Transcript: Nightly Business Report — April 28, 2015

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Sue Herera.

Twitter plunged nearly 20 percent after earnings were leaked early on —
what else? — Twitter.

Battling back. The one thing that`s still hammering the global
pharmaceutical and what Merck (NYSE:MRK) is doing to mitigate the impact.

And, great expectations. What the nation`s top money managers and
strategists expect from the Federal Reserve as it begins a two-day policy

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
April 28th.

Good evening, everyone, and welcome. I`m Tyler Mathisen. Sue Herera
has the night off.

Well, call it a taste of a two-fleet tweet. The Twitter quarter
earnings were released prematurely today on — where else? — Twitter. And
the numbers stunk, to put it mildly. Revenue was far below forecast and
the company slashed its outlook.

The official profit report was supposed to come after the close of
trading today. But some key numbers were tweeted out early by a financial
research firm that claimed it got them off of Twitter`s own investor
relations Web site. Shares nose-dived. They were then halted at the
Twitter`s request, the company says, so it could put out the full report.

The stock then resumed trading, but by the close, shares were down 18
percent. That is the Twitter`s second worst day ever.

As for earnings, Twitter did beat expectations on that score at seven
cents a share, but the critical revenue number, a disappointed $436 million
is what caught investors off guard.

Julia Boorstin has more now on the report and what investors should


Twitter`s all important monthly active user number came in right in line
with expectations, the news moving the stock lower was its guidance, which
along with quarterly revenue came in lower than expected. The company
lowered its full year outlook from the top and bottom line.

One issue was lower-than-expected performance from its direct response
advertising products. That`s the weakness it`s looking to address with an
acquisition it announced today, along with earnings is buying marketing
technology company TellApart. Another deal to improve that issue, Twitter
announced a partnership with Google`s DoubleClick to improve that ad
performance. We`ll have to see if these moves can help reverse Twitter`s
move to lower its outlook.

Back over to you.


MATHISEN: Julia Boorstin reporting.

All right. Sticking with earnings, there was just not as much drama
with UPS. Today, just a solid beat on profits. The company long regarded
as a key indicator of U.S. economic health says profitability improved
across all its business segments in the first quarter and that, as you
might expect, send shares higher by nearly 3 1/2 percent.

Morgan Brennan delivers our UPS package.


UPS profit climbed 14 percent, driven largely by higher prices. It was the
first quarter of newly implemented rate initiatives, including charging by
weight and size for all ground packages, a strategy both UPS and competitor
FedEx (NYSE:FDX) has deployed to incentive shippers to do a better job
packaging goods.

KURT KUEHN, UPS CFO: It did drive up revenue in the quarter. But
ultimately, the goal is just to help our customers shrink their package
sizes down, to make things more efficient, and it helps us operate better
and also more efficiently.

BRENNAN: UPS has also enjoyed strong growth abroad, with export
activity jumping 9 percent in Europe, where the company has a big presence.
But currency fluctuations, particularly the euro weakening against the
dollar did weigh on revenue which missed analyst expectations. And cheaper
oil prices add the pressure to the top line results as customer fuel
surcharges were adjusted lower.

Analysts say the biggest takeaway is that the economy is doing OK both
here and in Europe.

DAVID ROSS, STIFEL NICOLAUS: UPS is certainly comfortable with the
economy and the growth that we`re seeing in volumes to be able to push
price a little bit harder than they have in the past.

BRENNAN: In terms of guidance, UPS reiterated the outlook it gave in
January when 2015 earnings were revised lower. Analysts expect e-commerce
and international markets to continue powering profit growth this year.
But they also warned that despite falling 10 percent since the start of the
year, shares still look expensive.

ROSS: We`re still hold rated on the stock. Our estimates aren`t
going to change much in terms of what we`re looking for, for 2015, 2016 and

BRENNAN (on camera): UPS also announced a change in management.
Chief financial officer Kurt Kuehn will retire, succeeds by Richard Peretz
who is currently the company`s corporate controller and treasurer. That
transition is set to take place in July.



MATHISEN: It was kind of a tail of two drug giants in today`s trading
session. Dow components Merck (NYSE:MRK) and Pfizer (NYSE:PFE) both
reporting results their results, but they were digested quite differently
by investors. Merck (NYSE:MRK) shares popped 5 percent. That made it the
best performing stock on the Dow today, while Pfizer (NYSE:PFE) fell.

Bertha Coombs tells us the challenges both companies face and how
Merck (NYSE:MRK) managed to come out on top at least today.


The strong dollar is hammering the global pharmaceutical industry, yet
Pfizer (NYSE:PFE) still managed to top expectations, while warning that the
dollar will hurt sales for the year.

SEAMUS FERNANDEZ: The only thing they lowered their guidance on this
time go by about $500 million wasn`t that much was all currency. So,
again, it`s currency effects. We saw it with J&J. You know, we`re seeing
it now. We saw a little bit with Lilly last week.

COOMBS: Merck (NYSE:MRK) sales were also impacted by dollar strength,
but the second largest pharma giant`s revenues were well above
expectations, helped in part by hedging and by strong sales of specialty

BARBARA RYAN, PHARMA ANALYST: It was mix related to the new products,
and if you think a lot of the areas, the hot areas, you know, whether HPV,
or oncology, or vaccines, Merck (NYSE:MRK) is participating in all of that.

COOMBS: Investors were also encouraged after Merck (NYSE:MRK)
reported positive results showing the diabetes drug Januvia did not
increase heart complications. This is particularly good news for Merck
(NYSE:MRK) since an FDA panel has recommended that competing treatment
carry warning labels for cardiac patients.

For Merck (NYSE:MRK) and a number of drug makers, a strong pipeline of
new drugs, some through acquisitions, comes after years of declining sales
due to expiring patents, and generic acquisition.

RYAN: We`re seeing the fundamentals driven by good old-fashioned
innovation and new drugs coming to the market, which are improving the life
of patients.

COOMBS: For Bristol-Myers, sales of its cancer treatment Yervoy and
Opdivo more than offset currency headwinds. And even at Pfizer (NYSE:PFE),
new cancer treatments sales were strong.

FERNANDEZ: The Ibrance number, which is a new breast cancer drug from
Pfizer (NYSE:PFE), came in at $38 million and that was only in — that was
in the very early stages.

COOMBS (on camera): Analysts say pharmaceutical companies are set to
reap the benefits of cycle of drug introductions, with a number of
specialty treatments in the pipeline.



MATHISEN: But will the new specialty treatments, Bertha just
mentioned, be affordable for everyone?

Personalized treatment for cancer and cystic fibrosis that are already
on the market can sometimes caused tens and even hundreds of thousands of
dollars a year and in some cases, they prolong life by just a few months.

Dr. Peter Bach is director of the Memorial Sloan Kettering Center for
Health Policy and Outcomes, and he joins us now for insight.

Dr. Bach, welcome. Good to have you with us.

In a phrase or two, why do drugs cost so much in the United States?
And why do their prices keep rising as rapidly as they do, apart from these
really breakthrough personalized drugs that we`re seeing more and more of?

you for having me.

I think what we see is very rapid rises in drug prices that seem
largely disassociated from the benefits the drugs provide to patients. And
it`s important to realize that many of these therapies are coming on the
market and helping patients sometimes really magnificently but irrespective
of their major breakthroughs that change the trajectory of diseases, or
minor, incremental gains, we`re seeing very rapid price increases either

Tenfold price increase in the last 20 years adjusting for inflation
for new cancer drugs, 100-fold over the last 50. That`s much more than the
increase in benefits we`ve seen.

MATHISEN: And why is that?

BACH: We largely live in a place, in an environment where there`s
absolutely no downward pressure on drug prices. And, you know, the
purchasers are completely separated from being able to either negotiate or
in any other way leverage the benefits of the drug against their prices.
We are price takers.

MATHISEN: We are price takers because that`s what these
pharmaceutical companies charge. An article today in the — a very
controversial topic — an article today in “The New York Times (NYSE:NYT)”
in which you are quoted, says that the president would like to see Medicare
be able to negotiate the prices of drugs. This has been a political hot-
button and PhRMA, the main lobby of the pharmaceutical industry, is very
strongly entrenched in Washington with Congress.

Would that help keep the lid on price increases in a major way?

BACH: Tyler, I think you are right. This is major — primarily a
political talking point. The ability to negotiate or not wouldn`t affect
prices that much. What is happening is that most new products are treated
as if they are monopolies and if you require Medicare or other insurers to
include the drugs, the starting point of negotiation is the end of it. You
have to have the drugs and you have to take the price the manufacturer

MATHISEN: You have fought back personally, as I understand it, as my
reading of your work indicates, about some of the cases where drug
companies will come to you with what is described as an important new
medicine, but you don`t see the value, so you have fought against including
them in your therapies.

Is that true?

BACH: Well, I don`t like to call it fighting. I like to call it
using evidence to make good prescribing conditions and it`s true that my
hospital rejected an expensive cancer drug because we saw no additional
benefit to it, compared to an older drug. In fact, they were identically
beneficial and used the same mechanism of action and we rejected the higher
price drug.

MATHISEN: Are we spending in terms of therapies and obviously you and
Sloan Kettering, one of the great cancer hospitals in the world, are we
expending excessively on end of life care that may extend the time of life
by a matter of months or the quality of life in the small increment. Is
that one of the issues here?

BACH: I think there is a lot of issues but it begins with the pricing
of drugs. And it`s common to say we spend a lot on end of life of care,
but the truth is that people who are sick consume more health care
resources. We have a system that cares of the sick and it costs money.

And I don`t think that`s the problem. I think it`s the unit prices of
what we provide to our patient. We spend more on drugs. They cost more
here than any other developed nation. We have no ability or very limited
ability to limit or set drugs that are similar in efficacy against one
another like a normal market place would have.

We need a system that keeps drug companies profitable and successful
to promote innovation and brings drugs to market, but keeps them affordable
and doesn`t break budgets. Right now, we have the first couple that were
breaking Medicaid budgets across this country with some of the new
specialty drugs, were challenging the Medicare budget as well.

MATHISEN: Fascinating conversation.

Dr. Bach, thank you so much for being with us.

Dr. Peter Bach with Memorial Sloan Kettering Center for Health Policy
and Outcome.

BACH: Thank you.

MATHISEN: On to stocks now.

They got off to a volatile start today. Early in the day, the Dow
Jones Industrial Average feel more than 100 points on news of the seizure
of a western cargo ship off the coast of Iran. But stocks did recover. By
the close, the blue chip Dow index was up 72 points. It finished at
18,110, NASDAQ down 4, and the S&P notched a 5-point gain.

Onto the economy now, and the housing market, the S&P Case-Shiller
home price index increase a little more than 4 percent in the 12 months
ended in February, the conference board says consumers were less confident
about the economy in April. Its confidence measure dipped to a four-month
low primarily because of job market concerns.

And confidence in the housing — confidence and housing, I should say,
are two things the Federal Reserve watches very closely. And today, the
Central Bank policymakers began one of their periodic two-day meetings.

A rate increase is highly unlikely when we get the results of the
meeting tomorrow, many of the nation`s top money managers and investment
strategists do expect changes down the road.

Steve Liesman explains.


begins its two-day meeting, the market is looking for a Federal Reserve
that is easier than previously expected, and starts later, and the reason
is a stronger dollar and lower prices and lower oil prices, a low outlook
for inflation and weaker economic growth.

Here`s the time line from the CNBC Fed survey — 38 market
participants polled. First rate hike had been seen in August of 2015.
Now, it`s seen in October — two months later for the start of rate hikes.

When will the Fed let that $4 trillion balance decline? Had been
April 2016. And now, it`s May 2016.

How about when it will finally finish hiking rates? Had been the
fourth quarter of 2017 at 3 percent. Now, it`s a quarter later at a lower
rate, 2.85 percent.

And the outlook for rates this year and next is also lower. If you
look here, they lowered it for about 40 basis points for 2016 and by about
20 for 2015.

So, really just looking for two hikes here, two quarter point likes
here in 2015. Looking at growth, it`s remained pretty steady despite all
the headwinds that are out there. Still looking for 2.7 percent growth
this year, fourth quarter over fourth quarter, and 2.8 percent next year.

Still not reaching the 3 percent growth we`ve been looking for here.
The probability of recession however remains pretty low for this series of
the survey, just a 15 percent chance or so that we`ll have a recession in
the next 12 months.

What are the things that can go wrong? We asked about the possible
risk to the U.S. economy. Twenty-eight percent say it`s not here, it`s
overseas, global economic weakness. Eleven percent say it`s here in the
United States — tax and regulatory policies, followed by geopolitical
risks, finally, a slow job growth. And then last bit right over here, slow
wage growth.

Finally, we asked participants to grade the current chair of the
Federal Reserve, Janet Yellen, versus the previous chair, Ben Bernanke.
Over all, she does the same here on leadership. Transparency, a little bit
better. Communication, a little bit better. A little bit better along the
way here.

This is a combination of people giving Yellen giving an “A”, versus
those who give her a “C” because they think policy is not right. She beats
Ben Bernanke a little bit in the over all grade.



MATHISEN: To the biggest oil companies in the country posting earnings
this week, the results out of Exxon and Chevron (NYSE:CVX) will give
investors a read on the health of the energy sector. We`ll give you a look
at what to expect, just ahead.


MATHISEN: Demonstrations continued today in Baltimore as the city
recovers from last night`s violent unrest. T. Rowe Price, which is
headquartered there, closed its downtown offices today and said that many
employees will work from their home or other locations. Legg Mason
(NYSE:LM), also a Baltimore company, encouraged its employees to work from
home as well.

Meanwhile, Southwest Airlines (NYSE:LUV) have canceled ten departures
from Baltimore`s airport, citing worker and passenger safety.

And Major League Baseball is taking an unprecedented step. The
Baltimore Orioles will play the first game in Major League history in front
of no fans tomorrow. And a weekend series will be moved to Florida from
Baltimore. Today`s game was postponed and will be made up in late May.

Today, the president condemned the violence in Baltimore, calling it
counter-productive. The comments came during a joint news conference with
Japanese Prime Minister Shinzo Abe at the White House. The two countries
are working to strengthen economic ties while trying to further a massive,
new Pacific Rim trade deal.


trade can be hard in both our countries. It is never fun passing a trade
bill in this town.


MATHISEN: Japan recently surpassed China as the United States`
biggest creditor.

To the Supreme Court now where the justices heard arguments over the
constitutionality of gay marriage and the ruling could have implications
for businesses large and small.

Hampton Pearson reports.


Demonstrators for and against gay marriage outside the Supreme Court
reflected the divisions and caution among the nine justices being asked to
decide whether to require all 50 states to recognize same-sex unions or let
the states decide.

Justice Anthony Kennedy, a likely swing vote, took the lead in voicing
apprehension about redefining marriage.

been with us for a millennia, and it`s very difficult for the court to say,
oh, well, we know better.

institution is the opposite sex relationship.

PEARSON: Same-sex marriages are legal in 36 states and the District
of Columbia. Today`s case involved 16 same sex couples from four states
where their marriages are illegal.

GREG BURKE: We don`t feel like we should have to leave our state just
so that we can get the same treatment that other couples get in other parts
of the country.

APRIL BLEGER (ph): We took this step for the protection of our
children, and we stand before you one step closer to being a legalized,
recognized family in the state of Michigan.

PEARSON: There are an estimated 350,000 married same-sex couples
nationwide according to a population expert at UCLA. Several companies,
large and small, have already implemented benefit plans for same sex
couples. The question remains, how many more businesses will have to
follow suit if the court rules in favor of gay marriages.

So far, the biggest economic headache has been — you guessed it —
taxes. Federal tax policy is uniform, after the court`s ruling two years
ago. The challenge now is what to do at the state level.

JOSEPH HENCHMAN: The uncertainty is where it`s still disputed, in a
state like Alabama where the federal courts are saying one thing, and the
state courts are saying another. It`s tough for us to see taxpayers and
citizens put in that kind of situation.

PEARSON (on camera): Based on today`s arguments, it looks like the
justices` plan to set a very high legal bar before possibly saying yes to
the notion of same sex marriage as a constitutional right.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson at the U.S. Supreme


MATHISEN: We begin tonight`s “Market Focus” with two well-known
companies upping their shareholder payouts.

IBM and MetLife (NYSE:MET) both announcing increases to their
quarterly dividends. IBM`s is up 18-percent to $1.30 a share. MetLife
(NYSE:MET) hiked its dividend to about 38 cents a share. Both yields are
around 3 percent. Shares of IBM up almost 2 percent today to $173.92.
MetLife (NYSE:MET) was 1 percent higher, it closed at $50.86.

Ford disappointed investors with results that missed estimates on the
top and bottom lines. The car maker sold fewer vehicles in North America
as it`s working to increase production of its new F-150 truck. It
maintained its full-year profit forecast, though and shares rose 1 percent
to $16.06.

It was a tough day for shares of Coach (NYSE:COH). The clothing and
accessories maker saw its profit drop more that 50 percent. This as the
company was hurt by a stronger dollar and increased competition from other
retailers like Michael Kors and Kate Spade. The stock down 6 percent to

Whirlpool (NYSE:WHR) also fell victim to the strong greenback. The
maker of appliances lowered its profit and sales forecast for 2015. It
also said Latin American sales are gong to weigh on its results, mostly
because of Brazil`s stagnating economy. Shares of Whirlpool (NYSE:WHR) off
7 percent today to $183.70.

This earnings week for big oil. Started this morning with results
from BP, which came in better than expected and those results will be
followed later this week by the two American giants, ExxonMobil (NYSE:XOM)
and Chevron (NYSE:CVX).

Our Dominic Chu has the report tonight.


week will be key for many investors interested in the energy sector. The
two biggest oil companies in America are slated to report earnings.
ExxonMobil (NYSE:XOM) comes out Thursday, Chevron (NYSE:CVX) is scheduled
for Friday.

These two reports could provide some more clarity about where industry
leaders think we are headed. Some investors are feeling better about
energy companies.

ROBERT PAVLIK: I`m fairly optimistic for the energy space. When I
take a look at the earnings reports of both Total and BP, I think you`re
going to see, although trends continue for the overall industry, I think
you`re going to see earnings slightly better and I think revenues kind of
probably coming in line maybe a little bit of miss, but I think that`s
going to be able to carry the overall industry higher.

CHU: But not everyone is as convinced that the all-clear signal has
been sounded for buying energy stocks. Oil prices could still drift lower
and take much of the sector lower along with it. That`s the danger. But
some experts are pointing out that there may be an opportunity for longer-
term investors.

MARK TRAVIS, INTREPID CAPITAL FUNDS: Material price change since last
June is going to affect them and I think it`s going to be a challenge for a
lot of companies in the energy space. But I do think that over time that
is probably one of the biggest disconnect in equity values are, is in the
energy space, due to this commodities price swing.

CHU (on camera): There is no doubt they have rebounded very sharply
in a short amount of time, but can that move be sustained? Exxon and
Chevron (NYSE:CVX) could shed light on that part of the story.



MATHISEN: Still ahead, Wall Street gives back, with a little help
from celebrity A-listers.


MATHISEN: Here`s what to watch tomorrow. We`re going to get the
statement from the Federal Reserve after the Central Bank`s two-day
meeting. First quarter GDP, which is the broadest measure of economic
activity going to be released tomorrow, and that is what`s on the agenda
for Wednesday.

The National Football League has decided to give up its tax exempt
status in a letter today. The NFL commissioner informed team owners and
members of Congress by saying he was eliminating a distraction. The league
had been under pressure from lawmakers who questioned whether it deserved
such a classification. As a result, the league will no longer be required
to disclose the compensation of its commissioner and other top executives.

And finally, tonight a star-studded Wall Street trading floor. Some
famous named made their way to the financial services firm BTIG for its
annual charity day — answering phones, taking orders. And the day`s
commissions will be donated to help worthy causes.

Bob Pisani was there.


was the 13th annual BTIG charity day. Over 150 celebrities from A-Rod to
Shaquille O`Neal, to Eli Manning, to “Sports Illustrated” swimsuit cover
model Hannah Davis.

They descended on midtown Manhattan to raise money for dozens of

SHAQUILLE O`NEAL, NBA LEGEND: Make some great calls, make a call,
make a trade, make a difference here at BTIG. The charity of my choice is
Odessa Chambliss Quality of Life Fund. It`s my mother`s charity. Since
1995, we sent about 150 nurses to nursing school.

PISANI: BTIG`s founder Steve Starker who just last week became the
co-owner of the Atlanta Hawks has no problem getting his dozens of sports
star friends to attend his annual event.

STEVE STARKER, BTIG FOUNDER: The goal is to raise $5 million today to
get us well north of $30 million over 13 years and hopefully, we`re going
to hit $5 million.

PISANI (on camera): One thing every charity participant emphasized
was the importance of people in the public eye to give back to the

(voice-over): Giants` quarterback Eli Manning was raising money for
the March of Dimes and other groups. He stressed the importance of being
involved with his own community.

ELI MANNING, GIANTS QUARTERBACK: Once you did a little bit or you
visit a hospital and go to an event and see you get a difference, maybe you
get a written note from a parent or a child comes up and you see them
smile, or maybe they`ve had a rough time and you understand that just a
little can make a big difference in these people`s lives.

PISANI: “Sports Illustrated” cover model Hannah Davis who was raising
money for the Happy Hearts Fund to raise money for schools hit by
catastrophe insisted that people in the public eye should help others.

HANNAH DAVIS, COVER MODEL: I think it is extremely important because
we have this platform, whether you`re an athlete, you`re an actress or
model, you know, people look up to you and people are listening to you.
So, I think it is important to do charitable work.

PISANI: The message here — the big money in sports, business, and
entertainment comes with responsibilities.

charity event.


MATHISEN: Well done.

That`s NIGHTLY BUSINESS REPORT tonight. I`m Tyler Mathisen. Thanks
for watching. And have a great evening, everybody. We hope to see you
right back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post
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