ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Growing scrutiny. The
doomed Ethiopian Airlines flight showed clear similarities to another
deadly crash, and pressure mounts on Boeing and its stock.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Hitting the road. Lyft is one
step closer to going public, but rival Uber is close behind.
GRIFFETH: Blood shortage — for dogs, and some in the $17 billion vet
industry are trying to fill that gap.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Monday,
March the 18th.
HERERA: Good evening, everyone, and welcome.
A new week brings new questions about Boeing`s popular plane, the 737 MAX.
Black box data shows, quote, clear similarities between the crash of the
Ethiopian jet and the Lion Air accident just a few months ago. There are
also reports that federal investigators are looking into the development of
the aircraft itself, which has been grounded worldwide for almost a week.
Shares today fell more than 1.5 percent and have lost about $30 billion in
market value since the crash on March 10th.
Phil LeBeau has the latest developments.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The development and
certification of the Boeing 737 MAX airplane is now at the heart of
questions being asked by the federal government. “The Wall Street Journal”
says the Department of Transportation is scrutinizing how Boeing and the
FAA went about making sure the plane was safe to fly before it was
certified two years ago.
Separately, a federal grand jury is investigating development of the MAX,
issuing at least one subpoena. Boeing says it does not respond to or
comment on questions concerning legal matters, whether internal,
litigation, or governmental inquiries. We do not comment even as to
whether such matters exist.
Meanwhile, completed 737 MAX jets are stacking up at Boeing`s plant in
Renton, Washington. The company is not changing its production schedule
and is planning to update the software in all 737 MAX jets, perhaps as soon
as next week. That update, in theory, would eliminate potential issues
with anti-stall technology suspected of causing a 737 MAX crash in
GORDON BETHUNE, FORMER CONTINENTAL AIRLINES CEO: I think they`ll fix this
one by having two sensors instead of one and they`ll both have to agree. I
think that`s a critical comparative that would keep this from happening
again. And, two, I`m sure they`ll put some ultra pilot interference mode
so that if the pilot rejects it, it disconnects, which I understand it does
LEBEAU: The black boxes of the 737 MAX that crashed in Africa convinces
some there is a definite link between that accident and the crash of a 737
MAX last October. In fact, Ethiopia`s transport minister says there are
clear similarities between the two planes that crashed shortly after take-
It may be months before there is a definitive cause to the two 737 MAX
accidents. In the meantime, Boeing hopes it can move as quickly as
possible to convince authorities its most popular plane is ready to return
to the skies.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
GRIFFETH: Carter Copeland joins us now to talk more about Boeing, its
stock, and what investors might want to do with that. He is defense
analyst at Melius Research.
Carter, thanks for joining us tonight.
CARTER COPELAND, MELIUS RESEARCH DEFENSE ANALYST: Happy to.
GRIFFETH: You know, it occurs to me there certain costs that Boeing faces.
Not only the cost of lost business while the jet is grounded. There`s the
possibility of canceled orders. We`ve heard about a few already. And
then, of course, possible litigation costs.
Have you tried to add it all up and figure out what it would do to Boeing`s
COPELAND: Yes, we estimated that the nonrecurring cost that Boeing may
incur to get through, let`s call it a three-month delay or probably on the
order of a billion dollars, with half of that being related to customer
compensation and the other half split between legal costs and the cost to
fix the airplane. And those are all based on, you know, historical
examples and public lease rates and things we can observe.
Now, there`s some variability around that, you know, when it comes to
things like legal settlements. We could envision those being larger. But
in terms of, you know, if the plane is suspended deliveries for a quarter
or so, you know, we would expect the company to build up a significant
amount of planes just as Phil was implying they`re currently doing before
delivering them later. And that would be billions of dollars, but we would
chalk most of that up to timing.
HERERA: Well, speaking of the timing, now we`re seeing there may be an
investigation into the development of the 737, and it seems as though every
day, the timeline on when this all may be over seems to be getting longer
and longer. Have you factored some of that into your analysis?
COPELAND: Yes, absolutely, Sue. I think that there`s — the news over the
weekend probably extends that timeline considerably. Now, Boeing has been
talking about having a software fix, and that`s been in the works for some
number of months. They said it was delayed, in fact, by the government
But even though that software fix will be ready to go, they sort of hint in
the next couple weeks, I think there`s an immense amount of pressure on the
FAA here in the States and IASA in Europe to really dot every “I” and cross
every “T” when it comes to certifying that the plane is airworthy, ready to
go with these new changes.
So, I think you`ll be a little bit more stringent. There will be a lot
more scrutiny. I think that, you know, could push this into some number of
months. But I`m not sure it points to us having more extensive changes
than what Boeing is already sort of proposing.
GRIFFETH: What do you do with the stock, whether you`re a shareholder or
non-shareholder who`s watching this unfold right now?
COPELAND: Yes, I don`t — I think we will look back in the longer term and
say this was a very attractive entry point for a company that is profitably
growing in a very attractive market, and that`s the market for commercial
air travel, which as you know has been growing very attractively for the
last several years and we predict will do so for another dozen or so, you
So, I think this will prove to be a great entry point, but it will require
patience. We are going to continue to see a lot of headlines fly out.
You`re going to see customers talking. You`re going to see regulators
talking. Each one of those things, I think, probably makes this stock
somewhat range bound in the short term, but the longer term, we`re still
GRIFFETH: All right. Carter Copeland with Melius Research, again, thanks
for joining us tonight.
COPELAND: Of course.
HERERA: On Wall Street, stocks rose and the Dow posted a four-day win
streak despite the decline in Boeing shares. Investors looked ahead to a
busy week, which also includes a Fed meeting. The Dow Jones Industrial
Average rose 65 points to 25,914, the Nasdaq added 25, and the S&P 500 was
Stocks today are not far from reaching their most recent highs, making this
market much different from the one of just a few months ago.
Mike Santoli has more.
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: This week marks a
half year since the stock market last posted a record high, and with the
persistent rally since December, the S&P 500 has recovered four-fifths of
its 20 percent drop from its September peak. But stocks have staged this
rebound with little new enthusiasm over the economy and without investors
returning fully to a confident bull market posture.
Stocks are now less than 4 percent from that September peak, and it`s fair
to ask exactly how they`ve made up so much ground so quickly where
corporate profit expectations have slipped. It starts with the fact that
the December free fall reflected premature or exaggerated fears of an
oncoming U.S. recession exacerbated by worry over Federal Reserve
tightening, and the year-end tax law selling.
The snap back has taken hold as the Fed sent a message of patience toward
further rate hikes which has held treasury bond yields near their lows of
the past year. Low rates have bolstered stock valuations as dividend
payers and big-growth companies with sturdy profit margins hold up the
Investors have been a bit skeptical of rally until recently with cash
continuing to flow out of equity funds until a big belated rush of
contributions last week. This could represent the public growing tired of
watching from the sidelines as stocks levitate.
Question now is just how long stocks can thrive on low rates and the
reversal of excessive investor pessimism. The bulls point out that the
profit forecasts for 2019 are beginning to stabilize, and China is trying
to jump start its economy. Still, it`s not yet clear if that combination
will be enough to take stocks beyond the shadow of the bear that`s stalked
the market for half a year.
For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.
GRIFFETH: Elsewhere, the nation`s home builders are feeling good about
their business right now, and industry gauge of home builders sentiment
release held steady in March, and most say they anticipate a solid spring
home buying season. Affordability, though, has been the biggest issue
facing the new home buyers, and many in the industry hope that lower
mortgage rates will help fuel sales. But if you`re in the market to rent
instead, get ready to pay more.
Diana Olick tells us where you`ll pay the most.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Home prices may be
cooling off this spring, but rents are heating up yet again. After taking
a breather last year, thanks to new supply on the market, rents for both
single-family homes and multifamily apartments are now rising at the
fastest pace in nearly a year, that according to Zillow. The median
monthly rent in February came in at $1,472, an increase of 2.4 percent
compared with February of 2018.
For the typical renter, this means about $400 more a year. This after
rents actually fell last fall for the first time in more than six years.
Of course, all real estate is local with rents now significantly higher
than a year ago in Orlando, Phoenix, Riverside, California, Tampa, and
Rents are unlikely to rise as fast as they did three years ago when demand
was soaring because more millennials are now buying homes, and
homeownership overall is rising. Mortgage rates are lower again, and that
could give the spring housing market a much-needed boost.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: It is time to take a look at some of today`s upgrades and
downgrades. Facebook was downgraded two hold from buy at Needham. The
analyst cites the growing risk of regulation, executive departures, and CEO
Mark Zuckerberg`s strategy shift.
(BEGIN VIDEO CLIP)
LAURA MARTIN, NEEDHAM SENIOR ANALYST: Mark has do a strategic pivot, which
he did not talk about on the last earnings call, where he`s going to
combine Instagram, WhatsApp, and Messenger, he`s going to encrypt them and
have them all disappear. That feels like a strategic pivot that actually
drove the two people, very senior people out of the firm last week, saying
it`s going to be a multiyear challenge to reorient the business.
(END VIDEO CLIP)
HERERA: The price target is $170. The stocks fell 3 percent to $160.47.
PVH was downgraded to neutral from buy at Citi. The analyst cites the
retailer`s dependence on outlets and says that could weigh on sales and
profits. The price target is $120. Despite the downgrade, though, the
stock rose fractionally to $111.45.
And Dollar General was upgraded to overweight from equal weight at
Barclays. The analyst says the company`s investments will give it a
competitive advantage. And the price target is $125. The shares rose more
than 2 percent to $116.53.
GRIFFETH: Still ahead, some small businesses are enjoying big savings
under the new tax law, but there is a feeling that the law did not go far
GRIFFETH: Goldman Sachs said today it is expanding a program that aims to
improve diversity at bank. The company has set what it calls aspirational
goals of having half of its all-new analysts and entry-level associates in
the U.S. be women. It`s also issuing targets for black and Latino hires
for the first time.
CEO David Solomon said he thinks the goals can be achieved.
HERERA: JPMorgan is outlining a new $350 million program aimed at
improving job prospects for people in underserved communities. The bank`s
five-year plan includes training for in-demand digital and technical roles
and money to help employers and the educational system work together.
JPMorgan`s CEO says the program is designed to help bridge our economy that
is divided into haves and have-nots.
(BEGIN VIDEO CLIP)
JAMIE DIMON, JPMORGAN CHASE CHAIRMAN & CEO: It is absolutely obvious that
a big chunk has been left behind. So 40 percent of Americans make less
than $15 an hour. Forty percent of Americans can`t afford a $400 bill,
whether it`s medical or fixing a car, something like that.
Fifteen percent of Americans make minimum wages. OK? Seventy thousand
died from opioids. We`ve kind of bifurcate the economy.
(END VIDEO CLIP)
HERERA: Mr. Dimon said the new world of work is about skills, not
GRIFFETH: You`ll soon be able to buy shares of Lyft on the open market.
The ride-hailing company is preparing to go public, and today, it entered
the home stretch with the start of its road show, an event that`s used to
market initial public offerings to Wall Street.
Leslie Picker is in New York for us tonight.
LESLIE PICKER, NIGHTLY BUSINESS REPORT CORRESPONDENT: HERERA: Lyft is
used to the road. That`s where the ride-hailing company`s business lives.
But their road show is something new. It kicked off in earnest today,
allowing its executives to pitch their new shares to investors.
CEO Logan Green and President John Zimmer traveled in Lyft cars all across
Wall Street, meeting with banks to explain to their sales teams how to
market their deal.
LOGAN GREEN, LFYT CEO: We`re at the very beginning of a generational shift
from car ownership to transportation as a service.
PICKER: The deal is a boon for Lyft`s executive team as well as the banks
underwriting this offering. They`re expecting to sell about $2 billion
worth of stock at a valuation around $20 billion. Lyft is the first of
many large tech IPOs expected to come to market this year. Being the first
Lyft allows chance to share its story ahead of larger rival Uber as well as
get out while market valuations are high.
SANTOSH RAO, MANHATTAN VENTURE PARTNERS: I think this is the best time to
come out. They`re doing a great job in the major market. Macro market is
good. IPO sentiment is good. But I think this is the right time to get
out and they`re doing the right thing.
PICKER: Lyft`s road show will take place all over the country over the
next two weeks. The feedback they get from investors will help determine a
final price to sell their shares, something they plan to set next Thursday.
And next Friday, the stock will begin trading under the symbol LYFT.
For NIGHTLY BUSINESS REPORT, I`m Leslie Picker, New York.
HERERA: Lyft`s larger rival Uber is also going public. It plans to make
its stock market debut in April, but between the two ride-hailing
companies, which one might be better for investors?
Joining us to talk about is Kathleen Smith, principal and co-founder of
Kathleen, great to see you again. Welcome back.
KATHLEEN SMITH, PRINCIPAL AND CO-FOUNDER, RENAISSANCE CAPITAL: Thank you.
HERERA: And you say it`s going to be tricky to make money in either one of
these companies. Why?
SMITH: Well, they`re both losing money for every hundred-dollar ride.
Lyft is losing $6 per ride, and Uber is lose — sorry, Uber is losing $6
and Lyft is losing $12. So they`re both money-losing companies. That
should be a red alert for investors looking at these businesses.
GRIFFETH: If we had to pin you down, I mean, Uber is clearly the pioneer
and much larger of the two companies. Does that give it an advantage that
would be more attractive for investors, or do you go with the upstart Lyft?
I mean, which way do you go here, if you had to pick one?
SMITH: If I had to pick one, I`d go with the dominant market leader, even
though we have to give Lyft some credit for being faster growing and
gaining in market share. But Uber is really the giant company, and
generally the giant companies tend to be the better call if you`re going to
make call it — better protection and a sizable firm.
HERERA: And we`re just looking at some of the points you sent us. You say
this should be part of a well-diversified portfolio because there may be
some volatility and because of the financials, which you just discussed.
SMITH: The way we would approach it is unless you`re able to get shares on
an IPO, the best thing, especially for companies like these, which are
growth companies and growing at all costs, would be to put them into a
portfolio of other companies so that you can at least have some other
diversified risks. There`s still risk. So, that would be the approach
we`d take. That`s why we have put together an IPO ETF, that`s a basket of
60 or so newly public companies, and you`ll moderate your risk that way.
GRIFFETH: Now, Lyft is going to have two different classes of stock. Here
we go again. You know, this has happened with other technology giants as
well. And this ideally is to give the founders more control over their
company. Does that — should that give investors pause before they decide
to buy this stock, do you think?
SMITH: It`s not favorable to have a company that limits the shareholders`
right to vote. That`s not favorable. I think it`s a negative. I don`t
think it will stop the deal from happening. But to have the founders who
own really less than 5 percent of this company control about 50 percent of
the vote, it`s not right. If things go wrong, public shareholders have a
right to make changes and to have their vote represented equal to their
HERERA: On that note, Kathleen Smith with Renaissance Capital. Kathleen,
SMITH: Thank you.
GRIFFETH: A big acquisition in the fast-growing payment sector, and that`s
where we begin tonight`s “Market Focus”.
Fidelity National Information Services is buying WorldPay for about $35
billion in cash and stock. The deal is one of the biggest in that
industry, and it comes amid greater regulatory scrutiny. Today, the CEO of
Fidelity National said the pairing makes sense.
(BEGIN VIDEO CLIP)
GARY NORCROSS, FIDELITY NATIONAL INFORMATION SERVICES CHAIRMAN & CEO: So
we`ve really got two very good companies coming together here. We`re going
to be able to accelerate our growth as a company so it`s a pivot to growth
for us on a combined basis. We`ll do 12 billion in revenue, growing 6
percent organically and producing 5 billion of EBITDA.
(END VIDEO CLIP)
GRIFFETH: WorldPay shares were up nearly 10 percent today. Fidelity
national was off a fraction. Both stocks closed around $108 a share.
There is takeover chatter in the casino industry right now. Reports
tonight say that Caesar`s Entertainment and El Dorado resorts are in early
merger discussions. No guarantees though. According to “Reuters”, El
Dorado has yet to make an official offer for Caesar`s. Activist investor
Carl Icahn has a take in Caesar`s, and he has been pushing for just such a
sale. Caesar`s rose 4.5 percent in today`s trade, while El Dorado fell
nearly 2 percent to $45.60.
And credit rating agency S&P has placed Kraft Heinz on review for a
possible downgrade that would lower the company`s credit rating even closer
to junk status. This after the struggling food company failed to file its
annual report with the SEC. The stock fell a fraction to $32.03 after
hitting a 52-week low during today`s trading session.
HERERA: Over the next three years, Marriott plans to open more than 1,700
hotels around the world. The company expects more than 40 percent will be
in North America. In the same time frame, Marriott says it could buy back
up to $9 billion worth of its stock. The stock rose 2 percent to $124.96.
The cannabis producer Tilray reported a wider than expected quarterly loss,
but its revenue surged by more than 200 percent year over year to about $15
million. The company says expenses grew as the company expanded and
increased production. The stock rose in initial after-hours trading. It
finished the regular session down a fraction to $72.24.
GRIFFETH: This tax season not only are individuals trying to navigate the
new tax laws, but so are small business owners. And for some, it`s a bit
Kate Rogers takes us to Main Street tonight.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Lana Pol`s small
business is enjoying big savings under the new tax law, at least for now.
The entrepreneur owns four businesses across Iowa and said this year, she
saw a drop in her overall tax burden, thanks to the qualified business
deduction. She was also able to expense a major investment, buying six new
tractors totaling a million dollars. Her accountant says her savings look
LANA POL, SMALL BUSINESS OWNER: We`re estimating around up to $40,000.
And by utilizing that, we gave our employees raises, knowing that was going
to help us for taxes this year.
ROGERS: And Main Street advocates point out corporations still have a 21
percent rate while pass-through businesses could face rates of up to 29.6
TODD MCCRACKEN, NATIONAL SMALL BUSINESS ASSOCIATION: While we got some
ground work laid for parody for small companies, we didn`t actually get
there. So, corporations, big corporations that make millions of dollars
are actually seeing their tax rates at a lower level than many small
businesses that are pass-throughs that are making less money. And we don`t
think that`s fair. We think we need to get closer to parody than we have.
ROGERS: Taxes have long been a trouble spot for small businesses. The
National Federation of Independent Business, NFIB, says that at least 10
percent of small business owners have ranked taxes as their single most
important problem nearly every month since 1973 when the group began
polling Main Street.
Despite the tax law`s benefits, small business owners like Pol face another
test. The deduction used to lower her taxes will expire after 2025. So,
Pol went to Capitol Hill on behalf of the NFIB to urge lawmakers to make
these changes permanent.
For now, though, Pol is feeling good. She recently expanded one of her
businesses with a 40,000-square-foot warehouse and says she sees the same
optimism from other entrepreneurs in her area.
POL: Business in this area really seems to be booming. Down the line, I
think what I`m hearing and seeing is more people are getting a little
concerned because of the provisions not being permanent. So I think
there`s great optimism for at least the next two, three years here and then
after that, I think people start getting a little more concerned.
ROGERS: For NIGHTLY BUSINESS REPORT, I`m Kate Rogers.
HERERA: Some sad news tonight. Well-known economist Alan Krueger died
over the weekend. He advised both Presidents Clinton and Obama and served
as the chairman of the Council of Economic Advisers from 2011 to 2013. His
focus was labor economics, where he emphasized data rather than theory.
Krueger taught at Princeton University for more than three decades. The
family in a statement said the cause of death was suicide. He was 58 years
HERERA: Arlington, Virginia, approved a multimillion dollar incentive
package for Amazon to build its second headquarters in Crystal City,
Virginia. On Friday, we told you that this vote was to take place over the
weekend. Amazon is promising 25,000 jobs in the neighborhood, but some
activists wanted to send the company packing, like they did in New York.
GRIFFETH: Pet care clearly is very big business these days. People will
do just about anything and spend just about any amount for their furry
friends, especially when it comes to their health. And now the veterinary
industry is trying to fill a surprising shortage to help pets in need.
Jane Wells has our story tonight.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is a dog receiving
a blood transfusion, and this is a dog blood bank, a rare thing in the $17
billion U.S. veterinary business. Jaqui Lenner found out how rare when her
beloved lab China suddenly needed emergency surgery for a tumor. The
doctor had troubling news. There was no blood.
JAQUI LENNER, DOG OWNER: I`m like, what do you mean? Like, there`s no
WELLS: Lenner did her own leg work and managed to find one unit of blood
an hour`s drive away, costing hundreds of dollars.
LENNER: We were able to use this one unit of blood. And, you know, she
made it through the night and she went into cardiac arrest and she passed
WELLS: For all that we do for our pets, most of us don`t realize pets can
help each other. Dogs and cats each only have only two blood types and
they cannot donate to each other. And, of course, human blood doesn`t
Meanwhile, there are only a handful of pet blood banks around the country,
and supply and demand are completely out of whack.
Blue Pearl Emergency Pet Hospital started its own mini blood bank in
Paramus, New Jersey, buying the equipment and training staff because too
often they were coming up short.
ALLISON KWASEK, BLUE PEARL VETERINARY TECH: I could call one of our
commercial blood banks that we use routinely and order a certain type of
dog blood, and they could have it to me within four days, or they can tell
me — well, we`ll get it to you in four weeks.
WELLS: Annual screening of a donor can cost $1200, a service the hospital
does for free. And to lure new donors, they have a Facebook page and
TRACEY HORYCZ-SANGUILIANO, BLUE PEARL HOSPITAL ADMINISTRATOR: We offer a
month`s supply of dog food, which owners are pretty excited about because
that is a costly thing.
WELLS: But some critics argue pets have not given their consent to be
LENNER: I thought they were joking at first because I`m like, a dog can`t
talk. You can`t ask a dog if he wants his teeth cleaned either. If people
knew it could help save another dog`s life, I feel like in the dog world
people really care about other people`s dogs too.
WELLS: For NIGHTLY BUSINESS REPORT, I`m Jane Wells.
HERERA: And before we go, here`s a look at the final numbers on Wall
Street. The Dow rose 65. Nasdaq added 25. The S&P 500 was up 10.
And that does it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herrera.
Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a wonderful evening, everybody. See