Nightly Business Report – March 18, 2019

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill 



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.  



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 



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.  



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.  


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 

bottom line.  

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 

up ten.  

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.  



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.  



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.  



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.


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.  


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.  


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.  


HERERA:  Mr. Dimon said the new world of work is about skills, not 

necessarily degrees.  

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.  



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 

Renaissance Capital.  

Kathleen, great to see you again.  Welcome back.  


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, 

thank you.  

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.  



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.  


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.  



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 



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.  



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.  



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.  


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 



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.  



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 

you tomorrow.  

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