nightly business report - april 23 2013

7/30/2019 Nightly Business Report - April 23 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and

Susie Gharib, brought to you by --

(COMMERCIAL AD)

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Not upsetting the Apple

(NASDAQ:AAPL) cart. Apple (NASDAQ:AAPL) earnings better than expected for

the most part and the market responds after-hours.


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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: And Midwestflooding.

Rain and snow soaked the country`s midsection and the worst may be yet to

come for businesses and farmers.

GHARIB: And Hollywood`s new courtship. Why the movie industry is

seducing aging baby boomers.

All of that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,

April 23rd.

Good evening, everyone.

Tyler, what a day. A lot of drama, a lot of suspense. There`s that

big surprising sell-off on Wall Street, and then, speculating all day for

those Apple (NASDAQ:AAPL) earnings after the market closed.

MATHISEN: And yet, when all was said and done the markets moving

sharply to the upside, gaining for the third straight day -- despite a mid-

session sell-off on a fake tweet that spooked already jittery traders.

But the big story right now is Apple`s second-quarter earnings and the

news was mostly good. Apple (NASDAQ:AAPL) beat on the top and bottom lines

on strong sales of the iPhone and the iPad tablet. It`s increasing a stock

buyback program by a staggering $50 billion, spending some of its cash


3/26

hoard and it`s jacking up its dividend 15 percent.

But Apple (NASDAQ:AAPL) did lower its guidance for the current quarter

and that disappointed Wall Street just a touch.

Seema Mody is at the NASDAQ with more on Apple`s results and where the

stock is trading after-hours -- Seema.

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tyler, we`re

seeing the stock moved higher after-hours, as you point out. Apple

(NASDAQ:AAPL) beating street expectations, its second-quarter revenue

coming in at $43.6 billion versus the street expectations of $42.31

billion. Now, its quarterly earnings also topped street consensus by 9

cents.

Analysts were hoping for some clarity around its capital allocation

strategy and the street got that. Apple (NASDAQ:AAPL) sharing the

repurchase authorization from $50 billion to $60 billion. Apple

(NASDAQ:AAPL) also increasing its quarterly dividend by 15 percent, to

$3.05 a share.

CEO Tim Cook in the press release says, "We are very fortunate to be

in the position to more than double the size of the capital return program

we announced last year."


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Now, in terms of its iPhone and iPad sales, the company sold $37.4

million iPhones and 19.9 million iPads in this quarter, both which came in

higher than street expectations.

Tim Cook, again, in the press release said, "Our teams are hard at

work on some amazing new hardware, software and services, and we are very

excited about the products in our pipeline."

Good news there -- Tyler and Susie.

GHARIB: Seema, thank you so much.

Seema Mody reporting from the NASDAQ.

Let`s turn now to John Buckingham. He`s been buying Apple

(NASDAQ:AAPL) for his clients and he`s chief investment officer at Al Frank

Asset Management.

So, John, is this what you expected in terms of earnings, the

dividend, the stock buyback from Apple (NASDAQ:AAPL) tonight?

JOHN BUCKINGHAM, AL FRANK ASSET MANAGEMENT CIO: Well, it was

certainly a news-filled afternoon from Apple (NASDAQ:AAPL). The stock

buyback was frankly, more than we might have envisioned. So we`re very

appreciative of that.


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You know, Apple (NASDAQ:AAPL) has a gigantic cash hoard, of over $150

a share in cash and we really are happy that they`re putting that to work

especially when you can buy the stock here at these very inexpensive

valuations.

You know, we are trading at less than 10 times earnings for one of

America`s greatest corporations, and yes, I know that earnings were a

little disappointing in terms of the guidance here for the next quarter,

but this is a fantastic company with tremendous products and a huge,

installed base of rabid customers.

Yes, they`re going through a little bit of a product lull here now as

we wait for the next big thing, and of course, that`s what`s on everybody`s

mind as we go forward.

MATHISEN: You`ve been taking some profits prior to recently. You`ve

been buying the stock for some clients. If I didn`t own the stocks based

on today`s numbers and based on your prospects for it -- I`m not asking you

to be a portfolio manager -- I`m just saying, would you buy it at these

prices?

BUCKINGHAM: Well, Tyler, I am a portfolio manager and absolutely I d

be a buyer of the stock at these prices. I know in the after-hours, it`s

had a little spike and maybe it will pull back a little bit as people might


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start to get a little concerned about that forward guidance.

But absolutely, as part of a diversified portfolio and I`m always

about diversification. You know, we`ve owned Apple (NASDAQ:AAPL) since

2003 and you`re right, we did take some money off the table over a year ago

in the $585 range. But when it went back down again, it just looked like a

stock in our mind that something we want to add to portfolios.

Again, the multiples are really important to us. You know, single-

digit P.E., fantastic balance sheet, great products. You know, I mean,

this is amazing. The company earned $10 billion in the quarter.

GHARIB: You know, John, but a lot of future growth and revenues and

earnings will depend on what the next new thing, as you mentioned a while

ago, and everybody is waiting for Apple`s next big hit. Some people are

talking about an Apple (NASDAQ:AAPL) TV.

Will this possibly be the game changer and the next must-have consumer

gadget that will make a big difference for Apple (NASDAQ:AAPL)? What do

you think?

BUCKINGHAM: Well, I think it would certainly be a product people

would want to buy. The problem, though, is can Apple (NASDAQ:AAPL) make it

at a reasonable level of margins. You know, you`re not selling a $300

phone or $400 phone subsidized by a phone company. You`re selling a


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gigantic television set which costs a lot of money as far as the components

go.

And so, that would be the real challenge. Can you maintain those

margins? You know, we`re complaining about margins dropping, what, 36

percent, 37 percent in the next quarter. I just don`t think they can

maintain that with the television.

So we`re going to give them the benefit of the doubt. This has been a

company that`s been innovative for year after year after year. I don`t

know what that next big thing is going to be, but I feel really well

protected with the strength of the balance sheet and the inexpensive

valuation to be a buyer of the stock at these levels.

MATHISEN: You know, John, there had been some rumblings about Tim

Cook, the CEO of that company. You said any rumblings that he might be in

jeopardy -- I might quote you, it`s a bunch of hooey. I guess that`s a

technical term.

(LAUGHTER)

MATHISEN: Does this lay any of those concerns to rest if they needed

to be laid to rest?

BUCKINGHAM: Well, I think it does. The folks that were agitating for


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change at apple were concerned about how they were going to spend that cash

hoard. So the David Einhorns of the world I would imagine are happy today,

given the gigantic increase in the buyback.

And Tim Cook, you can`t forget -- he`s been there a long time. It`s

not like, you know, he just came a year ago and presided over a stock

slump, you know, from $600 to $400. He`s been part of the history of Apple

(NASDAQ:AAPL) and has been a very innovative guy, as well.

And keeping the trains running on time is a big deal. And I think he

does it very well.

GHARIB: All right, John, thank you so much. Apple`s stock everybody

loves to talk about and we`ll talk about it more tomorrow.

John Buckingham, chief investment officer at Al Frank Asset

Management.

MATHISEN: As we mentioned earlier, Wall Street was rattled shortly

after 1:00 Eastern time after what turned out to be a phony tweet issued

under "The Associated Press`" Twitter handle. It reported explosions at

the White House that injured President Obama. By the time it was

determined that hackers sent out that bogus bulletin, the Dow in a frenzy

of electronic trading tumbled 143 points in a matter of minutes, and just

as quickly, the index snapped back to within a few points of where it was.


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You know, see almost the second by second trading action in this Dow

chart. The S&P 500 and the NASDAQ and treasury futures all had similar

reactions.

Now comes the investigation. How was "A.P.`s" Twitter feed

compromised? Who did it? Was it someone trying to short the market for a

quick gain or just the hacker trying to unnerve the nation already on edge

after the Boston bombings? A pro-Assad Syrian group claimed

responsibility, but that claim has not been verified.

And while officials try to figure out what happened traders breathed a

sigh of relief as the markets rebounded to notch a third straight day of

gains. Helped by a boost in new home sales in March and a strong round of

earnings before the bell, stocks chocked up another winning session.

In the end, the Dow shot up 152 points. The NASDAQ up 35, the S&P

added 16.

GHARIB: More headaches today for people traveling by air. At

airports from coast to coast more flights were delayed because of

furloughed air traffic controllers due to the budget sequester. Members of

Congress today urged the White House to postpone those furloughs to speed

up air travel and find other ways to save money.


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MATHISEN: Those long lines means more Americans are flying and that

means good news for some of the nation`s biggest airlines. With two major

carriers reporting their latest quarterly results today, Phil LeBeau tells

us what`s drawing profits at the airlines and the challenges they`re facing

in the months ahead.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):The

combination of tax liens and higher revenue drove two of the country`s

largest airlines to post a rare profit in the first quarter.

Let`s take first the Delta Airlines (NYSE:DAL) -- excluding charges,

it earned 10 cents a share on revenue of $8.5 billion. By the way, this is

the first profitable first quarter in over a decade for Delta.

Meanwhile, U.S. Airways also beat the street, earning 31 cents a share

on revenues of under $3.4 billion.

Now, with both airlines, the combination of tighter capacity and

higher load factors meant their planes were fuller in the first quarter and

pull back fuel prices also help the bottom line. But on the earnings

calls, executives for the airline expressed concerns about delays due to

the FAA furloughs impacting their business in the second and third

quarters.


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They`re not alone. With more than 1,200 flights delayed on Monday and

more delays expected, some on Wall Street are worried the sequester could

force potential airline customers not to fly.

HELANE BECKER, COWEN SECURITIES AIRLINE ANALYST: People get to vote

their vacation dollars however they want. And if they see that it`s a

hassle to fly more than it`s normally a hassle to fly, they may vote, you

know, differently. And with lower gasoline prices, they might get people

driving to their vacation rather than flying.

LEBEAU (on camera): So far, advanced bookings have not been hurt by

sequester delays, but there is a genuine concern that if the longer these

delays last, and if they become worst, that at some point, people who were

planning to take a flight might instead decide not to take that trip.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

GHARIB: We are just two weeks into the first quarter earnings season

and you`ve probably noticed that many companies have been reporting

earnings that are better than investors expected, but there are also weak

forecasts for the rest of the year, like the one we got from Apple

(NASDAQ:AAPL) tonight.


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With 20 percent of S&P 500 companies already out with their quarterly

numbers. How is corporate America doing?

Here`s Bob Pisani with our earnings scorecard.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a goodday

for earnings, and most importantly, big, multinational industrial companies

like United Technologies (NYSE:UTX), Ingersoll-Rand (NYSE:IR) and Illinois

Tool Works (NYSE:ITW) and others affirm their 2013 earnings guidance.

That`s important because these companies sell in many countries, and if

there were significant signs of an ongoing global slowdown, they would have

spotted it.

Now, some have noted that second quarter earnings may be a little bit

below expectations, but they expect to make up for it in the second half of

the year.

Now, we`re about 1/4 of the way through earning season so far. Here`s

the good news. Almost 70 percent of the company s reporting have bet

earnings expectations. That`s above the history leverage.

Now, the bad news: only 42 percent are beating on the top line, on


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revenues, and that`s way below the historic average of about 62 percent.

This has been a problem for several quarters now. It means the

companies are able to do well on earnings because they become cost-cutting

monsters not because they`re increasing their revenues. Of course, it`s

good for companies to become more cost efficient, but the lack of revenues

is adding to the employment problem. Companies are reluctant to hire more

people when they`re not able to sell anymore.

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

Exchange.

(END VIDEOTAPE)

MATHISEN: Here now to talk more about those first quarter earnings

results and to look forward is Christine Short, senior manager at S&P

Capital IQ.

Christine, welcome. Good to have you with us.

CHRISTINE SHORT, S&P CAPITAL IQ: Great. Thanks for having me.

MATHISEN: I assume that Bob got it right there, that the

disappointment, if there is a disappointment, is that revenues have not

been growing the way profits have. It`s easier to finagle good profits


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than it is to manipulate the top line, isn`t it, Christine?

SHORT: Sure. There is a disparity between what we`ve seen with

earnings results and revenue results. As of this afternoon, with all of

the companies that reported after the bell, we have 67 percent of S&P 500

companies beating on the bottom line. However, only 41 percent beating

revenues and just like you said, it`s very easy through accounting measures

to throw in a special item and create the illusion of having a higher

profit than you actually do.

However, you can`t really manipulate that top line number. That`s

what`s been particularly concerning this season. It`s kind of deja vu back

to the second and third quarter of last year when we saw a similar trend

emerging.

GHARIB: I think what`s also interesting in this earning season, we`re

seeing many more companies forecasting weaker growth going forward for the

rest of this year versus a positive outlook. What does that mean for

earnings growth for the rest of 2013?

At the end of the year, what is earnings growth going to look like?

SHORT: That`s correct. For the second quarter, 28 companies have

provided guidance at this point. Of those, 21 have given negative

guidance, only four positive and three in line. So, that gives us a


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negative deposit ratio of 5.3 and that`s the highest negative deposit of

ratio we`ve seen in 15 years of data. So, much higher than we saw in the

last few quarters and that`s a bit disconcerting of course. But not

terribly surprising because at the end of last year, companies did warn,

the first half of the year would be quite weak in comparison to the second

half of the year.

So, even today, with companies that reported, we are seeing brighter

outlooks for the second half of the year. But they do warn, Q2 is still

going to be quite weak. More of the same from what we`re seeing in the

first quarter.

MATHISEN: Christine, as you look sector by sector -- who is hot and

who is not? And can the hot stay hot and will the cool stay cool?

SHORT: Telecom is our leading sector right now. And with almost all

of those companies reporting, they`re up about 10 percent. Of course, we

saw AT&T (NYSE:T) beating on the bottom line today adding to the overall

growth rate. Not much of a story there.

There are only eight companies within a sector, but they are doing

well because of heavy weights such as AT&T (NYSE:T), Verizon (NYSE:VZ).

Sprint reporting tomorrow and they`re expected to do better this quarter

than they did a year ago quarter.


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As far as other leaders, we have consumer discretionary and

financials. After today`s report are actually tied for second. As far as

leaders go, both expecting 7 percent growth. Within consumer

discretionary, it`s really the homebuilders and retailers that are driving

growth there and then, financials which began the season expecting negative

growth, negative 1 percent growth, they`re actually up 7 percent after

great reports from big banks such as Morgan Stanley (NASDAQ:NBXH)

(NYSE:MS), Goldman Sachs (NYSE:GS), Citigroup (NYSE:C).

So, that`s where the financials have certainly gained as companies

have come out and reported positively within that sector.

GHARIB: Looking behind those sector numbers and who`s winning and

who`s not, what is that telling you about economic and business conditions?

What are the themes?

SHORT: Well, one of the sort of negative themes that we re seeing and

despite what Bob said, yes, we did see group reports out of industrial

companies today. But, overall, the industrials are expected to be down

year over year as are the materials.

And when you have two sectors that are proxies for global growth, as

big as those sectors are, it is sort of disconcerting and just continues

what we already know and there is still weakness in global growth. A lot

of these companies are still citing Europe and China as sort of growing


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pains, as areas that they`re seeing weakness in the first quarter and, you

know, continuing into the second quarter.

So, I would say those two sectors alone do paint a rather negative

picture. But then, it is nice to see consumer discretionary on the other

end, because it does point to a healthy consumer that consumers are still

out there shopping.

MATHISEN: Christine Short, thank you very much for being with us.

Christine is senior manager at S&P Capital IQ.

GHARIB: And coming up on the program still, rain and snow hit the

Midwest and the worst may be yet to come for businesses and farmers in that

region.

But, first, here`s how the international market closed today.

(MUSIC)

GHARIB: Turning now to "Market Focus".

A parade of earnings after the market closed today. We start with Dow

component AT&T (NYSE:T). Profits per share were in line and revenues were

slightly below analyst estimates. Shares had been up less than 1 percent


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before the close and follows as much as 2 percent in after-hours.

MATHISEN: Amgen (NASDAQ:AMGN) reported higher first-quarter profits

when increased sales of the rheumatoid arthritis drug. But revenues were

below estimates. Shares had been flat before the close and dropped as much

as 5 percent in the after-hours trade as you see on that chart.

GHARIB: But shares of Yum brands surged in after-hours trading by

more than 5 percent. The company said it expected double-digit profit

growth in 2014. Investors focused on the upbeat forecast instead of

disappointing revenues because of problems in China, tainted poultry and

now avian flu.

Still, Yum said today it will open at least 700 locations in China

this year. Shares were down almost 2 percent ahead of the report at $64 a

share.

MATHISEN: And a bounce back for Coach (NYSE:COH). It reported a 6

percent gain in profits and increased its dividend. A turnaround on its

footwear line got some of the credit after a poor holiday quarter. Shares

were up on the result and an increase in the dividend gaining almost 10

percent, as you see there, today.

MetLife (NYSE:MET) boosted its dividend by almost half to 25.5 cents a

share and that`s the first raise in six years and as a result shares jumped


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almost 5 1/2 percent.

GHARIB: Days of powerful rainstorms have caused flooding to rivers

big and small throughout the Midwest. And now, all that surging water is

threatening the Northern Plains states just as farmers prepare for the

spring planting season.

How will the region deal with the cost and devastation of flooding?

And what could it mean to the nation`s Corn and Wheat Belt?

Sharon Epperson has more.

(BEGIN VIDEOTAPE)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-

over):

The danger may be easing from surging rivers, but after days of drenching

rain, the damage has been done.

STEVE YEAGER, HEART OF ILLINOIOS REGIONAL PORT DISTRICT: This is the

record-setter of flood for the Peoria in modern times. We`re at that time

30 feet. The flood stage is 18 feet.

EPPERSON: Steve Yeager, who runs the hard-hit Heart of Illinois

Regional Port District based in Peoria, hopes shipping traffic will get

back to normal conditions if the dryer weather forecast holds back over the


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next few days.

YEAGER: We`re expecting probably in the next couple of days, an

easing of the situation. Water`s going down and the resumption of barge

traffic for transportation purposes for agriculture, for, you know, and

soybeans and fertilizers and the like, probably by about Wednesday going

into Thursday.

EPPERSON: Runaway barges and busted bridges have made it difficult to

navigate these waters for the past week. Home, businesses and farms along

the busiest commercial shipping lane have been flooded.

(on camera): Now, the focus shifts to the Northern Plains, where it

still looks like winter. Snow packs in some parts of North Dakota are

running 20 to 40 inches deep. But if there`s more wet weather it warms up

and the snow begins to melt, there could be trouble.

(voice-over): Near Fargo, North Dakota, the sandbags have been out

for about a week. Part of the Red River flooded there two years ago,

causing $100 million worth of damage. And there are fears it could be

worse this time

When the snow melts the runoff could take farmland top soil with it, a

problem that`s grown worse as grasslands have been converted to farms since

2005.


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Farmers try to plant corn when the ground temperatures hit 50 degrees.

So far this year, corn prices have fallen 11 percent, and wheat is down

more than 12 percent. But that may change. One of the North Dakota

farmers we spoke with called hopes of planting half a million new acres of

corn this year a pipe dream.

For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson.

(END VIDEOTAPE)

GHARIB: It looks so far away for us here in New York, but all of that

impacts us. Higher corn prices meet higher dairy and meat prices and we`ll

see it in restaurants and the grocery stores.

MATHISEN: And you see, we have flooding now, we had drought last

summer. And so, the people -- farming business is a tough doggone business

to be in and --

GHARIB: We live in an era of extremes, right?

MATHISEN: We wish them all the best. Wishing them luck.

Still ahead, folks, why Hollywood is falling in love with aging baby

boomers.


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But, first, a look at how commodities, treasuries and currencies fared

today.

(MUSIC)

GHARIB: Have you seen any good movies lately? Well, if you`re a baby

boomer, you might be heading to the Cineplex more often. A new study from

the Motion Picture Association of America shows more older Americans are

going to the movies more often than any other age group.

Now, as we told you yesterday, with younger people streaming more

content through Netflix (NASDAQ:NFLX) or watching films on their tablets

and smartphones, Hollywood is now aiming right where the big money is,

making movies geared toward the people who still like to watch them on the

silver screen.

Julia Boorstin has the story.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

While summer action flicks may target teenage fan boy, what`s old is new

again in Hollywood. Studios are increasingly targeting the 50 and older

crowd, with films like Lionsgate`s R-rated romantic comedy "The Big


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Wedding", with four A-list baby boomer stars, Robert De Niro, Susan

Sarandon, Diane Keaton and Robin Williams.

UNIDENTIFIED MALE: I feel so used.

BOORSTIN: This weekend`s "Big Wedding" is debuting against Mark

Wahlberg and the Rock in "Pain and Gain", which targets a younger

demographic.

Earlier this month, "42", the Jackie Robinson bio pic featuring 70-

year-old Harrison Ford, brought in nearly $30 million. In contrast, teen

scream flick "Scary Movie 5" grossed just about half of that in its debut.

PHIL CONTRINO, BOXOFFICE.COM CHIEF ANALYST: You know, you`respeaking

about a generation that was raised on going to the movie, and they believe

that`s how you see a movie, in a theater.

BOORSTIN (on camera): In contrast, teenagers and 20-somethings more

open to streaming a movie on Netflix (NASDAQ:NFLX) or watching video on

demand, which is why movie studios are increasingly focused on that older

demographic. Based on last year`s results, it`s working.

(voice-over): A slew of movies with adult appeal like "Silver Linings

playbook", "Zero Dark Thirty" and "Lincoln" made big money at the box

office and drew critically acclaimed.


24/26

CONTRINO: Adults don`t want to be talked down to when they go to the

movies. They don`t feel like they`re teenagers again. They want

intelligent, engaging films in Hollywood. When Hollywood realizes that,

that`s when they make the real money.

BOORSTIN: And with "The Great Gatsby" from Warner Brothers opening

wide next month, Hollywood could hit a grownup gold mine.

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

(END VIDEOTAPE)

MATHISEN: The big drop in gold prices last week sent a lot of savvy

investors into the yellow metal as prices hit two-year lows.

Well, now, the U.S. Mint has been forced to suspend sales of its 0.1

ounce American eagle gold bouillon coins, because they ran out of them.

The Mint said gold coin sales are up 100 percent over the same period last

year and there are still plenty of one-ounce, half-ounce and quarter-ounce

coins to meet demand. In other words, go bigger or go home, I suppose.

GHARIB: Or go to the movies and you don`t need to spend that kind of

money.


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MATHISEN: I think that`s a really true thing. I saw a movie called

"Parental Guidance" not long ago, had Billy Crystal and Bette Midler in it.

And it really was a baby boomer-aimed story about the three generations

trying to raise a family. Very interesting --

GHARIB: We got a lot of good movies coming out this summer.

MATHISEN: Yes.

And that will do it for tonight`s edition of NIGHTLY BUSINESS REPORT.

Thanks so much for watching.

GHARIB: And I`m Susie Gharib, have a great evening, everyone. Tyler

and I will be back right here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post

broadcast at http://nbr.com. The program is transcribed by CQRC

Transcriptions, 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) 2013 CNBC, Inc.


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nightly business report - april 23 2013

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