Transcript: Nightly Business Report – April 25, 2019

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Dow drags.  The blue chip  index falls triple digits as 3M (NYSE:MMM) has its worst day in 30 years  and Intel (NASDAQ:INTC) says its financial results for 2019 will not be as  good as once thought.  

Trillion dollar club.  Microsoft (NASDAQ:MSFT) is now part of that  exclusive group, but what happens to stocks when their valuations enter the  stratosphere?  

Box office blockbuster.  Superheroes are known to break things and Disney`s  “Avengers” are breaking record after record.  
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this  Thursday, April 25th.  

And we do bid you a good evening, everybody, and welcome.  Sue is off  tonight.  

It was a case of the blue chip blues.  The world`s most recognizable stock  index was the problem child today.  The Dow fell sharply led lower by 3M  (NYSE:MMM) which saw its worst one-day rout going all the way back to Black  Monday of 1987.  3M`s weak quarterly report dragged other industrial stocks  lower, as well.

And by the close, the Industrial Average was down 134 points down to  26,462, but the Nasdaq was higher, up 16, and the S&P lost just one point.  
And here`s a closer look at 3M (NYSE:MMM).  Investors punished that stock  after the company lowered its profit outlook and said that revenue fell in  most of its divisions.  

Bob Pisani has more now on today`s mixed market and the signals the  earnings season is sending.  

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  We`re about a quarter  of the way through earnings season and so far, the earnings recession is  looking less and less likely.  That`s good news.  
3M (NYSE:MMM) and UPS may have missed some mark, but strong earnings beat  from Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT) and CNBC parent  company Comcast (NASDAQ:CMCSA) (NYSE:CCS) gave a significant boost to the  S&P 500 earnings, both estimates which have picked up from down 2.5 percent  to flat today, and that`s good news.  
But we`re not out of the woods yet.  The stock market has been rallying on  the belief that the economies in China and to a lesser extent, Europe, had  been bottoming.  The comments in the last 24 hours is reminding us that  this debate has not been settled.  First, South Korea`s surprise  announcement that it suffered its slowest growth since 2008, dropping 0.3  percent.  That was a real warning sign.  

The weaker growth in that region was driven by weak semiconductor sales  largely to China.  We also heard from 3M (NYSE:MMM), which gets 20 percent  of its revenues from Asia, pointing to slower growth in key markets  including China.  Remember, the chipmakers are particularly reliant on  China for growth.  

Texas Instruments (NYSE:TXN), another chip maker, said Tuesday weakness in  chip sales may continue into this quarter and the next quarter.  And Lam  Research (NASDAQ:LRCX), which is one of the largest semiconductor  manufacturing equipment companies said last night that the spending  correction in the memory chips will extend through the calendar year.   That`s still a warning sign.  

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

GRIFFETH:  Intel (NASDAQ:INTC) added to the disappointment after the  closing bell.  The company said that it`s talking a more cautious view of  this year, issuing a revenue and earnings forecast that is well below what  Wall Street had been expecting and this was a new quarterly report since  Intel`s new CEO, Bob Swan, took over.  And investors expressed their  dismay, sending that stock lower in initial after-hours trading tonight.  
Josh Lipton has more.  

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  $4.9 billion, that  refers to how much revenue Intel`s DCG business generated in the quarter or  chips for servers that was down 6 percent and missed estimates.  

Stifel`s Kevin Cassidy says that was a big number to him because it reminds  us that`s Intel`s most profitable business line, and because it`s a  business segment, it should have the most long-term potential growth.  But  Cassidy says it looks like the big cloud companies aren`t spending as much  on the server chips right now as they wait to see if they require  additional capacity.  

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.  

GRIFFETH:  As for Amazon (NASDAQ:AMZN), it blew past earnings expectations.   The company`s profit more than doubled on cloud computing growth.  

Just look at these numbers.  Amazon (NASDAQ:AMZN) earned $7.09, easily  surpassing the estimate of $4.72.  Revenue rose about 17 percent from a  year ago to more than $59 billion.  

But a tepid sales forecast created volatility in the after-hours trading  session tonight.  Deirdre Bosa has details.

DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT:  We`ve been seeing a  slower growing, but more profitable Amazon (NASDAQ:AMZN) over the last  year, and that narrative was intact this quarter.  Growth in Amazon`s core  e-commerce business is moderating while its cloud computing segment known  as Amazon (NASDAQ:AMZN) Web Services or AWS, it continues to drive overall  growth and profits.  
Last year, the company delivered quarter after quarter of record profits as  they raked investment from the last few years, but this year, the company  is warning that they`re going to be in spending mode again.  Amazon  (NASDAQ:AMZN) is making big bets in groceries, devices and pushing abroad  to challenging markets like India.  

For NIGHTLY BUSINESS REPORT, I`m Deirdre Bosa, San Francisco.  

GRIFFETH:  Let`s turn to Tuna Amobi to talk more about these numbers  tonight.  Tuna, of course, senior equity analyst at CFRA Research.  
Good to see you again.  Welcome back.  

GRIFFETH:  You know, for years, Amazon (NASDAQ:AMZN) — their sales growths  was so strong but they weren`t profitable.  Now, sales growth are slowing  and their profits are getting fatter.  What do you make of that?  
AMOBI:  Well, what I think of it is that there is better visibility in  terms of the operating outlook.  It`s pretty clear to us that the company  is on some kind of momentum in terms of generating cash operating cash flow  and free cash flow.  Both of those metrics are almost double compared to a  year-ago level.

AMOBI:  And as was indicated earlier, Amazon (NASDAQ:AMZN) Web Services  continues to outperform expectation.  

GRIFFETH:  However, you know, analysts love to point things out detail-wise  and while 41 percent growth rate in their sales of their cloud service is  strong, it`s not as strong as the previous number when it was 49 percent  sales growth.  Is that a warning sign of any kind?  

AMOBI:  I wouldn`t read into that as a warning sign.  There`s no question,  Bill, that the cloud computing space has gotten a lot more competitive, but  if you look at that division, they also reported over 300 basis points of  margin and just this quarter.  We think that by the end of this year, it`s  going to exceed a $30 billion run rate business.  So, that continues to be  a major catalyst and I don`t see that slowing down any time soon just  because the space is also growing globally.  

GRIFFETH:  What about the Whole Foods experiment?  The acquisition there?   I mean, it has mixed result, let`s face it.  What is your outlook for that  division?  

AMOBI:  So, yes, I do agree that the jury is still out in terms of the, you  know, the overall outlook for Whole Foods and, in fact, for the physical  stores in general.  The one silver lining in this quarter that they  reported 1 percent revenue growth in the physical stores which compares to  the 3 percent decline in the last quarter.  So, sequentially, it seems to  be going in the right direction.  

Overall, I would look to Whole Foods as more or less a strategic asset,  potentially with the loss-leader as they look to extend their online  grocery delivery business.  

GRIFFETH:  Very quickly, do you like the stock here?  

AMOBI:  I do, Bill.  We are still recommending a buy with the 12-month  target of 2,000 which will be revisiting fairly soon.  

GRIFFETH:  All right.  Tuna Amobi with CFRA Research, again, thanks for  joining us tonight.  

AMOBI:  Thank you, Bill.  

GRIFFETH:  Now to the economy, a new report out this morning said that  orders for long lasting durable goods posted their biggest increase in  seven months, rising by 2.7 percent led by stronger demands by cars, planes  and networking equipment.  The economists say that the increase signals a  rebound in the slower growing, industrial side of the economy.  
And in another report the number of Americans filing applications for  unemployment benefits increased by the most in 19 months last week, jobless  claims rose by 37,000 but experts still say that the underlying trend  continues to point to a strong labor market.  

Time to take a look at some of today`s “Upgrades and Downgrades”.  
We start with Facebook (NASDAQ:FB).  That was upgraded to a buy from  neutral at UBS.  The analyst cited strong advertising trends that were  mentioned in Facebook`s earnings report that we told you about last night.   The new price target $240.  That stock was up more than 5.5 percent to  $193.26.

American Express (NYSE:EXPR) (NYSE:AXP) was upgraded to overweight from  equal weight at Morgan Stanley (NYSE:MS).  The analyst cited the company`s  strong revenue growth right now.  Price target $140.  That stock was up  more than 1 percent to $115.88.

And Tesla was downgraded to neutral from outperform at Wedbush Securities.   The analyst cited changing demand for vehicles right now.  Price target  $275.  That stock fell 4 percent today to $247.63.  
Still ahead, why houses for sale in a famed Connecticut suburb are just  sitting on the market.  

GRIFFETH:  Wall Street`s trillion dollar club has a new member, Microsoft  (NASDAQ:MSFT).  The company hit one trillion dollars in market value for  the first time today after its latest earnings report.  Microsoft  (NASDAQ:MSFT) joins Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) as the  only U.S. companies to ever reach that milestone.
But how significant is it and what does it is a about the state of our  economy right now?  

Ivan Feinseth s here to talk about that.  He`s chief investment officer and  director of research at Tigress Financial Partners.  
Good to see you.  Welcome back.


GRIFFETH:  I learned something today, and you taught it to me.  The first  company to hit a billion dollars in market value was — 


GRIFFETH:  It was U.S. Steel.

FEINSETH:  U.S. Steel.

GRIFFETH:  We`ll get to G.E. in a second.  But 1901 is when they hit a  billion dollars.  It must have been huge at that time.  


GRIFFETH:  And then G.E. hit 100 billion for the first time in 1995, but  now we have the trillion dollar club.  

What does it is a about the changing nature of our economy to see these  companies now hitting a trillion dollars?  

FEINSETH:  Well, it was interesting to see U.S. Steel and G.E.  They were  manufacturing companies that were heavily capital intensive, financial  capital intensive where Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and  Amazon (NASDAQ:AMZN) are actually intellectual capital intensive.  These  three companies have tremendous returns on capital while Amazon  (NASDAQ:AMZN) has the ability to create incremental return on capital.  
They all have significant excess cash and free cash flow, that they  continue to re-invest in their companies and actually, all three of those  companies should really accelerate returning cash to shareholders.  They  have such an abundance of cash.  They have very little debt and the only  reason these companies even have debt is because the cash that they earn  overseas cannot be brought back to the U.S. without paying tax and they  pledged that cash to debt and have been buying back stock and paying  dividends in the U.S. 

GRIFFETH:  Now, the institutional investors, let`s face it, they`re the  ones that move the market.  Do they view the company differently when they  hit a milestone like this?  Do you think?  

FEINSETH:  Well, it`s kind of just a number.  It`s a large number and it`s  been driven by their growth and these three companies have very strong  growth and most importantly very strong return on capital that continues to  compound the growth of their equity.  

GRIFFETH:  So you don`t think this will change the nature of the beast as  institutional investors view these companies as investments, then? 

FEINSETH:  No.  I think these are industry-leading companies.  They are  game changing companies.  If you look at Larry Kudlow and the companies  that have disrupted many industries and really improved life and brought  down costs of so many things that they`ve changed the financial landscape  of the world.  

GRIFFETH:  Who else joins the club, do you think at some point? 

FEINSETH:  Google (NASDAQ:GOOG) and Alphabet.  

GRIFFETH:  They`re late to the party aren`t they, right now?

FEINSETH:  Eight ninety billion, and I think one of the four companies it  is one of the cheapest and so many that they have the leading mobile  operating system and Android user base is significantly more than the Apple  (NASDAQ:AAPL) iOS user base.  They have incredible autonomous, and Waymo is  estimated to be worth anymore between $50 billion as much as $150 billion  of their almost $900 billion in market cap, and they`re a dominant cloud  provider and they also are the dominant search provider with over 98  percent search market share, which is incredible.  

GRIFFETH:  Probably won`t be long before they hit that number.
Ivan, good to see you again.  Thank you.

FEINSETH:  Thank you.

GRIFFETH:  Ivan Feinseth with Tigress Financial Partners joining us  tonight.  

Elsewhere, sanctions on Iran have so far cost that country more than $10  billion in oil revenue, that according to a U.S. official.  It was just on  Monday when the White House said it would end all waivers on Iranian  sanctions.  And today, the price of domestic crude fell about 1 percent to  just about $65 a barrel.  

World leaders are gathering in Beijing as part of China`s so-called Belt  and Road initiative.  This is a sweeping infrastructure project designed to  expand the country`s global trade links, but the program has a lot of  critics.  

Eunice Yoon is in Beijing for us tonight.  

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The Trump  administration has described China`s Belt and Road infrastructure program  as a death trap.  Well, on the first day of the three-day summit, Beijing  is sending a message that will fend off that criticism.  Generally, the way  the program works now is that you borrow money from the Chinese to pay the  Chinese to build stuff and then you owe all that money to the Chinese.   That`s been an issue for countries like Pakistan that now have a lot of  debt.  

Secretary of State Mike Pompeo has described the program as non-economic  and predatory and Washington didn`t send a delegation here this year.   Today, China`s central bank governor said they then would set new criteria  to attract more private and international financing and consider the  country`s ability to service a lot of debt and offer greater transparency  in lending.  

The IMF Managing Director Christine Lagarde who`s here for the forum called  the move a welcome step.  I did speak to a European official who said that  his companies who are already wary of getting involved would want to see  more information before committing to join.  President Xi Jinping is going  to be speaking tomorrow, and is expected to potentially moderate his  language in order to address some of the apprehension among China`s trading  partners.  

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.  

GRIFFETH:  UPS says the winter sent a chill through its business, and  that`s where we begin tonight`s “Market Focus”.

The package delivery company reported an earnings miss and had to pay $80  million in extra costs because of the severe weather across the country  that caused operating profit to fall in its main business unit, but the CEO  did say the company`s fundamentals remain strong.  

DAVID ABNEY, UPS CHAIRMAN & CEO:  If you look at our volume in the U.S., it  was 7 percent increase over the year before.  If you look at our ground  yield it was up 2.7 percent and even with the weather, we were actually  able to bend the cost curve down.  And then, in our international business  with the trade pressures that you see, whether it`s Brexit or U.S.-China,  we were still able to have a record first quarter.  

GRIFFETH:  UPS shares fell 8 percent, though, today to $105.13.  
Southwest Air says its bookings are strong and is forecasting better than  expected second-quarter revenue, the low-cost carrier is forced to cancel  the flights of the Boeing (NYSE:BA) 737 MAX jets and that is something that  the CEO says the company is dealing with.  

GARY KELLY, SOUTHWEST AIRLINES CHAIRMAN & CEO:  We have to work through  this MAX issue.  When we launched the MAX airplane, we felt like it was the  best single airplane in the world, and we still feel that way.  Obviously,  this MCAS issue still needs to be addressed and we are happy with the way  that Boeing (NYSE:BA) and the FAA are collectively addressing that issue.  

GRIFFETH:  MCAS is the navigation system they`re working on.  Shares rose a  fraction today to $53.35.  

Bristol-Myers beat quarterly expectations thanks to strong drug sales.   Sales of their blockbuster blood thinner called Eliquis jumped by 28  percent.  The company also raised its full year guidance as well.  Shares  were up 2 percent today to $45.64.  

Comcast (NASDAQ:CMCSA) (NYSE:CCS) reported better than expected earnings  but revenue came up light.  The biggest U.S. cable company was helped by  the addition of high-speed internet customers and the CEO says streaming  and broadband are a big part of Comcast`s future.  

BRIAN ROBERTS, COMCAST CHAIRMAN & CEO:  In our case in the U.S. led by the  broadband business which is now substantially larger than the video  business.  So, the more people want to stream, the more you want the best  broadband and hence you saw the results in the first quarter, which is why  broadband has been strong, not just this quarter, but all last year and we  hope throughout the remainder of this year.  

GRIFFETH:  Shares touched a 52-week high during the day ending up 2.5  percent to $42.93.
By the way, Comcast (NASDAQ:CMCSA) (NYSE:CCS) is the parent company of CNBC  which produces this program.  

And than after the bell tonight, Starbucks (NASDAQ:SBUX) topped  expectations thanks to solid growth in North America and China.  The  company also said they currently have nearly 17 million active loyalty  rewards members.  Shares were volatile after-hours today, but they did  close the regular session up 1 percent to $77.11.  

Also after the bell, Ford posted much better-than-expected results thanks  to strong demand in North America for those popular trucks.  That helped  offset losses in both China and then South America.  Ford is in the midst  of an $11 billion restructuring plan that the CFO says is starting to work.  

BOB SHANKS, FORD CFO:  Well, the Chinese economy seems to be stabilizing.   We saw an industry level, it is flat on a year over year basis.  The  government has announced some things they`ll do, for example, to stimulate  the broader economy there`s rumors that they`re going to do more.  

So, the government recognizes the importance of this additional sector and  it`s possible that they`ll give us a bit of help and stimulation as the  year progresses.  But overall, I think we`re seeing a more stable  environment than we were a few months ago.  

BRIGGS:  Ford`s stock rose after hours and it closed the regular session at  $9.40.  
Mortgage rate the fourth straight week last week.  According to Freddie  Mac, the 30-year fixed rate mortgage averaged 4.2 percent, that was up  slightly from the prior week.  As you know, mortgage rates are tied to the  10-year treasury which dipped earlier this year, but have since been  ticking higher.  

Well, the biggest homebuilder in the country disappointed investors even  amid ongoing demand for new homes.  D.R. Horton (NYSE:DHI) is now  forecasting 2019 revenue below Wall Street estimates and in its earnings  report today, it did not provide an outlook on gross margins for the year.   And that pressure the stock as investors grew concerned about the impact of  rising costs on the home builder`s future profits.  

And there`s another concern growing in one corner of the real estate  market.  The prices for high-end homes and they`re dropping in high-tax  markets.  Just look at Greenwich, Connecticut, where residents are  complaining that sellers can`t even give away a house.  
Diana Olick has details.  

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  On the grandest  streets of Greenwich where heads of hedge funds lay their heads to rest — 

JENNIFER LEAHY, DOUGLAS ELLIMAN REAL ESTATE:  We`re seeing people that are  selling at loss.  Absolutely.  And it`s across the board.  It`s a problem.  

OLICK:  Real estate agent Jennifer Leahy is not the first agent on this  six-bedroom and nine-bathroom colonial.  It is indicative of everything  going in high-end Greenwich today.  It`s been on the market for over a  year, started around $5.4 million, dropped to $4.995 million, then $4.8  million, still nothing.  Now, Leahy is dropping it to $4.5 million.  

It`s all about the changes to the tax laws hitting this market hard.
JONATHAN MILLER, MILLER SAMUEL INC. CEO:  It can be significant.  You`re  looking at $5 million, $6 million, $7 million properties that pay $100,000  to $125,000 a year in taxes and now, you can only write off $10,000.  What  that does is impact value, but it takes a while for buyers and sellers to  agree on what that value is.  

OLICK:  Greenwich sales in the first quarter of this year were down 25  percent compared to a year ago.  The median price, down 17 percent to just  over $2 million.  Days on market, 214, and inventory is up to a two-year  supply of homes for sale.  In other words — 

LEAHY:  It`s a great buy right now.  So my buyers are getting awesome deals  and I had a buyer who bought a house for $6.6 million that was on for $8.25  million.  I have a buyer who bought a house for $750,000 that was  originally on for $900,000.  So, you get a deal for every price range right  now.  

OLICK:  And that makes it a nightmare for sellers.  These home owners  actually bought the home over a decade ago and now, they`re looking at  potentially taking a loss.  
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Greenwich, Connecticut.  

GRIFFETH:  And coming up, the movie that is likely to break all kind of box  office records.  

GRIFFETH:  Here`s a look at what we`re watching tomorrow.  More earnings  and this time from ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) among  others.  We`ll find out how much the economy grew in the first quarter when  the government releases its quarterly GDP report.
And here comes Uber.  It`s scheduled to start its road show tomorrow.   That`s a series of presentations leading up to its initial public offering.   That`s what we`re watching for on a busy Friday.  

And now, that tax season is over, the numbers are coming in right now.  The  percentage of households with refunds is nearly unchanged compared to last  year, it turns out.  According to the IRS, the average refund was smaller  down 2 percent on average to $27.25.  As has been widely reported, that  could be base many did not change their paycheck withholdings.  
Well, Disney (NYSE:DIS) and Marvel`s latest “Avengers” movie is flying into  this weekend and these powerful superheroes will likely shatter box office  records.  

Julia Boorstin breaks down the big money behind the big action flick.  

UNIDENTIFIED MALE:  I don`t know what I`m going to do if it doesn`t.  
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  A superstar lineup  of Marvel superheroes in the culmination of a decade-long journey for these  characters, on track to deliver a record opening weekend for Disney`s  Marvel.  “Avengers: Endgame” is projected to be around $270 million and  $300 million at the domestic box office, and as much as $700 million for  overseas markets, putting it on track to over $1 billion worldwide, a  record by a long shot, the last record held by “Avengers: Infinity Wars”  opening weekend last year.  

ERIK DAVIS, FANDANGO:  Demand is through the roof.  I mean, I`ve been in  this business for 50 years and I`ve never seen anything like this film and  I`ve seen “Star Wars: The Force Awakens”, as well as “Avengers: Infinity  War”, we have never seen movie theaters scramble to add as many show times  as they are adding.  

BOORSTIN:  First day ticket sales in China of over $107 million smashing  the prior record and Fandango says ticket presales in the U.S. are five  times what the last “Avengers” film drew.  With the domestic box office  down over 16 percent so far this year from the same period last year,  “Avengers: Endgame” is expected to draw back moviegoers and rev back up box  office numbers and not just with this film, but by exposing moviegoers to  trailers for a range of big sequels and franchise films coming up this  summer.  
DAVIS:  I definitely expect “Avengers” to revitalize the box office.  It is  a film people take off work to go see and screenings are around the clock  and everyone will be there opening weekend with those packed crowds,  reminding them why it is so much fun to go to the movies.  So, I think that  will definitely help inject some light into the box office.  

BOORSTIN:  The film is expected to benefit from rave reviews and 96 percent  positive critic score on Rotten Tomatoes and word of mouth spreading like  wildfire on social media.  
“Avengers: Endgame” is one of the top-trending topics on Twitter.  

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.  

GRIFFETH:  And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Bill  Griffeth.  Thanks for watching, everybody.  Have a good evening.  We`ll see  you tomorrow.  

Nightly Business Report transcripts and video are available on-line post  broadcast at The program is transcribed by ASC Services II  Media, LLC. Updates may be posted at a later date. The views of our guests  and commentators are their own and do not necessarily represent the views  of Nightly Business Report, or CNBC, Inc. Information presented on Nightly  Business Report is not and should not be considered as investment advice.  (c) 2019 CNBC, Inc.


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