Warren Buffett’s Piling Into Occidental Despite Falling Oil Prices. Here’s Why.

Buffett also says he likes to bet on the U.S., and his Occidental wager can be seen as one. The company agreed to buy privately held CrownRock earlier this month for $12 billion for extensive shale acreage in the Permian Basin in West Texas and southeastern New Mexico.

The revival of the onshore U.S. oil industry has been a huge energy story. The world’s biggest economy is now also its biggest crude producer at around 13 million barrels a day.

The rise of shale oil helps stabilize the world market. If Islamist rebels attack ships in the Red Sea, or the Organization of the Petroleum Exporting Countries decides to restrict output, U.S. producers can step up.

To be sure, even though OPEC’s grip on the global market has weakened somewhat–Angola leaving the blocis the latest illustration–it’s still strong. Oil prices can fluctuate a lot within only small changes in supply and demand. With discipline, OPEC will have little trouble putting a floor under prices next year.

But OPEC is also contending against other factors, too. Energy demand may weaken with the global economy, and the economy itself doesn’t require nearly as much oil as it used to for growth.

Buffett’s bet on Occidental isn’t about just one company. It’s a bet on stable energy markets and U.S. security. It’s the kind of wager he likes to make.

—Brian Swint

*** The Barron’s Daily newsletter will next publish on Wednesday, Dec. 27, 2023, after a holiday break.

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Nike Eyes Cost Cuts as Growth Slows Amid Uncertainty

Nike
is seeking $2 billion in cost cuts as its sales outlook softens, even though its beat profit expectations for the second quarter. Executives for the apparel maker said the cost cutting would come from job cuts, streamlining the product lineup, and using more automation and technology.

• The cost-cutting plan will result in pretax restructuring charges of $400 million to $450 million, to be recognized in the current quarter, mostly for employee severance. CFO Matthew Friend said Nike is seeing indications of more cautious consumer behavior around the world.

• Nike’s third quarter reported revenue is expected to be slightly negative, and fourth quarter revenue should be up low single-digits, Friend told analysts, reflecting “increased macro headwinds,” especially in China and its operations in Europe, the Middle East, and Africa.

• The downbeat outlook comes after Nike beat expectations for second quarter profit, which jumped 21%. Revenue in the period edged up 1%, to $13.4 billion. Revenue from North America dipped 4% but rose 4% in greater China from one year ago.

• CEO John Donahoe said the company will invest in areas of greatest potential, increase the pace of innovation, and accelerate responsiveness. The cost savings will be used to fuel future growth, the company said.

What’s Next: Executives told analysts on a conference call that Nike is taking a more prudent approach to planning for the second half of its fiscal year. Lower levels of growth from e-commerce and higher levels of promotions require a focus on innovation to distinguish the brand, they said.

—Sabrina Escobar and Liz Moyer

Hollywood in Year-End Push for Holiday Weekend Box Office Sales

Hollywood is in a year-end push, with seven movies scheduled for release from today through Christmas. This year has been dominated by
Warner Bros. Discovery’s
Barbie movie, which currently tops domestic sales at $636.2 million. Another Warner film, Wonka, sold $39 million in its domestic premiere last weekend.

• Studios historically see 6% to 10% of their box office sales coming in the final two weeks of the year, according to Comscore, illustrating how crucial the year-end crunch can be to overall sales. In 2022, box office sales of $558 million made up nearly 8% of the year’s total.

• Christmas weekend box office sales have averaged $163.4 million over the past 20 years, according to Comscore data. The biggest Christmas weekend sales domestically came in 2015, when Star Wars: The Force Awakens pushed overall sales to $296.7 million.

• Comcast
  -owned Universal’s The Super Mario Bros. Movie, with $574.9 million, and
  Sony’s
  Spider-Man: Across the Spider-Verse, with $381 million, are second and third this year.
  Walt Disney’s
  Guardians of the Galaxy Vol. 3 is fourth, with $359 million, but other Marvel movies flopped.

• Through Dec. 17, domestic box office sales have reached $8.58 billion, according to Comscore, with 88 films in wide release. That is up 22% from one year ago. The 2019 box office, in contrast, was $10.6 billion from 108 wide releases.

What’s Next: Warner Bros. has two more movies slated this weekend, including Aquaman and the Lost Kingdom, which is estimated to make $40 million in domestic sales over four days, and The Color Purple, which is expected to make roughly $13 million in a Christmas Day opening.

—Liz Moyer

***

Holiday Travel Rush Is On, Despite Threatening Weather in West

Airport security was getting ready for a Christmas weekend crush of travelers, with 2.5 million people estimated to pass through Transportation Security Administration checkpoints both Thursday and today. That’s up from in 2019 but still slightly below the record 2.9 million set on the Sunday after Thanksgiving.

• The TSA said the busiest air travel days should be Thursday, today, and New Year’s Day. Air travel is expected to be 6% higher than last year at this time, when the TSA’s busiest holiday season travel day recorded 2.4 million screened travelers.

• More than 115 million people are expected to travel from Saturday through Jan. 1, according to AAA, the second busiest season since 2000. Most travelers are expected to drive. Gasoline prices average $3.12 a gallon, up from the 2023 low of $3.06 a gallon notched earlier this week.

• Thursday saw minimal air travel disruptions despite heavy rain on the West Coast. As of late afternoon, Los Angeles International had no cancellations, and 10% of flights were delayed, while San Francisco International had no cancellations and 13% flight delays, according to FlightAware.

• Cruises are also popular this year, AAA said.
  Carnival Corp.
  beat expectations on strong vacation demand that is raising ticket prices. Fourth quarter revenue rose 40% from the same time last year. Booking volumes for the two weeks near Black Friday and Cyber Monday hit a record, it said.

What’s Next: The TSA advises air travelers bringing gifts in their carry-on bags to put them in gift bags that can be easily opened or in boxes with removable lids. Fully wrapped gifts may have to be opened if they aren’t stored in checked luggage.

—Liz Moyer

***

Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. Attacks in the Red Sea at the Bab el-Mandeb Strait have disrupted shipping in the region amid the Middle East conflict. What percentage of global trade passes through the area?

a. 10%

b. 12%

c. 14%

d. 16%

2.
Apple
had to stop sales of which of its gadgets just before the Christmas rush in the U.S. because of a patent ruling by the International Trade Commission?

a. AirPods Max

b. AirPods Pro

c. Watch Ultra 2

d. Pencil

3.
Southwest Airlines
was ordered to pay the biggest fine ever after last year’s holiday season travel disruptions triggered by bad weather that overwhelmed its systems. How much was the fine?

a. $140 million

b. $160 million

c. $180 million

d. $200 million

4. The Federal Trade Commission banned
Rite Aid
from using artificial intelligence facial recognition technology for surveillance in its stores, which it said the retailer used to track shoppers without their knowledge. How many years is it banned from using the technology?

a. 10

b. 8

c. 5

d. 3

5. The market for initial public offerings may rebound next year with expectations rising for Federal Reserve interest rate cuts. Which of the following potential IPOs have investors buzzing?

a. Shein

b. Reddit

c. Databricks

d. All of the above

Answers: 1(b); 2(c); 3(a); 4(c); 5(d)

—Barron’s Staff

***

—Newsletter edited by Liz Moyer, Steve Goldstein, Rupert Steiner.