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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Friending Facebook (NASDAQ:FB). Blowout earnings put it on track to become one of the most valuable companies in the U.S. and one of the most powerful in the entire Internet sector.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Bumpy year for Boeing (NYSE:BA). The Dow component reports its first loss if nearly seven years. But shareholders shrugged it off.
MATHISEN: Bottoms up. What scotch distillers are doing so they can once again toast to better sales.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, July 27th.
HERERA: Good evening, everybody.
It`s a status update shareholders dream off. Facebook (NASDAQ:FB) reported a blowout quarter, powering through earnings and revenue estimates. It`s ad business crushed Wall Street predictions as its fast growing number of active users post like and share content.
Here are the numbers for you. The company earned 97 cents a share. Estimates were for 82 cents. It raked in more than $6.4 billion in revenue. That tops expectations and it is up more than 59 percent from a year ago.
That sent shares soaring initially in after-hours trading. And if the after hours gain holds, it puts Facebook (NASDAQ:FB) on track to become one of the most valuable U.S. companies, making it about the same size if not bigger, than ExxonMobil (NYSE:XOM).
Julia Boorstin has more on Facebook`s strong results.
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JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The key takeaway from Facebook`s better than expected earnings, the social network is growing across the board. The key metric just showed Facebook`s having significant growth both in terms of revenue and earnings, as well as users. The company`s average revenue per user grew to $3.82. That`s more than a dollar more per user than a year ago.
Facebook (NASDAQ:FB) CFO David Wehner telling me that while Facebook (NASDAQ:FB) is seeing growth in video and Instagram ads, that there`s really an across-the-board increase in demand for Facebook`s ad, particularly on mobile devices. He says it`s still very much early days for the company to make money from the likes of Facebook (NASDAQ:FB) Messenger. So, we`ll have to see if that helps the company maintain this fast pace of growth.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin at Facebook (NASDAQ:FB) headquarters in Menlo Park, California.
(END VIDEOTAPE)
MATHISEN: So, is Facebook (NASDAQ:FB) positioned to become the dominant powerhouse in the Internet sector for years to come? If so, should you get in on the stock now?
Anthony Zackery is portfolio manager at Zevenbergen Capital Investment. He owns the stock and he joins us now.
Anthony, good to have you with us.
You know, I look at some of the numbers here, and just on the face of it, Facebook (NASDAQ:FB), 1.7 billion users. WhatsApp, a billion users, Facebook (NASDAQ:FB) Messenger, a billion, and I don`t know how many are on Instagram, but all the cool people are.
At any rate, is this the one stock if you`re going to buy into this space, that you ought to own?
ANTHONY ZACKERY, ZEVENBERGEN CAPITAL INVESTMENTS PORTFOLIO MGR: I believe so. Facebook (NASDAQ:FB), we`ve owned since the IPO. It was not the first to market with the social network, but it was the first to scale. As we saw on the numbers this evening, advertisers have taken count. It`s 1.7 billion users has given Facebook (NASDAQ:FB) a treasure chest of data and that is valuable for advertisers.
HERERA: And is that why you say the opportunities are still early for Facebook (NASDAQ:FB)?
ZACKERY: Absolutely. So, as we talked about earlier, WhatsApp, Messenger, both with a billion users. They`re largely untapped. So, for the long-term investor such as Zevenbergen Capital, we still think there`s plenty of upsides.
MATHISEN: When you say untapped, you mean they haven`t figured out how to make money off it yet, right?
ZACKERY: They`re working on it now. It`s too premature to call it today for the long-term. We still there`s plenty of opportunity.
HERERA: How much of this has to do with people who are in place there? Zuckerberg certainly and the fact that the executive team seems to execute with such precision?
ZACKERY: Yes. That was one of the original reasons why we liked Facebook (NASDAQ:FB), was the founder/CEO Mark Zuckerberg and his mission to connect the world. They`re continuing to execute on that vision and advertisers have taken notice.
MATHISEN: You know, the history of technology companies has been in part that when they get so big, they begin to attract government notice, namely antitrust notice. Microsoft (NASDAQ:MSFT) did it. Google (NASDAQ:GOOG) has had its own experiences, most especially overseas with regulators.
Is that a danger for Facebook (NASDAQ:FB) that they will own so much of the social media space from WhatsApp and messaging to Instagram to Facebook (NASDAQ:FB), that they attract that kind of interest?
ZACKERY: Social media is relatively new. And I don`t know whether regulators are going to step into the market and do antitrust measures. But Facebook`s an innovative company and it will continue to grow regardless and we believe of regulatory issues.
MATHISEN: That sounds like a pretty strong buy.
Anthony Zackery with Zevenbergen Capital Investments.
HERERA: Boeing (NYSE:BA) posted its first quarterly lost in nearly seven years and cut its earnings outlook for much of this year. But shares of the Dow component moved higher because that loss wasn`t as much as expected. The aerospace company recorded a roughly $2 billion charge linked to problems with some key planes.
But as Phil LeBeau reports, investors still think Boeing (NYSE:BA) can cash in on the global demand for air travel.
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PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is turning out to be a bumpy year for Boeing (NYSE:BA) investors. Hefty after tax charges and concerns about a slowdown in demand for new planes has Boeing (NYSE:BA) shares lagging the overall markets.
One big problem for the company is clearing hurdles developing the next generation of military refueling tankers. Getting the first versions of those planes to meet standards set by the U.S. Air Force has led to costly delays.
But Boeing (NYSE:BA) CEO Dennis Muhlenberg believes his company is close to revolving those issues and Boeing (NYSE:BA) still sees strong demand around the world for new commercial planes. That`s reassuring to investors. As for the company`s two most popular models, the 737 single- aisle, and 787 wide body, there are deep order backlogs and production is on track to go higher.
While Boeing (NYSE:BA) is delivering more commercial airplanes and has improved its profitability for plane, the company has cut its full year earnings guidance by 25 percent. A sign the aerospace giant is paying the price for some hefty charges that hit the bottom line in the first half of 2016.
For NIGHTLY BUSIENSS REPORT, I`m Phil LeBeau, Chicago.
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HERERA: In a separate regulatory filing, Boeing (NYSE:BA) said it is considering ending production of its iconic 747 jumbo jet due to the low order rate.
MATHISEN: Now to fellow Dow component, Coke, which saw its sales fizzled. Revenue for the quarter fell short of expectations as consumers across the globe drank less soda. The decline in global volumes pressured sales, which fell more than 3 percent, and that made Coke the worst performing stock on the blue chip Dow index today.
Sara Eisen now with more on Coke`s challenges.
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SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Coca-Cola (NYSE:KO) reporting a mixed quarter, beating on profit expectation, but lowering its outlook for sales and missing analyst`s forecast. The reason, Coke is experiencing a challenging macro economic environment with slowdowns across the emerging market and the strong dollar eating into sales abroad. At the same time, Coke is also transitioning to refranchise or sell-off some of its bottlers in the future, which continues to weigh on results.
Still, COO and president, James Quincy, says there are signs of progress here.
JAMES QUINCY, COCA COLA PRESIDENT AND COO: Clearly, we`re being buffeted by some forex and the asymmetry of where we own our own bottling operation. But when you look beyond that, you see the company of the future emerging. We`ve got the refranchising on track. We`re making really solid revenue growth and profit progress in developing markets.
EISEN: The broader problem for Coca-Cola (NYSE:KO), soda consumption is down, and we saw that in negative volumes for sparkling or soda sales for Coke, helping offset that was better growth in the stills category like juice, water and other noncarbonated beverages.
But the problem remains, that consumers are eating and drinking healthier. They`re also increasing taxes on sugary sodas, including that tax in Philadelphia just this year. Here`s what Quincy said about the challenge that represents to his business.
QUINCY: I think it`s very disappointing. This is the vehicle. A lot of blame and hopefully, that can be changed at some point.
EISEN: Two bright spots in the report. North America, which continues to outperform the rest of the world and pricing, Coke is able to charge more for smaller packages or cans, the key part of the CEO Mukhtar Kent`s strategy to revitalize the business. For now, the jury is still out, but Coke`s stock has been appealing for investors that are looking for a defensive place to hide in a volatile global environment.
For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.
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HERERA: On Wall Street, stocks were pushed and pulled. Shares traded mostly higher after the Federal Reserve left interest rates unchanged and we`ll have more on that story in just a moment.
But those gains evaporated in the markets heading into the close. When all was said and done, the Dow Jones Industrial Average saw a fractional loss to 18,472, the NASDAQ rose 29, thanks to gains in Apple (NASDAQ:AAPL), which we told you about last night. And the S&P 500 was off, too.
As for oil, prices extended their declines. Domestic crude settled down about 2 percent to just under $42 a barrel, following a government report that showed a rise in inventories. Gasoline stockpiles rose as well despite being in the middle of the peak summer driving season and that doesn`t happen very often.
As Jackie DeAngelis reports, it`s creating a glut of gas on the markets.
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JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Crude oil prices are sliding and summer driving season is still in full swing. Crude oil has seen a near 10 percent drop in the last month, much closer to $40 now than $50 a barrel, and gasoline down 11 percent in the same time. While it`s good news for consumers, AAA saying the national average for a gallon of regular is $2.15. That`s compared to $2.71 a year ago.
It could be bad news for stocks and energy companies suffer when prices are low. The drop in prices, because the oil glut continues and the glut is swelling because producers pumped more and refiners made more products when prices went up. It`s a double edge sword and the consequence that was feared was exactly this. Just as prices see support, the industry pushes them right back down.
ANTHONY GRISANTI, GRZ ENERGY FOUNDER & PRESIDENT: Demand has been excellent this summer. In fact, some weeks have shown a record, but on the flip side of that, all the crude oil that we stored for months and months and month has been refined into that gasoline, causing the glut in the markets.
DEANGELIS: In addition, while demand has been strong this summer, dropped off after seasonally after Labor Day. Some analysts are forecasting another big drop in crude prices down into the $30s, with a corresponding drop in gasoline prices of roughly 10 percent by Election Day.
GRISANTI: I think most traders will agree that the reason crude is supported is seasonal demand. In about four or five weeks, that`s about to end. Once it does, I think you`re going to see crude oil prices trade into the mid-30s and could possibly hit the low 30s.
DEANGELIS: A lot of big banks are forecasting a rebound into the second half of the year. But their theories may not pan out. We`re already in the second half heading into that seasonal slump and prices are moving lower not higher.
For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
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MATHISEN: And now to the economy. New orders for long lasting equipment fell in June by the largest amount in two years. Orders for so- called durable goods like cars, appliances and computers dropped 4 percent last month. That was mostly due to a big decline in commercial aircraft orders, but a gauge of orders for capital goods considered a proxy for business investment showed a small gain after two months of decline.
HERERA: A measure of homes under contract for sale rose in June, according to the National Association of Realtors. Pending home sales rose 0.2 percent from the prior month. Job growth and low interest rates are expected by many to continue to support the housing market going into the second half of the year.
MATHISEN: Federal Reserve upgraded the U.S. economy today. The labor market has strengthened its head, activity is expanding, and the downside risk to economic growth had diminished, but what investors really want to know is when, when might the central bank increase interest rates next.
Steve Liesman looks for clues.
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STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve left interest rates unchanged but made slightly hawkish comments in a statement that opened a debate about what happens in September. Did the Fed signal a rate hike coming or just leave open the door to a possibility? The Fed upgraded the economy, saying consumer spending is growing strongly and the labor market has strengthened the economy. It said it`s growing at a moderate rate. And there was one dissent from Kansas City President Esther George who wants to hike rates now.
Importantly, the Federal Reserve added a line suggesting there`s less slack in the labor market now. And another that said, quote, "Near-term risks to the outlook have diminished," end quote.
This was not a stronger previous line, which were it said, the risk to the outlook were balanced. More explicit language saying the Fed might be hiking at the next meeting.
Now, the Fed continues to point to inflation running below its 2 percent objective, something that might stay from future rates. So, the bottom line here, strong data between now and September, along with better inflation data could prompt a rate hike. But it could just as well be that right now, a very patient Fed is using the next meeting to be explicit that a rate hike is on the way.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.
(END VIDEOTAPE)
HERERA: And from the Fed to Japan, where that country`s government is planning to add more than $260 million billion in stimulus to help reflate that economy. The announcement caught many off guard and the size exceeds initial estimates. At this point, there are few details and it`s not clear how much will be spent directly to increase growth.
MATHISEN: Still ahead, the new controversy hovering over the race for the White House.
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HERERA: Tonight, several prominent speakers will take the stage at the Democratic National Convention, to make the case for Hillary Clinton as president. But attention turned to Donald Trump today, who challenged Russian hackers to find Clinton`s missing e-mails.
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DONALD TRUMP (R), PRESIDENTIAL NOMINEE: Russia, if you`re listening, I hope you`re able to find the 30,000 e-mails that are missing. I think you will probably be rewarded mightily by our press. Let`s see if that happens.
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HERERA: The Clinton campaign was quick to respond.
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BRIAN FALLON, CLINTON PRESS SECRETARY: This is, though, perhaps the worst of all the comments that he`s made to date, openly suggesting that a foreign country should come in and conduct cyber espionage against any U.S. interest, is whatever happened to politics on the water`s edge? I think we agree with the sentiments from Speaker Ryan suggesting that all American should be upset about the idea that Russia is trying to illegally commit espionage against any U.S. interest. It`s not a political issue. It`s now a national security issue, and Donald Trump is completely on the wrong side.
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HERERA: John Harwood is our guy in Philadelphia tonight.
John, there`s a controversy practically every day in this campaign. But how significant is this?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s very significant, Sue, for a couple of reasons. First of all, ever since the Cold War, Republican hawkishness on national security has been a unifying theme within their party. Remember Reagan and his confrontations with the Soviet Union and telling Gorbachev to tear down this wall.
But that also raises the question as to why Donald Trump is doing this? He said today at a news conference that he had sold a house for $60 million to a Russian -- $60 million more than he paid for it to a Russian national. There are questions about business investments by Russians in Trump properties, increases pressure on him to release his tax returns. This is a mess for Donald Trump and we`ll see how he handles it the next few days.
MATHISEN: He is known for his improvisational comments. It sounded like this was one of those, but maybe not.
Last night, President Clinton, John, offered a very personal portrait of his wife as a person. It was curious to me a little bit because of all the people who I thought I knew because he`s been in the public eye for that long, it would be Hillary Clinton, and most people think they know her know what they think of her.
But what`s tonight`s theme?
HARWOOD: Tonight`s theme is more for the case for Hillary Clinton on policy and leadership. They`ll be a lot of foreign policy. Vice President Biden will make the case for Hillary Clinton as the champion of the middle class on economics. And then you`ve got President Obama who, of course, has worked alongside her when she was secretary of state. He`ll be making the case and her running mate, Tim Kaine, will introduce himself to the biggest national audience he`s ever had.
HERERA: What do we expect from the president tonight? Obviously, he introduced now Secretary of State Kerry some 12 years ago. But what do we expect to hear from him tonight?
HARWOOD: This is not going to be about President Obama. This is going to be the case for Hillary Clinton. He`s going to try to persuade Americans that this woman that they`ve known for so long, a quarter century in public life, is uniquely situated to deal with the problems that we have now. He`ll talk about why she is matched to the leadership demands of the Oval Office and Trump is not.
HERERA: All right, John. We`ll let you go. Thanks so much.
HARWOOD: You bet.
HERERA: John Harwood in Philadelphia for us.
MATHISEN: Well, higher than expected drug sales helped Amgen (NASDAQ:AMGN) topped expectations. That`s where we begin tonight`s "Market Focus".
Both profit and revenue rose as the world`s largest bio tech drug maker benefitted from stronger demand for its arthritis and osteoporosis treatments. The company also raised its outlook for the year. Shares of Amgen (NASDAQ:AMGN), though, fell slightly in afterhours trading, but ended the regular session up more than 1 1/2 percent at $170.68.
Sales growth disappointed at Whole Foods as the grocery chain`s same store numbers fell for the fourth straight quarter and by more than Wall Street expected. Despite that miss, the company did manage to meet street`s target on both profit and revenue. Shares fell in afterhours on top of being down in the regular session by a percent and they finished the day at $33.64.
Meantime, earnings at Deutsche Bank, what a miss here, nearly wiped out, down 98 percent, year over year. The German bank said low interest rates and restructuring costs hurt results in the latest quarter. Revenue also took a hit, off 20 percent. The bank`s CEO also warned that further cost cuts may be needed if the current weak economic environment continues. Shares at Deutsche down nearly 4 percent at $13.63.
And NBCUniversal parent Comcast (NASDAQ:CMCSA) (NYSE:CCS) topped analysts revenue and profit expectations. Results lifted by strength in the company`s Internet and video segments. CEO Brian Roberts says his company is on a roll.
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BRIAN ROBERTS, COMCAST CHAIRMAN AND CEO: I think it`s X1, our video experience, that we give our customers with a new box. It`s the additional content. It`s to our improving customer service. It`s our better operational focused. It`s a really good trend. And we do believe we can continue this momentum that we`ve created in the first half of the year.
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MATHISEN: Comcast (NASDAQ:CMCSA) (NYSE:CCS), of course, owns CNBC, which produces NBR.
Shares up 1 percent at $67.92.
HERERA: Increased membership in its government business division helped health insurer Anthem beat Wall Street targets. The company also raised its revenue guidance and confirmed its plans to acquire Cigna despite facing a lawsuit from U.S. regulators looking to block that deal. Shares fell more than 2.5 percent to $133.86.
An uptick in fighter jet deliveries lifted revenue at defense contractor Northup Grumman. Those results were better expected. Overall profit though lagged a bit, but still came in ahead of estimates. The company also raised its earnings outlook for the year. Shares fell a fraction to $217.81.
Net sales for the 11th straight quarter at Mondelez fell and basically, the maker of Oreo Cookies and Trident Gum missed revenue estimates, citing currency headwinds and an impact from the deconsolidation of its Venezuela business. But profit rose and it was ahead of street targets. Shares fell nearly 3 percent to $43.94.
Drug maker Kadmon Holdings had a rough debut today. The shares opened below their initial public offering price of $12 a share and it didn`t get much better after that. But the CEO says the focus is on the future.
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HARLAN WAKSAL, KADMON HOLDING PRES.AND CEO: This company has three drugs moving in development and the drugs that are moving in development are ones for a diverse portfolio of various indications and areas of on oncology, in areas of autoimmune disease and fibrotic disease and genetic disorders. And each one of them has already shown some clinical potential in phase two studies. So, I think the key thing that`s taking place and where the focus should be is on the products and programs that we`re moving forward.
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HERERA: Well, shares plunged 19 percent to end the day at $9.70.
Coming up, an acquired taste. Why sales of scotch are suddenly on the rocks.
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HERERA: SAB Miller has reportedly suspended work on integrating its operations with that of its suitor, Anheuser-Busch InBev. According to multiple reports, the brewer is consulting with shareholders over whether the revised takeover offer from Anheuser-Busch is acceptable. That sent shares of Molson Coors lower since the U.S. beer company is set to acquire SAB Miller`s stake in Miller Coors as part of that deal.
MATHSEN: It maybe National Scotch Day, but American whiskies are getting the attention now. Drinkers in the U.S. and abroad are raising a glass to bourbon, causing global exports of scotch whiskey to fall. I`m going to get on that tonight.
Jane Wells has our story.
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RAY PEARSON, SCOTCH WHISKY EXPERT: Cinnamon.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes.
Whisky expert Ray Pearson has poured me a 15-year-old single malt scotch.
But as smooth as it is, scotch is on the rocks. Other whiskies are gaining in popularity, especially American spirits.
Overall last year, whisky sales grew 4 percent according to U.S. distillers. But that was mostly thanks to really big growth in American whisky. That is bourbon. They grew twice as fast. And sales of Irish whiskies are, quote, "exploding".
PEARSON: To me, there`s a lot more experimentation in the bourbon area than there is in the scotch area. They have all sorts of different variants when you look at the retail shelves.
WELLS: The world is falling in love with bourbon. Exports of American whisky topped a dollars last near for the third year in a row. But bourbon and scotch need each other in one very important way, barrels. Bourbon can only be aged in brand new oak barrels, and once those barrels are used, they`re often sold to Scottish distilleries where they`re reused up to three or four times to make scotch.
Finding new oak every year is a challenge for the bourbon industry. So, Ray Pearson knows at least one Scotch maker trying to help.
PEARSON: The company actually owns tracks of land in the Ozarks and they are here managing the growth of the trees.