Transcript: Nightly Business Report – June 28, 2018




BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Here comes Amazon (NASDAQ:AMZN). The online retailer buys a little known Internet pharmacy, rattling parts of the traditional health care industry.

strong in North America for the first time in a year as the Dow component
turns in a better than expected quarter.

GRIFFETH: Place your bets. Atlantic City re-opens two casinos, but will
they improve the city`s fortunes?

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Thursday, June 28th.

HERERA: Good evening, everyone, and welcome.

Amazon (NASDAQ:AMZN) is making a big push into the pharmacy business. The
online retailer is acquiring PillPack, an online pharmacy with a nationwide
reach. It`s exactly the type of move the health care industry has been
fearing for some time, and that is because some see Amazon`s entry as a way
to upend the traditional market for prescription drugs.

That sent shares of Walgreens, CVS (NYSE:CVS) and Rite Aid (NYSE:RAD)
sharply lower. It also pressured stocks in the drug distribution industry.

Meg Tirrell takes a look at whether Amazon (NASDAQ:AMZN) just took its
first step to becoming a major player in health care.


is the great disruptor from books to retail to grocery stores, the entrance
of Amazon (NASDAQ:AMZN) has signaled massive transformation and loss of
business for competitors and its past. For more than a year, it appeared
pharmacies may be Amazon`s next target. With its announced purchase of
startup PillPack, the online giant has signaled a major move into the

PillPack is a 5-year-old online pharmacy specializing in serving patients
with multiple prescriptions. It delivers presorted medications directly to
patient`s homes.

UNIDENTIFIED FEMALE: You will never sort your pills, never stand in line
at a pharmacy and never miss your medication again.

TIRRELL: It allows patients to contact pharmacists any time of day, online
or through text messages. The company is not big. It had revenue of $100
million in 2017 versus more than $50 billion for both CVS (NYSE:CVS) and
Walgreens. Amazon (NASDAQ:AMZN) has though to have spent about a billion
dollars to acquire PillPack, though it didn`t disclose the terms.

But the market reaction was massive. Stocks of CVS (NYSE:CVS), Walgreens
and Rite Aid (NYSE:RAD) all sank, erasing many billions of dollars in their
market value. Drug distributors AmerisourceBergen (NYSE:ABC), Cardinal
Health (NYSE:CAH) and McKesson (NYSE:MCK), and pharmacy benefit manager
Express (NYSE:EXPR) Scripts all saw shares decline. Walgreens has long
been on the defense when it comes to Amazon (NASDAQ:AMZN) and its CEO
struck the same tone today on its quarterly earnings call.

STEFANO PESSINA: We don`t see any reason to be worried. We are not
complacent. I`ll repeat this. We have a clear plan. And I believe we
will continue with the execution of our plan.

TIRRELL: Others in the space have already turned to mergers to try to
counteract the Amazon (NASDAQ:AMZN) threat. CVS (NYSE:CVS) is looking to
purchase Aetna (NYSE:AET) for $69 billion, and Cigna to buy Express
(NYSE:EXPR) Scripts for $67 million. And as analysts point out, it`s not
just the competition for pharmacy business that may be weighing on

(NYSE:CVS) and Walmart who is a loser here in this bidder, I`m buying —
I`m picking up a lot of things on the way to getting my drug prescription
at the back of the store. Now, I`m definitely going to be doing ALL that
online. So, I think this just puts Amazon (NASDAQ:AMZN) right in a great

TIRRELL: While Amazon`s broader plans for the pharmacy space aren`t
immediately clear, investors clearly believe it will disrupt here as much
as it has other industries.



GRIFFETH: Steven Halper joins us now to talk about all of this. He is the
managing director of equity research at Cantor Fitzgerald.

Thanks for joining us tonight.


GRIFFETH: So, last year, a little over a year ago, when Amazon
(NASDAQ:AMZN) bought Whole Foods, it sent huge ripples through the grocery
business. With today`s announcement about PillPack, do you see the same
thing happening in health care?

HALPER: No. I think the pharmacy business is a lot more complicated than
grocery. Simply because the employers as well as the pharmacy benefit
managers get to control the networks where consumers can get their
prescriptions filled. Most of the managed care companies in our universe
that we cover at Cantor already have captive mail order facilities and they
basically exclude other mail order facilities. So, you can`t get your
prescription filled at another mail order pharmacy.

HERERA: So, what is it for Amazon (NASDAQ:AMZN)? Why would they do this
then if what you laid out obviously kind of shrinks the market for them?

HALPER: Well, clearly, pharmacy is a very large market. And to some
extent perhaps the next move for Amazon (NASDAQ:AMZN) is to move in to the
pharmacy benefit space. That`s a possibility. There are also many small
payers, health plans, that don`t have captive mail order where this might
be a good service.

But remember, pharmacy is a very large industry, collectively, $360 billion
of sales. And PillPack is very small and there is a very long road to
climb here to become mainstream and the biggest challenge is being part of
the pharmacy networks. Many years ago there was a company
(NASDAQ:DSCM) that tried to do the same thing. It simply didn`t work.

GRIFFETH: Clearly, today, we saw a big response to all this. Sue was
showing those fellow drug distributors and retail pharmacies that saw big
declines in their stocks after this announcement came out. The same thing
happened last year on the Whole Foods deal. A lot of grocery stocks went
down but then they came back.

Do you see the same thing happening here? In other words, would you step
in on some of the pharmacies now?

HALPER: Right. So, you know, within my coverage list which is the managed
care list, we saw the same weakness because of the exposure to mail order
pharmacy. We believe that the stocks overreacted and we would certainly
reiterate our overweight rating within our coverage list. We would point
out UnitedHealthcare and Centene (NYSE:CNC) as two great managed care
companies followed by Anthem, which is actually going through a process to
in-source its PBM and its mail order pharmacies and they are actually going
to be partnering with CVS (NYSE:CVS) beginning in 2020.

GRIFFETH: Very good.

Steven Halper with Cantor Fitzgerald, again, thank you for joining us

HALPER: Thank you.

HALPER: Well, Amazon`s move into the drugstore business came on the same
day Walgreens posted its first earnings report as a Dow component. The
company topped Wall Street earnings and profit estimates, it hiked its
dividend and it`s buying back shares.

But as Kate Rogers (NYSE:ROG) reports, Walgreens is facing a number of


is feeling blue. The nation`s largest drugstore chain is facing new
competition from Amazon (NASDAQ:AMZN) and trying to compensate for some of
its own missteps. Same store sales in Walgreens retail division were down
as people spent less on household and personal care. Even the pharmacy
business was flat.

JOHN RANSOM, RAYMOND JAMES: The same store sales, especially in the U.S.,
were quite weak. And that just reflects what we have been seeing in the
channel for the last couple of years which is margin pressure coming from
both ends of the business.

ROGERS: Analysts say the company is aiming to position itself as a healthy
destination like some competitors, offering an array of services designed
to bring in customers. Last year, the company announced a partnership with
FedEx (NYSE:FDX) for drop-off and pick-up services, as well as a
partnership with lab corps for patient service centers which is showing
some promise with early openings in Florida performing well.

RANSOM: They mentioned optical and hearing. I do think they are kind of
inching toward doing more health care-type services and chasing CVS

ROGERS: Good news for investors came today in the form of a $10 billion
share buy back and a higher dividend. And Walgreens does have another
thing working in its favor — demographics. As boomers continue to age,
they are likely to fill for prescriptions.



GRIFFETH: Elsewhere, fellow Dow component Nike (NYSE:NKE) reported better
than expected earnings and revenue, thanks to a number of new product
launches that consumers liked. Nike (NYSE:NKE) earned 69 cents a share.
That was 5 cents better than estimates. Revenue rose nearly 13 percent to
more than $9 billion. And that obviously pleased investors. They sent the
stock higher in initial after hours trading.

Sara Eisen now has more details on Nike`s quarterly results.


did it again, beating Wall Street`s high expectations in the quarterly
earnings report.

Three takeaways: North America is growing again. This is one of the
biggest questions going into the report after a sluggish period in Nike`s
home market. An important market — North America — representing more
than 40 percent of total Nike (NYSE:NKE) sales is now growing again, 3
percent. Investors want to hear if that can continue.

Nike`s growth market continues to be on fire. That would be China. China
representing 35 percent revenue growth for Nike (NYSE:NKE) during the

One question though — will the trade headwinds, if they escalate, start to
hurt? It`s not only an important market in terms of customers for Nike
(NYSE:NKE) as seen by the growth during this quarter but for manufacturing
as well. Footwear and apparel so far have been spared from the tariffs
back and forth between the U.S. and China. But if things get worse, that
could be an issue.

And finally, in terms of products, basketball continues to be hot but the
Jordan brand, not so much. Jordan brand sales shrinking during the period
on lower volumes in sales but basketball still continuing double digit
growth. New styles like Vapormax and Epic React analysts say are
performing well.

Overall, a healthy snapshot on one of the Dow Jones Industrial Average`s
best winners of 2018.



HERERA: On Wall Street, stocks rose as investors brushed off the
uncertainty over trade policy. A rally in the technology and financial
sectors helped lift major averages and by the close, the Dow Jones
Industrial Average advanced 98 points to 24,216, the Nasdaq was up 58 and
the S&P 500 added 16.

Bob Pisani has more on today`s move higher.


green after a slow but steady drift higher, and with just one more trading
day left in the month, the Dow is on pace to end down half a percent for
the month of June. The market showed signs of relief in the rare absence
of any trade-related headlines. Industrial stocks, materials stocks which
had been hit hard by trade related concerns managed to eke out small gains.

Tech and financial stocks provided a big help for a change. Goldman Sachs
(NYSE:GS), JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Morgan Stanley
(NYSE:MS), all up more than 1 percent. In fact, the XLF, it`s a basket of
financial stocks, finally managed to snap a 13-day losing streak as the
Federal Reserve released the results of its latest round of bank stress

Now, remember, tech and financials are the two largest sectors in the S&P
500. They have been massively oversold for months. Semiconductors in
particular have been very oversold. For the year, the S&P 500 is up just
about 1-1/2 percent, its worst showing since 2015. Sectors that led the
chart through most of the quarter weakened as the second quarter has come
to a close. So, that sector is like small cap stocks, the Russell 2000,
FANG stocks like Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix
(NASDAQ:NFLX) and semiconductors.

But there is a lot of good news for the second half. Buybacks are showing
no signs of slowing down. Tax cuts are continuing to boost U.S. earnings.
U.S. growth is strong. The markets have been shrugging off a slight
downward revision for first quarter GDP today.

So, the waters, the problem is, are just a little bit muddier now.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.


HERERA: It is time to take a look at some of today`s upgrades and

IBM was given a rating of buy in new coverage at Nomura Instinet. The
analyst cites the potential for modest but sustained revenue growth. The
price target is $150. Shares of IBM rose nearly 2 percent to $140.04.

Salesforce has rated a top pick by BMO Capital. The analyst cites the
potential for Salesforce to expand its operating margins. The price target
is $152. Shares of Salesforce rose more than 1 percent to $135.12.

GRIFFETH: Meanwhile, Mattel (NASDAQ:MAT) was downgraded to underperform
from neutral at DA Davidson. The analyst cited valuation and it`s lowering
its earnings estimates for the toy maker. Price target now $12. That
stock fell more than 2-1/2 percent to $16.34.

Madison Square Garden (NASDAQ:MSG) was upgraded to buy from hold at
Jefferies. The analyst cited the company`s just board approved plan to
spin the sports businesses into a separate company. Price target now $350.
The stock soared nearly 14 percent today to $303.29.

HERERA: Still ahead, the financial sector moves higher today after
floundering for a while. Is that a positive sign for long-term investors?


GRIFFETH: Amazon (NASDAQ:AMZN) certainly was busy today in addition to the
PillPack deal we told you about earlier. The company made another move as
well. Amazon (NASDAQ:AMZN) announced it is rolling out a new delivery
service aimed at the most critical part of the delivery chain — the Last
Mile. Logistics of course has been a big part of Amazon`s success and now,
the company is ramping up its own network.

Courtney Reagan is at Amazon (NASDAQ:AMZN) headquarters in Seattle.


(NYSE:FDX), UPS, DHL and the Postal Service, a major customer becomes a
bigger competitor.

Today, Amazon (NASDAQ:AMZN) is launching a delivery service, hiring
hundreds of delivery service partners — individuals running their own
local Amazon (NASDAQ:AMZN) package network. By doing this, Amazon
(NASDAQ:AMZN) is hoping to tackle the final most expensive leg of shipping
a package called the Last Mile.

Amazon (NASDAQ:AMZN) will lease up to 40 logoed vehicles to each unit and
provide training and technology. Each business will start the day at one
of 75 current Amazon (NASDAQ:AMZN) delivery stations in the U.S., getting
their packaged and routes.

Ola Abimbola has been running his Amazon (NASDAQ:AMZN) delivery service for
five months as part of the test in Denver.

process making sure we get ready for the day, making sure that drivers are
assigned the right area to deliver and make sure the packages are ready.
Work with the station that we are out of.

COURTNEY: Amazon (NASDAQ:AMZN) algorithm built to maximize efficiency,
determine which packages will go to Amazon`s new local delivery network and
which go to other delivery partners like FedEx (NYSE:FDX) and the Postal

effectively. If you think about the growth of e-commerce, parcel delivery
we`re going to have to meet the growth. It is outpacing the growth of our
core providers.

represents half of the e-commerce area which is only 15 percent of total
commerce. So, if it`s going to go to 40 or 50 percent of commerce, they`re
going to have to increase their logistics capability by three or four X.
And UPS and FedEx (NYSE:FDX) basically can`t do that. And so, Amazon
(NASDAQ:AMZN) has to find some new ways to continue to grow their logistics

COURTNEY: In response to Amazon`s new delivery program, UPS says it
closely monitors customer and competitor announcements. The postal service
says it needs to earn its customers` business every day.

Amazon (NASDAQ:AMZN) is hoping this new program will help it cut costs.
For Amazon`s partners it`s both an opportunity and a risk, an opportunity
to start a business with Amazon`s help, but a risk to run a business
completely dependent upon one customer.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan at Amazon (NASDAQ:AMZN)
headquarters in Seattle, Washington.


HERERA: Meantime, the economy grew less than initially thought in the
first quarter. The gross domestic product was revised down to 2 percent
amidst weakest consumer spending in five years. Economists, however, are
expecting a rebound in the second quarter.

GRIFFETH: Now, as Bob told you earlier, the Federal Reserve today cleared
the way today for most of the biggest U.S. banks to return billions of
dollars to shareholders. The one exception was Deutsch Bank. Regulators
cited material weakness in its data capabilities and capital planning
controls, so that rejection now requires Deutsch Bank to make changes in
its U.S. operations. But for all the other banks, they immediately came
out with dividend hikes and buyback plans.

Even Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) were allowed
limited payouts. Here are some of the new dividend plans and then here are
some of the buyback plans that were announced late today.

HERERA: Well, obviously a positive day for the financials sector after
suffering its longest losing streak ever. The XLF which is an ETF that
tracks the financial sector rose today after falling for 13 straight
sessions. But will the gains hold?

Ken Leon is the global director of equity research at CFRA Research and he
joins us with his outlook.

Good to see you, Ken. Welcome.

Thank you.

HERERA: Well, Bill just detailed the stress test results and they were
positive for many of those banks.

Did what we see today form a bottom, do you think, in the financials

LEON: I think it did. And for the — particularly the large banks` return
of capital, dividend increases and share repurchases, looks like it`s set
to reward investors. We think that`s the key driver for the second half of
the year. There`s other drivers in the business that are healthy, and
there`s been concerns as well.

GRIFFETH: But I`m curious. I mean, the economy is clearly in good shape
now. Interest rates are going up. Both of those things are good for the
banking sector. They improve their profitability and yet their stocks have
been in this prolonged slump.

Why is that, do you think?

LEON: The stocks had great performance last year and they did stall early
this year. I think the concern is with the economy being so strong long
growth is still, for example, on the corporate side 2 percent. Why isn`t
it 4 percent to 5 percent? The consumer side growth is better.

And then you often hear about a flattening yield curve. Banks need a
healthy spread between the cost of their money and what they lend for as

HERERA: All right. So, if you were to put new cash to work in these
names, what names do you like in the financial sector?

LEON: Well, taking into account today`s news from the Fed, Bank of America
(NYSE:BAC) which is a strong buy is going to have meaningful return, 40
percent upside as it relates to buybacks and dividend growth. They also
are executing very well every quarter now.

JPMorgan (NYSE:JPM) is the quality large cap name. They also had very
positive news as it related to a dividend increase.

And then thirdly, still like the capital markets. We prefer Morgan Stanley
(NYSE:MS) which is a buy. Morgan Stanley (NYSE:MS) is going to a big
beneficiary for mergers and acquisitions and investment banking.

HERERA: All right, Ken. Thank you so much. Appreciate it. Ken Leon with
CFRA Research.


GRIFFETH: Shares of BJ`s Wholesales soar on the first day of trading. And
that`s where we begin tonight`s “Market Focus”.

The members-only wholesale made its return to Wall Street after seven years
as a privately held company. And its debut comes at a time when the entire
industry is facing stiff competition online.


CHRIS BALDWIN, BJ`S WHOLESALE CEO: I think any retailer who says that they
don`t compete with Amazon (NASDAQ:AMZN) isn`t being truthful. So, there is
no doubt that the consumer is getting great value and great convenience.
But in the world we are living in today, value retail works. And
membership on top of value retail is a business we feel great about. And
investors have been encouraging us along the way.


GRIFFETH: And they did today. Shares of BJ`s rose nearly 30 percent in
its debut to $22.

Meanwhile, the long running patent dispute between Apple (NASDAQ:AAPL) and
Samsung is finally over. Seven years after it began, the two companies
settled their litigation over smartphone technology. Terms of the
settlement were not disclosed. You may recall that Apple (NASDAQ:AAPL) had
accused Samsung of copying iPhone design and software features. Apple
(NASDAQ:AAPL) shares were up three-quarters of 1 percent today to $185.50.

HERERA: Chipotle`s CEO outlined a broad strategy to revitalize the
restaurant chain which includes closing 65 stores and spending more than
$100 million to win back customers. The plan was light on details. That
disappointed investors. Shares fell 6 percent to $428.36.

McCormick (NYSE:MKC) reports savory second quarter results. The spice
maker posted double digit sales growth and profit thanks to strong demand
from both its consumer and commercial customers. McCormick (NYSE:MKC)
shares rose more than 8 percent to $114.83, their best day in nearly a
decade and a new high as well.

GRIFFETH: Coming up, rolling the dice on Atlantic City.


casinos opening up on Atlantic City`s boardwalk which has been down on its
luck. Is it enough to help the city regain its status as the crown jewel
on the Jersey Shore?

I`m Contessa Brewer. That`s coming up on NIGHTLY BUSINESS REPORT.



HERERA: Casino investors are betting Atlantic City is about to have a
change of fortune with two new casinos opening this week. In recent years,
the city saw casinos close and AC pushed to the brink of bankruptcy.

But now, as Contessa Brewer tells us, the city is raising the ante that
good times will roll again.


BREWER: With a guitar smashing and a ribbon cutting, two new casinos
opened on the famed Atlantic City boardwalk.

Mayor Frank Gilliam hopes it`s a turning point for his hometown.

FRANK GILLIAM, ATLANTIC CITY MAYOR: For so many years, the community was
actually left aside. But my job this year and this term is to make sure we
develop a partnership between corporations and the neighborhoods.

BREWER: Kenny Parnell has worked in Atlantic City more than 30 years, but
he got his walking papers from Trump Taj Mahal when this town hit the

KEN PARNELL, FORMER TAJ MAHAL EMPLOYEE: Leading up to the moment of
actually being dismissed, I leave here now tired, working 14-hour, 15-hour
days. And I walk out smiling, compared to the experience I was waiting for
the hammer to drop. Really, it`s a lot of stress.

BREWER: In the mid 2000s, casinos in New York, Pennsylvania, Delaware, and
Connecticut created stiff competition for gamblers. Gaming revenue in
Atlantic City fell by 50 percent. Nearly half the casinos went belly up,
11,000 people lost their jobs. The city`s finances were in such bad shape,
the state took over.

But that created an opportunity for a real deal. Hard Rock bought the
former Trump Taj Mahal for four cents on the dollar of the original
construction costs, but are spending a fortune to draw top talent to their
stages, with some 300 acts already booked for the first year.

JIM ALLEN, HARD ROCK INTERNATIONAL: Now, we are over 300 shows with a
complete variety of entertainment, whether it`s comedy, Motown, obviously
the legendary Pitbull, Carrie Underwood tomorrow night playing. So, just
really a great array of Broadway entertainment, restaurants, shopping,
that`s what people want to see.

And we are delivering it not just here at Hard Rock, in Atlantic City.

BRUCE DEIFIK, OCEANS CASINO OWNER: My hope now is that as we open and the
Hard Rock opens that the entire boardwalk is activated and the 24.5 million
visitors that come to Atlantic City realize, well, this is an incredible

BREWER: Sports betting, newly legalized, is already a big draw.

UNIDENTIFIED MALE: Browns to win five and a half more games.

BREWER: And gaming revenues have turned a corner, climbing modestly for
each of the last two years.

Gaming analysts are skeptical it is a clear cut jackpot. Investors are
counting on convention business to fill these hotels midweek, but adding
3,000 hotel rooms creates tough competition for the existing resorts,
especially in the winter months when visitors are scarce.

Add in the vacant lots, boarded up windows and decrepit buildings still
dotting the landscape, it might be a hard sell.

GILLIAM: We have a very aggressive code enforcement process that we`re
putting in place to get rid of abandonment and dilapidation, because we
realize the imagery of Atlantic City hasn`t always been the best, but it`s
our job to change that perspective as we grow.

BREWER: The mayor says his seven-year plan includes technology,
alternative energy, a new college. The big question, will investors have
the patience to let it ride? In Atlantic City, Contessa Brewer, NIGHTLY


GRIFFETH: And before we go, a final look at the day on Wall Street, one of
those days where we saw the opposite of yesterday. Yesterday, technology
and financial stocks were the big losers. Today they were the big winners.
The Dow advanced by eight points to 24,216. Tech-led Nasdaq was up 58
points and the S&P gained 16 points in today`s trading.

HERERA: And that will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue
Herera. Thanks for watching.

GRIFFETH: I`m Bill Griffeth. Have a great evening. We`ll see you


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply