Transcript: Nightly Business Report – October 22, 2019

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Change of plans.  Biogen  revised its experimental Alzheimer`s drug, offering new hope for millions,  sending the stock to its best one-day gain in 23 years.

Executive changes.  Nike (NYSE:NKE) CEO is stepping down, so is the man in  charge of Under Armour (NYSE:UA).  And a Boeing (NYSE:BA) senior official  exits amid that company`s growing crisis.  

Higher prices.  Consumers are willing to pay them for household goods, and  Procter and Gamble comes out on top.  

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Tuesday,  October 22nd.  

Good evening, everyone, and welcome.  Bill has the evening off.  
It was a busy earnings day dominated by corporate news.  And we begin with  something no one saw coming.  Biotech firm Biogen surprised investors when  it said its experimental Alzheimer`s treatment was ready to start the  regulatory approval process.  As you may recall, just seven months ago the  company discontinued the study of the drug which some on Wall Street had  expected to be Biogen`s next blockbuster.  

Analysts say the profit potential is huge because there are no current  therapies to reverse affects of the disease.  A disease that affects  millions and is projected to affect millions more in the years to come.   That news sent shares of Biogen up 26 percent, its best one-day gain since  1996.  
But as Meg Tirrell reports, while there is renewed hope, there`s also a  long road ahead.  

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It was a diagnosis you  don`t expect in your early 50s.  Jeff Borghoff was only 51 when he was told  he has early onset Alzheimer`s disease.  With no drugs approved to slow  Alzheimer`s progression, Borghoff enrolled in a clinical trial of an  experimental drug made by Biogen.  It`s called aducanumab, and it`s  designed to attack the amyloid plaque build ups in the brain associated  with Alzheimer`s.  

JEFF BORGHOFF, ALZHEIMER`S PATIENT:  When you`re participating in the  clinical trial or the experience for me participating in the clinical trial  was one of adulation.  I was really happy to be part of it.  

TIRRELL:  Borghoff was in the trial three years, going every month to a  center of to have the infusion of the drug.  He says he thought it was  helping.  

BORGHOFF:  Everyone in my family noticed a marked improvement in my  cognition.  For your family to see you doing things that you were having  trouble with before, you know, those are things that become very exciting  to you.  

TIRRELL:  Then, in March of this year, shocking news.  Biogen stopped  development of the drug says an interim analysis suggested it wasn`t  helping patients.  The trial stopped.  Borghoff says he was devastated.  
Seven months later, another about-face.  This morning, Biogen announced the  drug was back.  A new analysis of more data it says suggested the drug  actually may work, helping slow the declines in ability to think clearly  and remember things associated with the disease.  

As a result, Biogen plans to file for approval in early Alzheimer`s  diseases with the FDA early next year.  

Wall Street responded enthusiastically, driving Biogen stock back to the  level it had been in March when the trials stop.  If the drugs approved, it  would be the first cleared to slow the course of disease, and that means  big business, with almost 6 million Americans living with Alzheimer`s.  

But skepticism remains.  Alzheimer`s has an incredibly high failure rate in  drug development, 99.6 percent by some counts.  And many analysts say they  want more data on the drug and trials before being convinced the drug  really works.  Biogen says it aims to offer patients like Borghoff mo  participated in the trials access to aducanumab before approval.  
Borghoff says he`s elated.

BORGHOFF:  We`re going out to dinner tonight to celebrate.  
TIRRELL:  His advice to others facing the diagnosis of Alzheimer`s?
BORGHOFF:  You`ve been diagnosed with a neurodegenerative disease.  It`s  not the end of your life at that moment.  You should do everything that you  can to try to do all of the things that are known to help — to hopefully  extend your life.  

TIRRELL:  And he suggested look to join a clinical trial.  

HERERA:  On Wall Street, a tug of war.  Positive earnings from the likes of  Procter and Gamble were not enough to offset negative results from  companies like Travelers.  And this afternoon, the major averages fell  after U.K. lawmakers rejected a limited time frame to review a deal on  Brexit.  That makes an October 31st deadline extension more likely.  When  all was said and done, the Dow Jones Industrial Average was down 39 points  to 26,788, the Nasdaq slid 58 and the S&P 500 fell 10.  

And now to those positive earnings from Procter and Gamble that we just  mentioned.  The consumer products company reported better than expected  profit and revenue and raised its outlook for the year.  That offered some  relief to investors who as you know are also looking for signs that the  consumer is holding up.  The results sent shares of P&G higher by about 2.5  percent.  
Seema Mody breaks down the quarter.  

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Consumers are paying  higher prices for household goods.  And Procter and Gamble is reaping the  rewards.  

Over the past year, the company has responded to higher costs and tariffs  by raising prices on select products.  And despite wider issues like the  trade dispute and Brexit, growth overseas remains up beat.  

JON MOELLER, PROCTER & GAMBLE CFO:  Brexit and impact on consumer  confidence definitely has had impact but we`re still growing.  We grew 2  percent in the U.K.  China was one of the best quarters in a long time,  grew 13 percent.  

And in our industry, it`s really about, particularly in these categories  where performance drives brand choice, superiority of offering, delight of  consumer.  If we do that job well, we generally fare well and when we  don`t, we have issues.  

MODY:  P&G also saw solid demand in its health and beauty products for  things like its high end SK-II and Olay brands. 

MOELLER:  Beauty were performing really across the board.  It`s sixth  consecutive quarter of strong growth.  All portions of the beauty business  grew significantly.  The skin and personal care business grew in the teens.   Our hair care business grew in the mid-single digits.  So, it`s a business  that`s really hitting all cylinders.  

MODY:  Like all consumer giants, the maker of tide detergent and Gillette  razors had to contend with competition from its peers, Clorox (NYSE:CLX),  Unilever (NYSE:UN) and Kimberly-Clark (NYSE:KMB), as well as smaller  disrupters that have used social media as an effective tool to draw in  customers.  

Meantime, the company continues to double down on innovation and technology  to launch new products.  Whether it`s unveiling new makeup gear that  millennials or digital diapers that track baby sleep, with new players  flooding the markets, analysts say Procter & Gamble`s ability to maintain  its market share will become even more challenging for the company in  coming years.  However, unveiling new products at the right price that have  wider appeal could keep the growth story going.  

HERERA:  Also helping the market today was United Technologies (NYSE:UTX).   The Dow component topped earnings estimates for the third quarter and its  raised its guidance, which was good news for the closely watched industrial  sector.  The CEO cited strength in its aerospace business and improving  profit margins.  Shares rose 2 percent in today`s session.  
Now to McDonald`s (NYSE:MCD), which reported a rare miss.  The world`s  largest fast food giant posted disappointing profits for the first time in  two years.  Same store sales in the U.S. were not as good as expected  despite technology upgrades, promotions and menu price increases.  And that  pushed shares of the Dow component 5 percent lower in today`s session.  
Kate Rogers (NYSE:ROG) takes a look at the challenges facing the Golden  Arches.  

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  McDonald`s (NYSE:MCD)  is feeling the competitive pressure.  Consumers had an appetite for premium  chicken sandwiches from Chick-fil-A and Popeyes.  And when it came to the  plant-based burger craze, McDonald`s (NYSE:MCD) largely stayed on the  sidelines, announcing just last month that tests with Beyond Meat in Canada.  

R.J. HOTTOVY, MORNINGSTAR:  Obviously, innovations have got to be there if  other companies come up with new products, McDonald`s (NYSE:MCD) has to  match them.  I suspect that we`ll probably see a premium chicken sandwich  from this company sometime in the next several months.  I don`t know if  they want it right after that.  Probably want to give it more to him to  stand out from its competitors.  

But also plant-based alternatives.  I think that the company is certainly  thinking with that.  

ROGERS:  Traffic slowed but the company called it a big opportunity for the  future.  McDonald`s (NYSE:MCD) has made a series of acquisitions and  investments in recent months in technology companies, focusing on  artificial intelligence, mobile order and pay, and a speedier drive-thru  experience which will likely boost future results.  

HOTTOVY:  The technology standpoint, I think what McDonald`s (NYSE:MCD) is  trying to do with reimagining the drive through lane is something that`s  pretty unique among the click service restaurants base today.  The company  has obviously done its experience the future within the restaurants.  But  now, it`s moving to experience of the future for its drive thru lanes which  is something that I think can be pretty interesting when it`s all packaged  together and we see consumer adoption of it.  
ROGERS:  The company is also continuing to modernize its stores with some  9,000 in the U.S. outfitted with kiosk, digital menu boards and check  upgrades with more to come before the end of the year.  


HERERA:  A rough day for Travelers.  The insurance company saw earnings  decline after the company set aside hundreds of millions of dollars in  reserves for lawsuit.  The reserves were driven by an asbestos charge,  higher general liability in commercial auto losses.  The company also  warned of a difficult and aggressive tort environment.  The stock dropped  more than 8 percent, its worst day since 2008.  

A top Boeing (NYSE:BA) executive is out.  The company is replacing the head  of its commercial airplane division, the shake-up comes as Boeing (NYSE:BA)  prepares to report earnings tomorrow and CEO Dennis Muilenburg updates Wall  Street on the company`s plan to get the 737 MAX back in the air.  After two  tough days, the stock finished higher.  
Here is Phil LeBeau.  

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Almost one year after  the first 737 MAX crashed in the Java Sea and more than seven months since  regulators around the world said the MAX is not safe to fly, Boeing  (NYSE:BA) is changing the leadership of its commercial airplane division.   Kevin McAllister is out after almost thee years of running the largest and  most profitable business at Boeing (NYSE:BA).  

McAllister joined Boeing (NYSE:BA) as the MAX was getting ready for  certification.  And for two years, he oversaw a steady increase in 737  production.  But after a second MAX crash earlier this year and the  subsequent investigations which raised serious questions about how Boeing  (NYSE:BA) developed the plane, pressure was mounting on CEO Dennis  Muilenburg and the Boeing (NYSE:BA) board of directors to show that they  are taking action to fix the MAX and get Boeing`s commercial airplane  business back on track.  

That job now belongs to Stan Deal, a 33-year veteran of Boeing (NYSE:BA)  who has run programs within the company.  Boeing (NYSE:BA) CEO says: Stan  brings extensive operational experience at commercial airplanes and trusted  relationships with our airline customers and industry partners.  
Those relationships will be crucial as Boeing`s customers are increasingly  agitated at their inability to fly the MAX.  The situation they`re hoping  changes by early next year.  


HERERA:  It is time to take a look at some of today`s “Upgrades and  Downgrades”.  

Bank of America (NYSE:BAC) was upgraded to overweight from neutral at  Atlantic Equities.  The analyst cites what he calls an impressive third  quarter with on ongoing deposit growth.  The price target is $36.  The  shares rose a fraction to $31.20.  

Dropbox was upgraded to buy from neutral at Nomura Instinet.  The analyst  says the company`s revenue is nearing an inflection point after six  quarters of deceleration.  The price target is $25.  The stock was up 2  percent to $19.32.  

Electronic Arts (NASDAQ:ERTS) was downgraded to equal weight from  overweight at Barclays.  The analyst says the majority of earnings growth  next year will come from buybacks rather than business fundamentals.  The  price target is $99.  The shares fell 1.5 percent to $94.30.  

Longtime Nike (NYSE:NKE) chief executive Mark Parker is stepping down  effective in January.  He will be replaced by Nike (NYSE:NKE) board member  and CEO of ServiceNow, John Donahoe, who brings a heavy focus on digital.   Parker has been CEO since 2006 and been with Nike (NYSE:NKE) for four  decades.  He will become the company`s executive chairman.  Shares were  volatile following the afterhours news and closed the regular session down  a fraction at $95.60.  

And there is a change at the top at Under Armour (NYSE:UA).  CEO and  founder Kevin Plank is handing over the reins, leaving the new CEO to  complete the company`s turnaround.  The news sent the stock up more than 6  percent in today`s session.  
Courtney Reagan reports tonight from Under Armour`s headquarters in  Baltimore.  

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Under Armour  (NYSE:UA) is getting a new CEO in the New Year, only the second in the  company`s history.  Founder and current CEO Kevin Plank transitioned to  executive chairman and brand chief on January 1st.  As president and chief  operating officer Patrik Frisk takes over the top job.  

KEVIN PLANK, UNDER ARMOUR CEO & FOUNDER:  First and foremost, this is my  decision to get to this moment of the ability to work and, frankly, have  enough partnership where Patrik and I complement each other so well and the  ability of the business as we said last time we talked with you, the  company is moving from defense to offense.

PATRIK FRISK, UNDER ARMOUR PRESIDENT & COO:  We believe we have a strong  plan in place and we now want to be able to free up Kevin to be more  strategic in terms of how he thinks about what he does and then allow me to  do what I do with more freedom as well.  

REAGAN:  Frisk joined Under Armour (NYSE:UA) more than two years from Aldo,  where he was the CEO and also worked with the company`s founder.  He`s been  the heir apparent, often joining Plank for interviews though no official  timeline had been laid out until today. 

SUSAN ANDERSON, B. RILEY FBR:  How much is Patrik really in control even  though stressed that, you know, he is kind of in control of the ship now?   But he still reports to Kevin we`ll see how much he is actually making the  decisions.  And I think that`s going to be a big factor in how much we  really see change happen at the company that turned hem in the right  direction.  

REAGAN:  Frisk has been overhauling operations for the athletic brand as  part of a multi-year transformation, which has so far included changes to  the supply chain, inventory, manufacturing and even redefining its target  customers.  Consumers looking for performance first, rather than embracing  the athleisure trend.  

Under Armour (NYSE:UA) has been able to improve margins and reduce excess  inventory.  But North America, the brand`s largest region, is still  searching for a return to sales growth.  

FRISK:  The plan that we laid out on investor day we`re still executing on  that plan.  That was to over time get us back to strong growth in north  America.  It will take time.  

REAGAN:  Investors have been impatient.  Shares have lost a quarter of  their value since Under Armour (NYSE:UA) lowered its expectations for North  America sales.  

For now, Under Armour`s playbook remains the same, though officially  getting a new head coach in the New Year.  

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan at Under Armour (NYSE:UA)  headquarters in Baltimore, Maryland.  

HERERA:  Still ahead, home buyer demand is back.  So, why aren`t sales of  existing homes higher?  

HERERA:  Facebook (NASDAQ:FB) CEO Mark Zuckerberg will testify on Capitol  Hill tomorrow on his company`s cryptocurrency project called Libra.  His  testimony was released today.  And in it, he plans to tell lawmakers that  Libra won`t launch anywhere in the world until U.S. regulators approve it.   Zuckerberg will also say that projects like Libra will help extend  America`s financial leadership.  

Sales of existing homes disappointed in September but there was some irony  in the latest report.  Buyers were out and demand was strong in part  because of low mortgage rates which showed list sales.  But all of that  demand also resulted in higher prices which buyers don`t like.  
Diana Olick has more.  

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Demand for housing is  very high.  At least according to the high-tech entry lock boxes on homes  for sale.  Realtors can track traffic threw them and it is strong.  

LAWRENCE YUN, NAR CHIEF ECONOMIST:  The opening of the lock boxes, entry  log is showing improvement.  So, there is buyer interest because of lower  mortgage rates.  But the price increases and lack of inventory, that is  providing some pause for the actual signing of the contracts.  

OLICK:  Home prices jumped nearly 6 percent a annually in September, the  biggest increase in nearly two years.  Prices are being fueled by both  strong demand and lower mortgage rates.  The 30-years year fixed rate is  down sharply from a year ago while that should make housing more  affordable, it`s only bringing out more buyers and increasing competition  which in turn pushes prices higher.  

YUN:  If we have a disparity where prices are rising much faster than  people`s wages, first, there is a shock factor for the consumer.  
OLICK:  That shock resulted in lower home sales, especially in the lower  price ranging where demand is strongest and home builders do the least to  help.  Builders still claim today`s higher construction costs keep them  from putting up more entry level homes.  

And now, we head into the historically slow season for housing.  There had  been hope that all the pent-up demand from the disappointing spring would  make this an especially strong fall but overheating prices are turning  buyers away cold.  
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.  

HERERA:  Revenue at Texas instruments drops double digits.  That`s where we  begin tonight`s “Market Focus”.  

The chip maker results missed expectations hurt by global slowdown in  microchip sales and the ongoing trade tensions with China.  Texas  Instruments (NYSE:TXN) also gave weak guidance.  Shares initially fell more  than 10 percent after-hours, and close the regular session down 2 percent  to $128.57.  

And the trade war also hit Hasbro (NYSE:HAS) as the toymaker missed on both  profit and sales estimates due to the threat of tariffs, increasing  shipping and warehouse costs.  Even though it had strong toy sales, tied to  Disney (NYSE:DIS) movie franchises like “Star Wars” and “Frozen 2”.  The  shares tumbled almost 17 percent to $100.02.  

UPS beat on earnings driven by next day delivery service.  Rival FedEx  (NYSE:FDX) cutting ties with Amazon (NASDAQ:AMZN) and strong demand in  online shopping.  The company missed on revenue and trade tensions impacted  its U.S.-China shipping, but the CEO sees hope in international trade.  

DAVID ABNEY, UPS CEO:  What we like to see, trade developments go in a more  positive direction.  We think there are some rays of sunshine when you hear  about the first level between China and the U.S.  Brexit, there seems to be  a path.  So, we believe there is opportunities there.  

HERERA:  Shares fell about 2 percent to $116.10.  
And increase in international sales helped Harley-Davidson (NYSE:HOG) post  better than expected profits and sales.  But the motorcycle maker saw a  decline in U.S. sales.  Higher costs from European tariffs and it`s still  finding ways to entice new and younger riders.  The stock rose about 8  percent to $40.04.  

Verizon (NYSE:VZ) said it will be offering unlimited wireless and broad  band customers.  A free one-year subscription to the Disney (NYSE:DIS) Plus  streaming service, which is planning to launch next month.  Verizon  (NYSE:VZ) CEO believes this strategic partnership can bring a variety of  content to its consumers.  

HANS VESTBERG, VERIZON COMMUNICATIONS CEO:  We want to give our consumers  choices.  This is one of the best choices we can give them, on top of the  network.  We have a great network.  We`re building for the empire (ph) and,  of course, our Fios Network.  On top of that giving the customers these  opportunities is a great total consumer experience.  

HERERA:  Verizon (NYSE:VZ) shares up a fraction to $60.77.  
And after the bell, Chipotle topped expectations thanks to an increase in  same store sales, more delivery options and addition of healthier meals on  its menu.  Shares were volatile in initial after hours trading, and they  closed the regular session down more than 2 percent to $831.07.  
Coming up, a jolly holiday shopping season may be just what retailers and  the economy ordered.  

HERERA:  Here are some positive news when it comes to health care costs.   Premiums for some of the plans sold under the Affordable Care Act are set  to drop next year.  Federal officials say average rates for the most  popular mid-priced plans will decline 4 percent, though premiums vary  widely by location.  Twenty more insurance providers will participate, a  sign the experts say shows the program is stabilizing.  

The CEO of Lyft today said that the ride-hailing company will be profitable  on an adjusted basis a year earlier than analyst had expected.  He made the  comment at the “Wall Street Journal`s” Global Technology Conference.  That  gives shares of Lyft a the lift in today`s session, up about 6.5 percent.  
Well, we`re just 64 days away from Christmas.  And it looks like it`s going  to be a jolly shopping holiday season.  That at least according to  Deloitte`s 34th holiday survey of consumer spending.  Shoppers are expected  to spend nearly $150 per household this year.

Rod Sides, the leader of the retail practice at Deloitte, joins us to talk  more about the findings.  
Welcome, nice to have you here, Rod.  


HERERA:  It`s a pretty bullish survey even though parts of the retail  sector have had trouble this year.  But spending is going to be up overall,  right?  
SIDES:  That`s correct.  That`s what consumers are telling us.  We talked  about 4,000 of them early in September and they all feel good about the  monthly day so far.  

HERERA:  Who is going to be doing most of the spending?  
SIDES:  You know, it`s interesting.  I would say it`s the upper income.   So, what we found the top 20 percent of spenders account for 60 percent of  the total spend, or about $600 billion believe it or not.  

HERERA:  You know, the trend has shifted a little bit.  It used be that  Black Friday, the day after Thanksgiving, was the shopping day.  And it`s  still certainly important.  

But what are consumers telling you about how they`re going to shop and when  they`re shopping?  

SIDES:  Well, they`re telling us that they`re going to spend more time  looking for promotions on Cyber Monday, especially the middle to upper  income group.  Lower income groups are less than $50,000 in household  income, typically prefer stores.  But we see Cyber Monday taking on more  and more importance over the last couple of years.  

HERERA:  What about retail traffic, people going to the malls and physical  locations versus online?  What are the statistics there?  
SIDES:  So, yes, online it`s going to be about 56 to 57 percent overall.   And then from bricks and mortar, we`re looking at that to be about 36  percent overall.  So, we`re seeing a really folks focus on buying online in  this season.

HERERA:  And they want promotions.  That was one thing.  But they also want  to spend on experiences.  How much has that groan since you did the survey  last year?  

SIDES:  You know, it`s grown pretty significantly over the last several  years.  So, it`s up about to $600 this year.  That trend has been up the  last three or four years and it`s grown probably 7 percent to 8 percent a  year for the last five years.  

HERERA:  And is that one of the leading changes for lack of a better word  in the survey that you`ve seen that it`s less about what you buy but more  about where you go or what you experience?  

SIDES:  Yes, absolutely.  So, what we found is about 81 percent of the  spend for the upper income has something to do with travel.  Entertaining  outside the home is also really important.  We see restaurant visits up  about 59 percent of the total respondents.  

So, it is a very important part of the holiday season now.  

HERERA:  On that note, Rod Sides with Deloitte, thanks so much for joining  us tonight.  
SIDES:  Thank you.  

HERERA:  And finally tonight, Jeff Bezos Blue Origin is partnering with  Lockheed Martin (NYSE:LMT), Northrop Grumman (NYSE:NOC) and Draper  Laboratory to get back to the moon.  Bezos made the announcement at one of  the biggest space conferences of the year.  

JEFF BEZOS, AMAZON FOUNDER & CEO:  This is a national team for a national  priority.  We could — I could not be more excited to be doing it with  these partners.  And this is the kind of thing that`s so ambitious.  It  needs to be done with partners.  

This is the only way to get back to the moon fast.  This time we are going  back to the moon and we`re not going back to the moon to visit.  We`re  going back to the moon to stay.  

HERERA:  The three companies will collaborate on one moon lander design.   That they will then submit to NASA.  

Before we go, here`s another look at today`s final numbers on Wall Street.  The Dow fell 39 points to 26,788.  The Nasdaq was down 58 and the S&P 500  slid ten.  

And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera.  Thanks  for joining us.  And 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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