Pershing Square Holdings (PSH) Q3 2024 Investor Call earnings summary

Executive summary

• Optimism about the U.S. economic outlook following the Trump election, with expectations for pro-growth policies and improved business confidence.

• Portfolio underperformed the market, mainly due to Universal Music's stock decline, but management remains confident in long-term value.

• Top holdings include Universal Music, Alphabet, Brookfield, and Restaurant Brands, all viewed as annuity-like business models with strong long-term prospects.

Financial highlights

• Universal Music stock down 13-14% YTD, driven by a temporary slowdown in streaming growth, but Q3 showed improvement from 4% to 6%.

• Alphabet delivered strong earnings growth, with consolidated EBIT margins up 480 bps year-over-year and Google Cloud profitability rising to 17%.

• Brookfield's parent entity trades at 15x earnings, with expectations for cash flows to more than double by 2028.

• Restaurant Brands trades at 18x earnings, below peers, but maintains an 8% operating profit growth algorithm.

• Chipotle reported 6% same-store sales growth in Q3, with EBIT and EPS up 17%.

• Hilton's earnings up 18% YTD, with strong business quality and high valuation.

Outlook and guidance

• Universal Music targets 8-10% streaming/subscription growth and >10% adjusted EBITDA growth over the next few years.

• Brookfield expects rapid earnings growth, driven by scaling wealth solutions and carried interest, with significant cash for buybacks.

• Restaurant Brands expects operating profit growth to accelerate next year as temporary headwinds subside.

• Nike anticipated to benefit from new leadership and turnaround initiatives, with long-term growth potential despite near-term challenges.

• Canadian Pacific expected to compound earnings in the mid-to-high teens, trading at a historically low multiple.