TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Blowout quarter. A
big earnings beat, a big dividend increase, and a really, really big
buyback. Inside Apple`s results and what`s next for the world`s most
On strike. Labor tensions revived at the nation`s busiest ports.
This dispute is different.
And, not on the menu. What Chipotle did that no other national
restaurant chain has ever done before.
All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, April
Good evening, everyone. And welcome. I`m Tyler Mathisen. Sue Herera
has the night off.
Well, Apple (NASDAQ:AAPL) did it again. The most valuable publicly
traded U.S. company reported a blowout quarter, selling more than 61
million iPhones in just the first three months of the year, proving to
investors that its smartphone sales are still going very strong.
Here are the numbers and there are a lot of them. Apple (NASDAQ:AAPL)
reported a 33 percent increase in its quarterly profit over a year ago. It
pulled in $2.33 a share. That was 17 cents better than estimates. Revenue
up 27 percent. Coming in at an astonishing $58 billion, easily surpassing
And Apple (NASDAQ:AAPL) is also going to give back more to
shareholders increasing its dividend 11 percent, boosting its share
repurchase program by $50 billion, to a total of $140 billion and pledging
to return a total of $200 billion to shareholders through buybacks and
dividends by 2017.
And how about that cash horde? It now stands at $194 billion and
investors initially sent shares to a new high in after-hours trading.
Josh Lipton now with more on Apple`s earnings and what Tim Cook told
him earlier today.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The big number in
Apple`s latest earnings report, 61.2 million. That is the number of
iPhones that Apple (NASDAQ:AAPL) ships in a quarter and that was better
than expected. Wall Street was looking for Apple (NASDAQ:AAPL) to ship
about 57 million iPhones.
I did have the chance to sit down and speak with CEO Tim Cook who
pointed out that iPhones overall, 44 percent year over year. Cook also
pointed out some of the growth and particular geography, greater China was
up 70 percent. The U.S. was up 20 percent, Mexico up 80 percent and South
Korea up 100 percent.
The reason that`s important is for all the buzz and talk about Apple
(NASDAQ:AAPL) Watch or Apple (NASDAQ:AAPL) TV, it is the iPhone that is the
engine of Apple`s business. It still contributes more than 50 percent of
this company`s sales.
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in Cupertino, California.
MATHISEN: David Garrity is a fan of Apple (NASDAQ:AAPL). He owns
Apple (NASDAQ:AAPL) shares and he`s here to tell us why he thinks the stock
could gain 35 percent or more from today`s already lofty levels. He`s
principal of his own tech research firm, GVA Research.
David, welcome and as always, it`s great to have you with us.
Josh Lipton just pointed out that 50 percent of Apple`s profits come
from one product and that is the iPhone. Is that really the way it ought
to be there or is that potentially a risk at some point?
DAVID GARRITY, GVA RESEARCH PRINCIPAL: It`s been a risk investors
have been focusing on for a long time. And we would say that, you know, to
the extent that Apple (NASDAQ:AAPL) has been as successful as they`ve been
with the iPhone, if we do look at their unit numbers, they`re small in
terms of the penetration that they`re having in terms of total global
market. They`ve probably got less than a third of the units that are out
And if we`re going to be looking at what`s going to be driving
economic growth globally, it`s going to be continued penetration of devices
like smartphones, basically Internet-enabled smart devices and Apple
(NASDAQ:AAPL) clearly is the premium brand in this area.
We would have to say that yes, you know, there is risk but the thing
that`s nice to look at is we`re seeing strong reception for new products
such as the Apple (NASDAQ:AAPL) watch, a device that`s going to rely upon
people having an iPhone to actually use. But that seems to be taking
fairly good uptake and what`s encouraging I think for investors as well to
look at is that the Apple (NASDAQ:AAPL) watch is also going to have better
than average profit margins.
So, we`re going to be looking here at profit margins, arguably rising
rather than falling.
MATHISEN: So I hear you implicitly saying that the Apple
(NASDAQ:AAPL) Watch is going to drive iPhone sales at least marginally
GARRITY: Actually, what I was saying is that the prospects that to
the extent that iPhone 6 and 6 Plus sales a being as successful as they
are, actually has the opportunity to drive Apple (NASDAQ:AAPL) Watch sales.
GARRITY: So you`ll have a nice add on.
And the thing to think about here is that even if you look at the
average selling price for an Apple (NASDAQ:AAPL) smartphone being somewhere
around $660, average Apple (NASDAQ:AAPL) Watch prices most likely will be
moved coming in perhaps somewhere higher than that.
MATHISEN: You have a stock price target of about $180 a share, which
is roughly 35 percent from current, current levels. How do we get there?
How does — what does the market have to revalue to take the stock there?
GARRITY: Oh, first and foremost, I mean, Apple (NASDAQ:AAPL)
currently is trading at about 15 times or so this current year`s estimate
for earnings. The company is growing their earnings, probably better than
20 percent rate. So, you`ve got a company in a price earnings basis is
trading in a discount to its growth rate. A lot of that discount I think
is due to the fact people are concerned about this dependence on the
As we start to see the success of products like an Apple (NASDAQ:AAPL)
Watch, as we start to see broader portfolio strength, if you will, then I
think you have, it`s not unreasonable to see technology stocks trade in
line with their earnings growth rate and with a company like Apple
(NASDAQ:AAPL) trading at discount, you know, this is a gap which if it
closes just to get one time its growth rate is what`s going to get you on
current earnings number for this year and next up to the $180 level.
MATHISEN: Very quickly, if you could pinpoint one risk to that
hypothesis and to Apple (NASDAQ:AAPL) stock prices, what would it be?
GARRITY: I think that, you know, some of the concerns people have
looking at larger addressable markets such as perhaps the possibility that
Apple (NASDAQ:AAPL) would get into the car business, obviously, there are
always risks to have companies enter new markets. Clearly, I don`t think
Apple (NASDAQ:AAPL) has any business going out in manufacturing cars but
that`s not to say they shouldn`t be in the business of potentially
designing cars that are made in collaboration with other companies. It`s a
question here of how well is Apple (NASDAQ:AAPL) actually executing on the
strategy to go into new end markets.
I think what investors have to take away from the launch of the Apple
(NASDAQ:AAPL) Watch and the success it`s seeing is we should have greater
confidence that management does know how to expand the product portfolio
and start to value the company accordingly.
MATHISEN: All right. David, thank you as always. Great to hear from
you. David Garrity with GVA Research.
GARRITY: Thank you, Tyler.
MATHISEN: You bet.
Stocks started higher this year, with the S&P and the NASDAQ hitting
new intraday highs, but the gains didn`t stick as biotech shares turned a
little bit lower. By the close, Dow Jones Industrial Average is off 42
points. It finished at 18,037. NASDAQ snapped its five day win streak,
falling nearly 32 and the S&P 500 dropped 8.
Despite the down day though, positive trends are emerging in the
market and the bulls are looking to some big events this week that could
Bob Pisani has more now from the New York Stock Exchange.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks ended in
the red, but still, we are just off record highs. This is a great relief
to everyone who worried that the market could not possibly advance once the
feds stopped its QE program and certainly not within a few months of the
fed raising rates, which seems likely later this year. With the Fed
meeting this week, the big question is, how will they characterize the
economy? Will the Fed statement be enough to get us decisively out of the
trading range we`ve been in?
The economic data has certainly been choppy with Q1`s GDP now expected
to be up a measly 1 percent. Yikes! However, I think there`s a good
chance the three factors that have been moving the market, the bad weather,
the weak oil, and the strong dollar are all likely temporary and are now
And indeed, they are reversing. West Texas Intermediate and crude is
near the highs of the year while the dollar prize stopped and even declined
since its highs in mid-March, and traders say those factors hold the key to
more stock gains ahead.
The strong dollar in particular has been a mess for multinational
companies. Just look at the difference in earnings between the big cap S&P
500 where many companies get more than half of revenues overseas, and the
small cap S&P 600 where most get little, if any, revenues overseas.
The S&P 500 has revenues down 3.4 percent in the first quarter. The
S&P 600 revenues up 5 percent. Wow. That`s the difference of more than 8
percentage points and that`s largely the strong dollar hurting the top and
the bottom line.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock
MATHISEN: Applied Materials (NASDAQ:AMAT) and Tokyo Electron have
scrapped their merger plans. The multibillion dollar deal would have
created one of the world`s largest semiconductor equipment manufacturers.
Both companies said they didn`t believe they could get antitrust approval.
Shares of Applied Materials (NASDAQ:AMAT) dropped sharply in trading today.
As you see there, down more than 8 percent to $19.97.
The board of the generic drugmaker Mylan (NASDAQ:MYL) rejected rival
Teva Pharmaceuticals unsolicited $40 billion takeover offer. Mylan
(NASDAQ:MYL) says the offer grossly undervalues the company and says it
remains committed to pursuing Ireland`s Perrigo (NASDAQ:PRGO) in a separate
$32 billion proposal that was spurned last week. Shares of all three,
Mylan (NASDAQ:MYL), Teva and Perrigo (NASDAQ:PRGO) ended lower today.
Well, a probable new outbreak of bird flu has been found in four Iowa
poultry farms. The Iowa Department of Agriculture says the new case
affects nearly 2.3 million birds. That brings the total number of
confirmed and probable cases out in Iowa to more than 6 million birds.
Well, today, Chipotle which builds itself as a healthier fast food
alternative became the first national restaurant chain to offer a menu
completely free of genetically engineered ingredients. That`s taken almost
two years to eliminate foods made with genetically modified organisms or
GMOs from its supply chain. But Chipotle says it`s all part of rethinking
the way we eat.
MATHISEN (voice-over): As of today, if you want your food free of
GMOs and you want it fast, you can get it at Chipotle. And at its shop
house, Southeast Asian kitchen restaurants.
GMOs are genetically modified organisms, most often engineered to
improve production, sometimes to resists certain pests or require less
water to grow. GMOs are regulated in the U.S. by the FDA and they`re
surprisingly prevalent. More than 90 percent of corn and soybeans produced
here are genetically modified.
Chipotle`s move has been in the works since it became the first chain
to voluntarily disclose which foods contain GMO ingredients.
Founder Steve Ells downplays any financial impact and sees today`s
move as a natural next step.
STEVE ELLS, CHIPOTLE FOUNDER: I wouldn`t think about the removal of
GMOs as being a significant hurdle financially. But for years now, we`ve
been committed to what we call food with integrity. And so, the removal of
GMOs is just a natural evolution of that.
MATHISEN: Still, Chipotle standards sometimes do eat into its
results. First quarter sales were up more than 10 percent. But that was
short of estimates. A miss Chipotle blamed on ongoing pork shortage
because Chipotle refused to sell meat it claimed came from farms that
GMOs have long been a source of controversy. Many countries,
including Australia, Japan, and much of Europe restrict or even ban the
production and sale of genetically modified foods. Chipotle and others
argue that more studies are needed to determine the long-term effects of
eating food with GMO ingredients, though they`ve been deemed safe by both
the FDA and World Health Organization.
Even if they are safe, though, consumer taste had been changing. Last
year, for example, General Mills (NYSE:GIS) responded to concerned parents
by switching Cheerios to all non-GMO ingredients and Whole Foods require
all of its suppliers to label GMO products by 2018. Since the early 1990s,
Chipotle has staked its claim as a healthier fast food alternative. An
early adopter of what appears to be a fast growing trend.
MATHISEN: And today, shares of Chipotle closed higher. They finished
at $643 a share.
Now, to the West Coast, where labor troubles returned to the nation`s
busiest ports but this time, it`s not a dispute between shipping companies
and the international longshoremen. This time, it`s different.
Morgan Brennan reports.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Just as the country`s biggest port complex was starting to recover from
congestion, another labor strike has struck.
Today, truck drivers hauling containers for four companies took to
picket lines, at the West Coast port of Los Angeles and Long Beach. The
gripe? Job classification.
Drivers at Pacific 9 Transportation and Intermodal Bridge Transport,
Pacer Cartage and Harbor Rail Transport are considered independent
contractors, but they want to be company employees, a move they say would
result in better wages and workplace protections. Not to mention the
ability to unionize.
But trucking companies counter that the pay is good, that it has to
deal with the driver shortage and this strike doesn`t count the majority of
Analysts don`t expect this strike to majorly disrupt operations, at
least for now.
DONALD BROUGHTON, AVONDALA PARTNERS SR. ANALYST: I don`t think it
lasts that long because these are really high-paying trucking jobs. And it
makes the equation easier to negotiate. If we were to see an extended
slowdown, we could see everyone affected from the Burlington Northerns and
Union Pacifics, to the railroads, to those that pull away loads directly
from there, whether it`d be the JB Hunts, the Swifts, the Knights of the
world. But it`s really premature to make that kind of a concern.
BRENNAN: Several similar strikes have the ports over the past year
had little impact, with only a few hundred drivers out of the port`s 16,000
picketing, the ports are still open for business. But experts say the
situation sheds light on a much bigger issue. What happens if these
drivers succeed in being recognized as company employees?
BROUGHTON: If you disallow contractor status, then you have much more
expensive employees at your hands. You have to go buy those assets, you
have to start paying Social Security tax on them, Medicare tax,
withholding. It becomes a completely different situation both from a legal
labor perspective, as well as from a tax perspective, as well as you have
the buy assets that they currently themselves buy and maintain.
BRENNAN (on camera): Strike aside, this debate has been making its
way through California support system, where truck drivers have been filing
this misclassification suits since last fall`s high profile cases have
already been found in favor of drivers.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
MATHISEN: Still ahead, the brand new companies that are cashing in as
home remodeling goes digital.
MATHISEN: Corinthian College is closing its doors. The for-profit
college is shutting down its remaining 28 campuses and what`s believed to
be the biggest shutdown in the history of higher education in the United
States. Corinthian says it is working with other institutions to help the
displaced more than 16,000 students who now won`t get their degree.
The announcement comes a few weeks after the Department of Education
fines Corinthian $30 million for misrepresenting job placement data and
last year, the government cut off the school`s access to federal aid.
For those ready to start their college careers, this is decision week.
Millions of high school seniors May 1 is the deadline to make final college
decisions and send in a deposit to secure a spot in the freshmen class next
For many, a major part of this decision involves evaluating the
financial aid award letter and Sharon Epperson joins us now with more on
what to consider.
It is an emotional decision that you really sometimes can`t separate
purely from dollars and cents, but what are the things families need to
SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, in
terms of dollars and cents they really need to think of the cost of tuition
for one year. And look at what that includes, tuition fees, room and
board, and also the cost of travel. Also look at what scholarships and
grants that they offer, and what they say in an award letter about federal
The key here is to look at this awards letter. You`ve got the
acceptance letter, that`s where the emotion and excitement comes in. The
award letter for financial aid is where people really get sticker shock and
see what they`re really going to have to pay.
MATHISEN: How do they go about calculating the actual final bottom
line number that`s going to affect them?
EPPERSON: Well, the first thing is they need to consider what`s in
there in terms of the money they`re talking about. Are they talking about
free money? Are they talking about scholarship and grants? That`s what
you to look at first, of course.
And then there`s earned money. So, a lot of times in a financial aid
package, it`s a work study program which is to think about how many hours a
week is the student going to have to work, will they able to find the job,
how much are they getting paid, how will that reduce the actual cost and
then also think about the federal student loans that they`re getting.
That, of course, is borrowed money and so you really want to be careful
that you don`t borrow too much and really afford to pay back.
MATHISEN: How can the family do the number work to figure out what
they can actually afford to pay?
EPPERSON: So, first, you look at attendance and make sure that you
include what the school will include in terms of direct costs, but also
those indirect costs. They`re going to school in California, you live on
the East Coast? That`s a big travel bill. You just want to make sure
you`re cover in there. And if they have to live off campus, what is the
total cost of housing, all those things that maybe somewhat intangible.
You want to try to nail down as best you can for the cost of
attendance. And then subtract the math, the financial aid, the
scholarship, and the grant, and what you have as a result is the net price
of the cost of going to college.
MATHISEN: That`s going to have to come out of your pocket.
EPPERSON: That`s going to have to come out of your pocket or that
you`ll have to get —
MATHISEN: Where quickly can people get more information to help
through this process?
EPPERSON: Studentaid.ed.gov is great Web site to go to, the
Department of Education`s Web site, to find out about different programs
that might be available, and then also, look at Sallie Mae and
Edvisors.com, a lot of great resources there.
MATHISEN: All right. Sharon, great. Good to see you. Sharon
EPPERSON: My pleasure.
MATHISEN: Procter & Gamble (NYSE:PG) plans to cut advertising costs
and that, folks, is where we begin tonight`s “Market Focus”.
The consumer products maker, which is the world`s largest advertiser,
wants to spend a lot less on marketing. Think of everything from Pampers
to Gillette razors, says it will cut costs by a half a billion dollars to
help other parts of its company accelerate growth. Shares were off a
fraction to $80.60, the close.
Activist investor Nelson Peltz has a key ally now in his fight for
influence at DuPont. Institutional Shareholder Services or ISS recommended
that shareholders give the billionaire investor seats on the company`s
board. This as Peltz`s Trian Fund is pushing the chemical maker to split
into two companies. Shares were 4.5 percent higher today at $74.81.
A big miss from The Container Store, that sent that stock as much as
25-percent lower after the close. The company`s quarterly earnings and
revenue came in well below estimates. The retailer blamed weather among
other factors. Shares, as you can see, were way off initially after the
bell. Before the close, the stock was up 1 percent to $21.69. Watch that
A tough day for drug maker Akorn (NASDAQ:AKRX) Pharmaceuticals.
Investors got a chance to react to an announcement that the company will
restate its earnings from the final three quarters of 2014, and its first
quarter filing for 2015 probably is going to be delayed. This as some of
the previously announced financial information turned out to be wrong.
Shares fell 22 percent to $43.10.
Well, home values rise. Homeowners gain much needed equity and they
are putting it to work. Home remodeling is on the upswing again and so are
the brand new companies behind popular remodeling Web sites.
Diana Olick has our story.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Before the dumpster comes in or the dry wall goes up, the mouth designs the
Homeowner Steve Gately who used to horde home improvement magazine
went online at the suggestion of his design build firm.
STEPHEN GATELY, HOMEOWNER: You can give them an idea what you liked,
disliked and it made that design process, it gave the designers a sense of
who we are and what we`re looking for in terms of the new space.
OLICK: Gately went on to Houzz, a web site that`s grown into a
remodeling marketplace valued at over $2 billion.
ADI TATARKO, HOUSE CEO: I think that the fact that the vendors were
there, the manufacturers were there, as well as the homeowners ready to do
that, and they really wanted the Houzz to become the place where they do
BRUCE CASE, CASE DESIGN/REMODELLING PRESIDENT: I view it as an added
cost of doing business.
OLICK: Remodeling web sites not just a destination for homeowners but
necessity for remodeling professionals.
CASE: Most of us got into this remodeling business because we love
the smell of sawdust, we love design, or passion about homes, and as you
said, now we have to be experts in social media and all these other
OLICK: And the competition is growing fast.
(on camera): Take for example, Seattle-based porch.com, a company
that connects homeowners with home improvement professionals. They started
in this space just over a year ago with barely 100 workers.
They`re busting out, literally taking on 75,000 square feet of new
space, expecting at least 600 employees by year end.
MATT EHRLICHMAN, PORCH.COM CEO: It`s nice to have winds at our back.
OLICK (voice-over): Porch got into the market in late 2013, just as
home equity took a huge leap. It offers consumers both professional
contact as well as historical information and visuals of local area
EHRLICHMAN: Focusing on aggregating this data that nobody else has,
building these partnerships like nobody else has like Lowe`s and all of
these, you know, really sets up to build products others can`t and that
just gives us a really big advantage.
OLICK: Porch garnered $100 million of investor capital so far, says
Ehrlichman, and with $300 billion remodeling business at their doorstep —
GATELY: I have several home magazines I think I can get rid of these
OLICK: — these companies have an awful lot to build on.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Seattle.
MATHISEN: Houzz is funded in part by the investment arm of Comcast
(NASDAQ:CMCSA) (NYSE:CCS), parent company of CNBC, which produces this
And coming up, can a company headquartered on the other side of the
globe take on Apple (NASDAQ:AAPL), the richest company on earth, on Apple`s
MATHISEN: Take a look at what to watch tomorrow. Pfizer (NYSE:PFE),
Merck (NYSE:MRK), and UPS just some of the companies to report their
earnings before the bell. The Federal Reserve begins its two-day policy
meeting and consumer confidence for April will be released. That`s what to
Well, as we told you earlier in the broadcast, Apple (NASDAQ:AAPL) saw
its iPhone sales surged, but now, there`s another smartphone maker that`s
trying to get the attention of American consumers and compete with Apple
(NASDAQ:AAPL) head on.
Eunice Yoon has more.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
These Chinese phones claim many firsts — first to use a special USB port
for charging, first to support wireless HDMI, first to compete directly
with the iPhone 6 on Apple`s home turf. The Le 1, Le 1 Pro, Le Max are the
products of Chinese company LETV.
You probably haven`t heard of it, but in China, LETV is a probably
streaming site for videos and live TV. Sort of like a Netflix
(NASDAQ:NFLX) but with its own movie studio, smart TVs and now branded
phones to rival the iPhone 6.
(on camera): LETV`s phones are high end. They`re competitive with
Apples but much, much cheaper. For example, the Le 1 costs about 246
bucks, and the Le 1 Pro sets you back $410.
(voice-over): The idea, the company says, is not to worry about the
low margins on the phones, but to make money off of memberships to its
massive library of TV shows and movies. LETV offers everything from
Chinese series to American favorites, like “House of Cards”, and sports
events like the NCAA, driving viewership, the company says, of more than
(on camera): LETV plans to sell its phones in China in May, and it
hopes to market the Le 1 Pro in the U.S. and have it here by the end of the
year. But some critics say the company is in over its head because unlike
Apple (NASDAQ:AAPL), it`s never made phones before.
(voice-over): Some also believe LETV`s venture into America won`t
work well since most of the content is in Chinese.
They company, though, says it`s targeting Chinese communities here
first before reaching out to a bigger audience. It aims to sell 3 million
phones in the first year, still a fraction of Apple`s iPhone sales, but
just a start, LETV says, of its global ambitions.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in New York.
MATHISEN: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Tyler
Mathisen, thanks for watching. Have a great evening, everyone, and we hope
to see you right back here tomorrow night.
Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2015 CNBC, Inc.