the world, right? Like 98%. It's got household penetration that's a fraction of that. So a real opportunity to get in more households and grow. We look at Mac and Cheese, which has been around for a long, long time, but, you know, had been a bit, you know, challenged by smaller competitors coming in with better offerings around protein, around fiber. And we knew we could make adjustments to the portfolio there. So where we felt we had strong brands where we could differentiate better and make a connection with the consumer through the customer is where we decided. Now we made some changes along the way. Capri is a great example. We had that in, you know, a win category. Well, as we discovered more and learned more, we felt that that was a win big opportunity because where we were losing business in Capri Sun is, you know, kids were aging out of the brand. Well, by coming up with something that was halfway between a kids drink and a sports drink, you know, come out with Capri Sun with electrolytes, we could actually innovate to keep consumers with us. So we moved that into win big. And so as I explored the portfolio with the team, I found that there was a lot more saliency to these brands and a lot of equity building opportunities if we just put our investment into smart ways. The other thing we did, which I think is really exciting, which we're just starting now, is this NFL partnership. And so you think about our condiments business. I mean, Heinz ketchup, Heinz mayonnaise, Heinz relish. It is built for Thursday night football, for Sunday afternoon football. And partnering with the NFL and starting with the NFL draft, you know, with pick number 57 gets a lifetime supply of ketchup. I mean, the team just came up with some great ideas to make our brands fun again and very relevant.
I think that's right. They've not been fun. I think they've been pushed around way too much. I did want to ask you, you've got some brands that are inexpensive, perfect for a person, you know, it's kind of struggling, and you've got some brands that are expensive. Do you find that you've got a mix that's right for the American consumer, or is the American consumer hurting too much to pay up even for good, for Heinz ketchup, so to speak?
Yeah, I think we've got a portfolio that's built for the moment for sure. We're in just about every aisle in the store. But affordability, which you just mentioned, is incredibly important. Even if we're in the higher end of the price tiers like Heinz Ketchup, which is a premium ketchup offering, obviously, we have to look at our whole price package architecture structure and say, do we have the right entry-level price points? Are we doing everything we can leading into productivity so that we can put the best affordable options out there for family budgets which are under pressure? So that is very much a focus of ours. How every item in our portfolio, every product in our portfolio starts with a question: Is this the right affordability value equation for the consumer today?
And what percentage do you think you have to augment with natural just to be able to kind of change the impression that Kraft Heinz has, which is that, you know, and you can tell me maybe it's just not true, but people feel it's just got a lot of preservatives. That's the problem that's been dogging Campbell, even though it's not true either.
Yeah, it depends on where you are in the portfolio, Jim. But look, health and wellness is a real trend. It's an important trend. Clean labels is a real trend. It's an important trend. So we're looking at our portfolio where we can renovate, where we can replace, where we can innovate around that health and wellness, you know, taking ingredients out that consumers don't want. That's part of what we must do. But, you know, I always say you have to make it and you can't fake it. So, you know, when we came out with Power Mac and Cheese, it really does have, you know, 17 grams of protein, seven grams of fiber, and in a much more affordable offering than some of the competition. That's real. That's not made up. And so we're working on our portfolio to make it more relevant for what the consumer wants today.
Well, this is the same Steve I saw who got in and realized that, wait a second, there's something here with Kellogg. It's not just Frosted Cereals. There was a lot more to it. You made a lot of money then. When I saw that you came in, I reached out immediately because I know you're going to have another win, Steve, because that's just what you do. Thank you so much for coming back on Mad Money.
Super. Thanks for having me, Jim. Really appreciate it.
Absolutely. That's Steve Kline, the CEO of Kraft Heinz, KHC. I'm telling you people, you may not believe me. I don't care. This guy's a winner, so therefore KHC is a winner. Mad Money's back after the break.
