NIGHTLY BUSINESS REPORT for April 27, 2016, PBS - Part 1

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Liesman, Michelle Caruso-Cabrera, John Harwood, Dina Gusovsky>

(NASDAQ:CMCSA) (NYSE:CCS); DreamWorks; Media; Mergers and Acquisitions;

Iran; Economy; Energy; World Affairs>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Status update: blowout quarter. Facebook (NASDAQ:FB) strong profit makes it a stand out in a season filled with tech earnings disappointments.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Turning up the heat. Why Comcast (NASDAQ:CMCSA) (NYSE:CCS) reported bid for DreamWorks may put pressure on Disney (NYSE:DIS).

MATHISEN: Inside Iran`s oil industry. A rare look at one of the most isolated economies in the world and the sector it hopes will reconnect it with the world.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, April 27th.

HERERA: Good evening, everybody, and welcome.

Facebook (NASDAQ:FB) shareholders are hitting the "like" button and what`s not to like about a big earnings beat. The world`s largest social network reported massive growth as the rest of the tech industry struggles. The company earned 77 cents a share, blowing past the 62 cent estimate. Revenue climbed 52 percent from a year ago, thanks to newer mobile and ad products and its push into live video. And shares took off, spiking initially in after-hours trading.

Julia Boorstin has more on what`s working at Facebook (NASDAQ:FB).

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Bottom line for Facebook (NASDAQ:FB), its mobile ads are working and consistently drawing more advertising dollars. CFO David Wehner tells me that video ads are part of that mobile ad growth and Facebook (NASDAQ:FB) doesn`t break out Instagram. Wehner say that ads in the photo-sharing service are definitely contributing to growth.

Facebook`s better than expected results show it`s working for Facebook (NASDAQ:FB) CEO Mark Zuckerberg to also be the controlling shareholder. And today, the company proposed creating a new class of nonvoting shares, the three for one stock split designed to enable Zuckerberg to maintain that control of the company while selling shares as part of its commitment to donate 99 percent of his wealth to charity.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in San Francisco.

(END VIDEOTAPE)

MATHISEN: So Facebook (NASDAQ:FB) good, the rest of tech not so much in terms of earnings. So why is tech trouble?

Let`s ask Skip Aylesworth. He`s portfolio manager of the Hennessey Technology Fund.

Skip, why have the earnings reports out of the tech sector been so variable and spotty?

SKIP AYLESWORTH, HENNESSY TECHNOLOGY FUND PORTFOLIO MGR.: I think it`s really two factors. One is innovation. And I think as you`ve seen Facebook (NASDAQ:FB) is currently the hot spot for innovation and we`ve seen good earnings release and after-hours market movement.

Apple (NASDAQ:AAPL) on the other hand -- currently, not the big innovation right now. They brought out the smaller iPhone, but we`re all waiting and have been waiting for a long time for the next big Apple (NASDAQ:AAPL) product and it hasn`t come.

HERERA: But isn`t that a long term very bad sign for those parts of technology, Skip? I mean, that`s how they made their mark was with all this innovation and if that`s drying up, that doesn`t seem like a good sign longer term.

AYLESWORTH: Well, that`s the evolution of these companies from the growth to more of a value play. So, yes, a growth oriented tech company needs to maintain that growth or it will then revert to more of a value-type operation which is on priced earnings and dividend yield, things like that.

MATHISEN: So, Facebook (NASDAQ:FB) at or near an all time high in terms of price, Apple (NASDAQ:AAPL) the worst performer in the Dow so far this year. Which one would you buy here?

AYLESWORTH: I would -- I think you should probably own both. And in terms of you always buy -- if you understand the fundamental story you buy on full back. So, today, I would probably look to Apple (NASDAQ:AAPL) as the potential purchase.

HERERA: I noticed under your recommendations for new technology, you listed GE, and I know they`ve been trying to position themselves as a technology company. It sounds like you think they`re succeeding.

AYLESWORTH: Well, at the Hennessy Tech Fund, GE has a lot of things going for it as it evolves and it`s trying to evolve into more of a pure technology type play. It`s in all the right fields, energy, health care, et cetera, so everybody thinks of GE, oh, the refrigerator in the kitchen. It really now has become a high-tech company.

MATHISEN: Am I better off going with older, larger, mature technology companies or maybe trying to find a fund like yours or some other one that can do the spade work to turn up the little really fast growing ones?

AYLESWORTH: Well, I think a combination of both is good. That is the strategy we follow at the Hennessy Technology Fund. We do own some of the older more established tech names and we also have a nice portfolio of the small aggressive growth names.

And so, you never really can predict the future no matter what everybody says, so you want to have this diversified approach to see what happens. Now, we`re always just a headline away from earth-shattering new technology event, and you want to kind of be in a position when it happens.

MATHISEN: You owe me a beer for giving you that layup question, Skip.

(LAUGHTER)

AYLESWORTH: Thanks very much.

MATHISEN: All right. Skip Aylesworth with Hennessy Technology Fund.

HERERA: Facebook`s results stand in contrast to Apple`s which we told you about last night. The stock was the worst performer on the blue chip Dow index, falling more than 6 percent today and a large part of Apple`s revenue decline came from a slide of sales in China.

But as Eunice Yoon reports from Beijing, the softness in that country may look worse than it actually is.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The numbers weren`t great, but that doesn`t mean that Apple`s position in the China market as seriously deteriorated. Part of the problem is that the whole smartphone market is maturing and slowing down. We used to see explosive growth, but for 2016, Gartner (NYSE:IT) estimates that the market is only going to pick up by 0.7 percent.

In terms of market share, Apple (NASDAQ:AAPL) hasn`t deteriorated. If anything, it`s picked up slightly. In 2015, it ranked third here, behind Xiaomi and Huawei. In Q4, it came in second.

Tim Cook made the point that Apple`s numbers look worse than they are because revenue grew by 81 percent a year ago. The iPhone 6 plus had just hit the market the year before, so by comparison, the numbers look worse but the company still sold a lot of phones.

The real test, though, will be with the iPhone 7. Traditionally, whenever Apple (NASDAQ:AAPL) releases a product here, you see a big boost and higher sales. However, I spoke with IDC analyst Brian Mann (ph) who said that has been hearing that the iPhone 7 could have only minor technology upgrades and if that`s the case, it might disappoint Apple (NASDAQ:AAPL) fans here and lead to worse sales.

And on social media, that`s been the buzz. People have been asking if Apple (NASDAQ:AAPL) has lost the technology mojo or its engineering heart at a time when Chinese rivals have been picking up steam.

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

(END VIDEOTAPE)

MATHISEN: On Wall Street, stocks were mixed. Apple (NASDAQ:AAPL) weighed on the NASDAQ, which suffered its first five-day losing streak since January. But the Feds statement on its outlook for interest rates helped lift the Dow and S&P 500, a little bit more on that in a moment. By the close, the Dow Jones Industrial Average added 51 to 18,041, NASDAQ down, though, by 25, S&P 500 gained three.

HERERA: Two components out with earnings this morning.

Boeing (NYSE:BA) reported its first earnings miss in five years on higher cost. The world`s largest plane marker saw a 9 percent drop in profit despite an overall gain in revenue. It also backed its full year profit and its revenue forecast.

United Technology has also reaffirmed its outlook after reporting slightly higher profit, but lower revenue. The company citing currency headwinds and a challenging global economy.

Both stocks finished the session higher.

MATHISEN: Comcast (NASDAQ:CMCSA) (NYSE:CCS) cast reported better than expect results. The largest U.S. cable provider and the parent of NBR`s producer saw its first biggest first quarterly jump in pay TV customers in nine years. It also saw growth in its high speed Internet and entertainment units and that sent shares up fractionally. Comcast (NASDAQ:CMCSA) (NYSE:CCS) is also reportedly in talks now to buy DreamWorks animation for about $3 billion.

Back with us is Julia Boorstin with a report on what`s driving that potential deal.

(BEGIN VIDEOTAPE)

BOORSTIN: Media giant Comcast (NASDAQ:CMCSA) (NYSE:CCS) is in talks to buy the studio behind "Shrek" and "How to Train Your Dragon", Jeffrey Katzenberg`s DreamWorks Animation. If a deal happens, it would give NBC Universal (NYSE:UVV) not just more animated movies to build on its access with "Despicable Me" production, Illumination Entertainment, but also more scale and consumer products and characters to turn into TV shows to bring in its parks and put on its apps.

BARTON CROCKETT, FBR CAPITAL ANALYST: I think that it would make sense. I think DreamWorks has been very good at making short form content for Internet, for Netflix (NASDAQ:NFLX), for Verizon`s Go90 service. Comcast (NASDAQ:CMCSA) (NYSE:CCS) is trying to role out a whole bunch of new Internet-driven services to compliment what they`re doing with cable. So, DreamWorks could be a content engine for that.

BOORSTIN: Neither company will comment and my sources tell me a deal is far from done, but a reported price tag of $3 billion, a healthy premium over DreamWorks Animation stock price sent DWA shares flying higher. Now the question is whether any other buyers emerge for DreamWorks Animation.

If the deal with Comcast (NASDAQ:CMCSA) (NYSE:CCS) happens, which sources say could come within the next few weeks, it could be a win for fans of "Shrek", "Kung Fu Panda", or "Peabody and Sherman".

CROCKETT: If DreamWorks/Comcast (NASDAQ:CMCSA) (NYSE:CCS) combination, you know, came to life, if it happened, you`d see a lot more content from DreamWorks all over the Comcast (NASDAQ:CMCSA) (NYSE:CCS) platform. So, and I think less in the way of movies but a lot more short form content. So, you`d see more TV series based on the DreamWorks movie characters.

BOORSTIN: Crockett says this kind of deal would help Comcast (NASDAQ:CMCSA) (NYSE:CCS) become like a Disney (NYSE:DIS) 2.0, emulating the Magic Kingdom`s success of building family-friendly brands that work across its platforms.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in San Francisco.

(END VIDEOTAPE)

HERERA: I love that "Peabody and Sherman".

To the economy now where the number of contracts to buy homes sit the highest level since last May. The National Association of Realtors reported a 1.4 percent rise in pending home sales last month. That report is considered a barometer of future home purchases.

MATHISEN: The housing sector and the labor market have both shown further improvement, this according to the Federal Reserve. But the Central Bank at the end of its two-day meeting decided it was best to stand pat on interest rates.

Steve Liesman has more on the decision that surprised almost no one.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Some changing language in the Fed`s April policy statement that are prompting a market debate about whether the Federal Reserve could potentially hike rates in June or September, and whether the U.S. is on course for one rate hike this or two.

Among the changes in the statement, it eliminated concerns over the global risks that have been so prominent in the March statement. It said growth appears to have slowed and that jobs have improved further. It eliminated concern of recent inflammation readings picking up. So, that`s two somewhat hawkish changes and two somewhat dovish ones.

Bond experts Bill Gross with Janus said after the statement, the Fed is likely to hike just once this year.

BILL GROSS, JANUS CAPITAL GROUP: I think over the next six months and the balance of the year, that, yes, we`re going to see one hike and probably not two. So, if you`re asking for an over-under relative to two, I`d take the under.

LIESMAN: The CNBC Fed survey ahead of the meeting pegged August for the next hike, so it seems to be in line with a post-meeting debate that argues between June and September.

DOROTHY WEAVER, COLLINS CAPITAL CEO: I don`t think the Feds going to be in any hurry to raise rates because they never going to want to have to roll it back. Once they go forward, they`re going to want to keep going forward. So, I don`t see them raising into June, that there`s just too much contradictory information coming out, nothing that`s actually pushing them to have to react.

LIESMAN: But economists over at HFE say, quote, "The more positive tone that in March is consistent with officials tightening again as soon as the June meeting, but only if the data and markets are supportive."

Speaking of data, there are two more meetings before the meeting in June. But the real question is the growth turnaround.

Tomorrow, the government is expected to report gross domestic product at just 0.7 percent for the first quarter. That compares with the CNBC rapid update of 0.9 percent. An actual fourth quarter reported growth of 1.4 percent. So, it`s expected to be another weak first quarter after a string of weak first quarters, and once again, investors face the tough question of counting on a second quarter rebound. The Fed is pondering the same question of figuring out whether to hike rates again.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

HERERA: Still ahead, a part of the world`s oil industry very few have seen before.

(BEGIN VIDEO CLIP)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Michelle Caruso-Cabrera. I`m on a tug boat in the Persian Gulf, just off the Iranian island of Kharg. This is where 90 percent of Iran`s exports live through. Coming up, a behind the scenes look at Iran`s oil industry.

(END VIDEO CLIP)

(MUSIC)

HERERA: ExxonMobil (NYSE:XOM) is raising quarter dividends. The board approved the hike of about 3 percent to 75 cents a share. The world`s biggest oil and gas company has increased its annual dividend payment to shareholders for 34 consecutive years, and the move comes just one day after Exxon lost its AAA credit rating in part because of its generous payout to shareholders.

MATHISEN: Oil prices hit 2016 highs today, rising another 3 percent. But now that sanctions against Iran had been lifted, there`s some concern that all the crude coming back online could potentially pressure prices again.

Michelle Caruso-Cabrera is on the island of Kharg with a rare look at the inner workings of Iran`s oil industry.

(BEGIN VIDEOTAPE)

CARUSO-CABRERA: This place is Iran`s cash machine. It`s the island of Kharg, 25 miles off the coast, dedicated solely to shipping oil. Ninety percent of Iran`s crude exports leave from here.

CNBC was given rare access to the island as the country prepares for increased exports now that nuclear sanctions have been lifted. These tanks have the capacity to store up to 28 million barrels of crude at any one time. But they also serve as a political billboard.

Oil and geopolitics go hand in hand, that`s on full display here at this Iranian export facility. Take a look behind me. "Persian Gulf" written in English in very large letters on this storage tank. Why? The export manager here tells me every time a tanker pulls in, he wants them to know they`re in the Persian Gulf.

The name of this body of water is disputed by Saudi Arabia. They call it the Arabian Gulf, while the rest of the world calls it the Persian Gulf.

This is what the tankers are here for -- slick, black crude.

The head of exports from the national Iranian company, Golam Hossein Garami (ph), opened the spout for us. And then took us out to sea on a tug boat.

This is where all the international oil tankers pull up so they can fill up with Iranian crude. The Iranians are hoping now with the lifting of the nuclear sanctions, they`re going to filling up a heck of a lot more of those tankers than they have for years.

Before the toughest sanctions were imposed by the West, Iran was exporting more than 2 million barrels a day of crude and other petroleum products. The sanctions pushed them as low as 700,000.

The workers here insist the sanctions were never a problem, instead calling them an opportunity because it forced the Iranians to learn how to make their own replacement parts. For example, this turbine meter from Smith System of Corpus Christi, Texas, the Iranians say was installed in 1984. Once American companies were prohibited from doing business with Iran, they could no longer get the replacement parts, so Iranian engineers manufactured them themselves.

On the walls in this room, photos of the severe damage suffered in Kharg from bombs during the Iran-Iraq War in the 1980s. Outside, a tribute to the first Kharg victim of that war, side by side with the former and current leaders of the country. Ayatollahs Khomeini and Khamenei, the first and second Muslim clerics to rule over Iran since the Islamic revolution in 1979 -- yet another reminder that politics and oil are deeply intertwined.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Kharg, Iran.

(END VIDEOTAPE)

HERERA: Boston Scientific`s heart business beats strong and that`s where we begin tonight`s "Market Focus".

The maker of medical devices tops analysts` targets for both revenue and earnings. The company sales rose 11 percent, thanks in part to strong demand for its heart stent and clot removal product. Boston Scientific (NYSE:BSX) also raised its full year guidance. Shares finished the day up 11 percent to $21.89.

Goodyear reported lower than expected revenue as the tire maker cited impacts from weak sales in the U.S., and the absence of business operations in Venezuela. Profits beat analysts` estimates by a penny but that wasn`t good enough to appease investors. Shares fell more than 7 percent to $30.34.

Health insurer Anthem issued better than expected quarterly earnings. The results were helped by robust enrollment across its Medicaid and Medicare segments and its Affordable Care Act exchanges. Despite the gains, the CEO said the company remains cautious on its financial projections based on sustainability concerns in the exchange marketplace. Shares of Anthem fell more than 1 percent to $144.76.

And low commodity prices continue to drag down results for oil and gas producer Hess (NYSE:HES). The company posted a quarterly loss, but it came in above street expectations. Revenue however fell below targets. Shares finished the day down 3 percent to $61.27.

MATHISEN: Yahoo (NASDAQ:YHOO) will give activist hedge fund Starboard Value four seats on the company`s board of directors. They will be among the four newly elected members. Separately, the first round of bids for Yahoo`s core business ended last week with Verizon (NYSE:VZ) Communications emerging as the projected front-runner. Shares of Yahoo (NASDAQ:YHOO) down a fraction today to $36.95.

Meantime, the defense contractor General Dynamics (NYSE:GD) topped estimates on both its top and bottom lines. The company said results were helped by strong demand for its defense products and business deals with Switzerland and the United Kingdom. Shares up more than 3 1/2 percent to $143.61.

Going in another direction entirely, Oreo maker Mondelez issued better than expected earnings and revenue for the latest quarter while reaffirming it`s guidance for 2016. But Mondelez says it remains cautious as weak demand in overseas markets continues to impact results. Shares up 3 percent to $43.88.

HERERA: On Capitol Hill, the outgoing CEO of drug maker Valeant says the company was too aggressive when hiking the prices of several medications. During a Senate hearing, which included testimony from Valeant investor and board member Bill Ackman, CEO Michael Pearson offered this mea culpa.

(BEGIN VIDEO CLIP)

MICHAEL PEARSON, VALEANT CHAIRMAN & CEO: I as its leader was also too aggressive, in increasing the prices of some of our drugs in our large portfolio of products. In hindsight, I regret pursuing transactions with a central premise was based on an increase in price.

(END VIDEO CLIP)

HERERA: The committee is investigating Valeant`s dramatic drug price increases.

MATHISEN: The high price of medicines is one of the hot topics on the campaign trail, but today, attention turned to Ted Cruz, with an attempt to change the course of race named his running mate, businesswoman and former presidential hopeful Carly Fiorina.

John Harwood is in Washington for us.

John, why beyond the obvious did he make this announcement?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Ted Cruz, Tyler, lost five primaries by very large margins last night. He lost very badly in New York before that. Donald Trump is on a path to getting to 1,237 delegates that he needs to be nominated. Ted Cruz has to do something to shake up the deck.

Indiana votes next week. He`s making that his last stand and by naming Carly Fiorina, he`s hoping to magnify his support from women. That`s a weak point for Donald Trump, and hope that he can pull a victory out in Indiana and perhaps deny Donald Trump those delegates that he needs to force a contested convention.

HERERA: Do you think it will work? Can it help them change the dynamic of the race?

HARWOOD: Boy, I think it`s very doubtful, Sue. It`s sort of like the Cruz/Kasich alliance we talked about earlier in the week. At this point, Donald Trump has got a lot of momentum. He`s got some structural advantages in big states that are voting, very hard to see how this can fundamentally make people reassess Ted Cruz.

Remember, vice presidential candidates don`t do all that much in a general election. It`s hard to see in a primary election how somebody like Carly Fiorina who didn`t do very well in her own campaign can make a big difference.

MATHISEN: Donald Trump, big winner as you pointed out yesterday, in the primaries. It wasn`t just that he won. It was a margin. I expected he reacted in his usual, humble way.

HARWOOD: Well, he said, he was like a boxer who knocked out his opponents. And then, today, he decided to act presidential and gave a foreign policy speech, read it from a teleprompter. That`s not like Donald Trump. He was tempered in his approach. It wasn`t all that innovative in terms of substance, there were some contradictions there.

But Donald Trump is trying to take on the trappings of the presumptive nominee and accelerate the momentum he`s been accumulating over the last couple of weeks.

HERERA: On the Democratic side, what about Bernie Sanders versus Hillary Clinton?

HARWOOD: Bernie Sanders announced today, Sue, that he`s laying off hundreds of staffers, he`s going to focus all his firepower on California. That`s the last state that votes on June the 7th. His chances of overtaking Hillary Clinton have become almost nonexistent. It appears that he`s looking for leverage to try to influence the party platform. It`s not really about winning the nomination anymore for Bernie sanders.

MATHISEN: All right. John, thank you very much. John Harwood in Washington.

And coming up, what some in the medical community are doing to reduce the risk of becoming addicted to prescription pain medications, in the final part of our series "The Business of Pain."

(MUSIC)

HERERA: The business of pain. A growing number of Americans are becoming addicted to the pills that are supposed to help alleviate their discomfort. Last night, we told you one man`s story and tonight what some in the medical community are doing to try to solve the problem.

Dina Gusovsky has the final part of our series.

(BEGIN VIDEOTAPE)

ROBYN, PAIN PATIENT: I don`t want to keep taking this pain medication that could make me addicted to it. If I get off of it, I`ll go through withdrawals.

DINA GUSOVSKY, NIGHTLY BUSINESS REPORT CORRESPONDENT: So it`s kind of a fear for you.

ROBYN: Uh-huh.

GUSOVSKY: Robyn, who asked us not to use her last name, has been taking powerful painkiller OxyContin every day for about seven years now because of her back pain. Though she`s not a lone, she is part of a growing number of patients seeing physicians who want to dramatical change the way they treat pain patients.

UNIDENTIFIED MALE: I want to recommend genetic testing. That will help us better identify what medications you do or don`t respond to.

GUSOVSKY: A simple swab test can reveal genetic markers that can determine a predisposition to misuse and abuse of certain medications.

DR. ASHISH SHANBHAG, SPINE & PAIN PHYSICIAN: Pain therapeutics is where it`s at, (INAUDIBLE) patients care. Now, we can identify how they will respond more specifically than actually doing the normal trial and error methodology. We want to help relieve a patient`s pain, correct? That`s been our goal to help relieve it, but now we`re on task with being able to help take patients from their inner demons, that part of the genetic profile which makes them susceptible to drug abuse.

GUSOVSKY: But some aren`t convinced. From those who help run drug treatment centers --

RICHARD CONABOY, CLEARBROOK TREATMENT CENTERS: I know they`ve made great advances with genetics, but I would be very skeptical if somebody said if we swab you, we can tell you if you`re going to be a drug addict or alcoholic or not.

GUSOVSKY: To lawmakers on Capitol Hill.

SEN. PAT TOOMEY (R), PENNSYLVANIA: I think we still have a long way to go to get to the point where we can like do a simple blood test and say you better never get this because you`ll become addicted. I don`t think we`re there yet.

GUSOVSKY: But those still in recovery from prescription painkiller abuse like Bobby Long remain hopeful.

BOBBY LONG, RECOVERING DRUG ADDICT: There`s got to be a way to treat chronic pain without getting the whole world addicted.

GUSOVSKY: For NIGHTLY BUSINESS REPORT, I`m Dina Gusovsky in Woodbridge, Virginia.

(END VIDEOTAPE)

MATHISEN: And finally tonight, Chobani employees got a surprise. The company`s founder is awarding his full time employees an ownership stake in the now private company. The awards total around 10 percent of the Greek yogurt maker`s value, and will be worth something if the company goes public or is sold. Analysis says the company is worth upwards of $3 billion. So, it is not just a cup of yogurt here that we`re talking about. CEO calls it a mutual promise to work together with a shared propose and responsibility.

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