tv Nightly Business Report PBS October 21, 2015 1:00am-1:31am PDT
this is "nightly business report" with tyler mathisen and sue herara. >> pressure mounts. yahoo! misses arngs estimate and now some say the ceo marissa mayer has only two options left. >> wall street's worry. companies have just started reporting their results, but already one big concern emerging. >> the race to get ready for the flu season. why it's a six-month mad dash to get the vaccine made. a look how it's done in the second part of our series tonight on "nightly business report" for tuesday, october 20th. good evening, everyone. welcome, thanks for joining us from yahoo! to boo who. the pressure is building on yahoo!'s ceo marissa mayer. the company reported earnings and revenue after the bell missing wall street estimates.
another not so the hot quarter for a ceo trying to earn the company around. it earned 1r5 cents a share, a penny below expectations. revenue also missing forecasts but at least was above year ago levels. as for the stock, it traded initially lower after the report and as josh lipton reports, ceo marissa mayer may have only two options left. >> her stock is down, her key lieutenants have left. so what are marissa mayer's options at yahoo!? for one, she could try and a turnaround at the business, that is means driving revenue from the company's mobile, video, native and social ads. these are the areas whereas internet ad dollars are moving but these areas also represent only a relatively small part of yahoo!'s overall bills that's notice maier needs to stabilize the company's core online
business. that won't be easy because the competition is fierce. predicted yahoo! will capture just 2% of the $170 billion worldwide digital ad market. and meanwhile, google commands 30% of the market while facebook controls 10%. yahoo! spent a lot of its time on the product side and now it's just focusing on add monization. there's a big gap that they have to fill which is why we're cautiously optimistic yahoo! can get there. >> even more critically than the health the of the core business is the uncertainty surrounding ali ba back, the chinese ecommerce giant. yahoo! plans to go ahead with its planned spinoff of its stake in alibaba even though the irs won't say ahead of time whether that frx will be tax free. the difference between no tax mayer's preference and a 40% capital gains tax amounts to billions of dollars for yahoo!
and its shareholders. if maier can't can sell rate the turnaround of the business, then doshi has a more radical option, sell. >> i think private equity wouldt be very interested in potentially owning still relevant asset with a lot of traffic and that's cash flow positive. >> despite its challenges, there are still plenty of yahoo! fans on wall street. nearly 70% of analysts rate the stock a buy. that's because they thinkse tha at this price, the stock already reflects a lot of bad news. either way, analysts say the pressure is on for maier who is now more than three years noose this turn around for this silicon valley company. for "nightly business report," i'm josh lipton in san francisco. a trio of blue chip earnings from verizon, travelers and united technologies, all three reported better than expected earnings per share and that helped send their shares higher with united technologies the top performer on the dow index today.
verizon says its wireless business, the country's biggest anise fios internet and tv business are both health ewe. but it's betting on mobile video tracking their 100 million wireless customers to see what aps they're using. valuable information for tisers. verizon earned $1.04 per share in the third quarter beating estimates by two cents. revenues beat estimates up 5% year over year. travelers, the insurance giant says revenues were better than expected, too. a quiet hurricane season has kept claims down, but the lack of claims is also helping to keep premiums down. and investment income fell overall third quarter earnings beat expectations by 66 cents. for most companies though, third quarter revenues have been a sore spot and that was the case at united technologies. it makes pratt and whitney jet engines, otis elevators and carrier air conditioning equipment but sales fell more than 5.5% in the third quarter.
the company blamed a strong dollar and delays on engine deliveries. but it says it's on target to meet earnings projections for the year. third quarter earnings beat estimates by 6 cents and united technologies will use money it made from selling off see course ski helicopters to buy back $12 billion worth of stock. >> and tomorrow the dow component slated to report include boeing, coke and american express. earnings reports vrts only started to come in but there is one big issue be already emerging. bob pis san no tells us what wall street is starting to worry about. >> while it's still early in the earnings season, traders are focused on this quart, the fourth quarter. analysts are taking down earnings estimates in some cases very aggressively. it's not an industry specific issue. chip names like my con and rambis and commodity companies like alcoa and agricultural companies mike monsanto and companies like yum! brands and
wynn casinos, the earnings are coming down. what's hinds all this? simply put, there's a revenue recession going on. the s&p 500 is looking at four consecutive quarters of revenue declines this year if the estimates hold up partly due to the big decline in revenues from oil companies and to a stronger dollar. that's hurt companies' earnings overseas. companies from ibm to united technologies to eaten are all indicating revenues are lower than projected and the conclusion is that the global economy remains weak. as a result, corporations are spending less on new investments and instead using their available cash to buy back a lot of stocks. that's one reason the market held up pretty well this year. another reason is the margins have been strong. the s&p has margins of a little over 10%, near a record. declining revenues means the margins are underpressure. to keep them up, keep the stock market going, companies have to keep cutting costs. how do you do that?
they've been cutting costs for years but they're already cut to the bone. if this continues, the only way is layoffs. that's why we need better revenue growth. for "nightly business report," i'm bob pisani at the new york stock exchange. >> on wall street, the dow snapped a three-day winning streak earnings by verizon, and united technologies wer not enough to offset the weak guidance from ibm we mentioned last night. by the closing bell, the dow jones industrial average dropped 13 points to 17,217, the nasdaq fell 24, s&p 500 lost two. >> to the economy, housing starts rose to a near eight-year high in the september driven by an increase in multifamily construction. the commerce department says ground breakings rose to a seasonally annually adjusted pace of $1.21 million. and new applications for building permits fell about 5%. from housing to politics.
where donald trump remains the republican presidential front-runner according to the latest nbc news/"wall street journal" poll. ben carson a close second with marco rubio rounding out the top three. while republicans prepare for the next debate, there are questionses in congress and within the democratic party about who will run for some positions and what that could mean for the economy. we're happy to have john harwood joining us in studio tonight. goo to see you. >> speaker of the house position, is paul ryan going to accept that position if formally asked? >> feels like it's been moving that way. he's been reluctant for good reason. the house is difficult to run right now with this this icpublican caucus. he's getting so much pressure from republicans i think in the end it will be difficult for him to turn down. he's asking for conditions that he not have to mortgage his running of the house to a particular faction. he's not going to have to agree to changes they want. not clear that he's going to get
the assurances he needs, but it feels like it's moving in that direction. >> switch to the democratic side. what can we expect from joe biden and when? >> i believe that a week from now, we will know whether joe biden is in this race or not. i think is no. he is thinking about it seriously. his staff has prepared options for him. but i suspect he's not going to do it in the end. >> does hillary clinton's performance in front of a benghazi committee on thursday influence his decision one way or another. >> i don't think so. i think tyler, this is a much bigger issue for joe biden than how she does. first of all, because you can assume especially after that debate that she's going to perform well. she usually he does in set piece moments like that. but joe biden has got to decide whether he has the stomach for this, whether his family has the stomach for it, whether there's a path to victory i think the answer to all those questions will come up no. >> also the fund-raising issue which may not be an issue for michael bloomberg because he is
a very wealthy man. reports are he may consider jumping into the race. >> michael bloomberg could be a credible independent candidate for president. he's got the money for it. i'll believe it when i see it. he has been reluctant so far. he took himself out previously. see if he changes his mind. >> john, great to see you. thanks for coming by. >> still ahead, small business owners are considered job creators. so why do so many of them feel they are being shortchanged?
ferrari has reportedly priced its ipo near the top of the expected range according to reuters, shares of the luxury sports carmaker priced at $52 apiece, raising nearly $900 million. the ipo will give ferrari a market value of close to $10 billion. >> toyota's lexus is the most reliable car brand. that's according to consumer reports' annual survey. buick is the only detroit brand to make the top ten. however, tesla's model fell off the recommended list because of below average reliability. that pressured the shares which tumbled more than 6%. states spend billions of dollars every year trying to attract business and jobs. a new study says most of that money may well be misspent and is not going to the real job creators. scott cohn joins from us san jose with the story. >> hi, tyler. we hear this all the time especially during campaign
season. the big job creators are small businesses, companies with 100 employees or less. but it certainly seems like states are always giving tax breaks and subsidies to the big companies to set up shop there. well, there are now some hard numbers to tell us just what is going on. the nonpartisan watchdog group good jobs first examined more than 4200 state assistance awards supposed to be open to byes of all sizes. we're talking about more than $3 billion worth of subsidies in 14 states. on average, 90% of that money went to big firms. in some cases it's even higher. in indiana, 96% of the hoosier economic development tax credits awarded over the last four years went to big businesses. same number for personal property tax exemptions in nevada. even for the most equitable program in wisconsin, 80% of the money went to big firms. one small business group says it is stunned by the findings but not surprised. sue and tiler.
>> scott, so does the study make any suggestions how toge change things? >> well, the study suggests that this money should be better focused on areas where it's going to be making a difference. with small businesses in particular, expanding their access to credit and capital which still is curtailed even now after the great recession. that, they say, would be more effective. >> scott, is there any rationale for the states devoting so much money to big business? is there an argument to be made? >> yeah, we spoke to a site selection consultant who is at the heart of all these deals and the competition to get a plant to move to this state or that. and he points out that these subsidies ultimately benefit everybody. it's not a case of states giving checks to these companies. there's often infrastructure improvements, workforce development that benefits the entire area. and it is a global economy. there's global competition so it's not just states competing against states. states are competing against
other countries and sometimes at least according to this consultant, those can make a difference as far as the cost advantage is concerned into all right. scott cohn, thanks, good to see you. industrials have been beaten down and battered this year but there are some areas within the group that are doing better than others. so morgan brennan digs into the sector and finds potential opportunities for investors. >> reporter: industrial stocks have slumped thanks not only to the collapse of the commodity complex, but because of emerging market exposure, as well. take caterpillar. the mining equipment maker is down more than 20% this year. as equipment demand adds waned partly due to economic weakness in china and brazil. emerging marks represent about a third of the company's revenue and investors will be watching closely when it reports earnings later this week. and it isn't the only one. analysts are looking to hear how companies plan to navigate the global economic environment heading into 2016. >> we'd expect 20 see some
additional modification to near term expectations. and even beyond the third quarter going into fourth quarter where many diversified industrials provide their 2016 outlooks. we expect to hear more details about how these companies are planning to change their near term strategies, either to mitigate or possibly even take advantage of the slower global growth environment we're in. >> there has been a bright spot. aerospace and spdefense. the industry group is down less than 1% for year, outperforming both the overall sector and the s&p 537 defense stocks have been safe havens. helped by multiyear backlogs, increasing international sales and buyback activity. shares of lockheed martin, rath theon, and general dynamics are all in the green for 2015. in the short term uncertainty around the fiscal 2016 defense budget in the u.s. could be a headwind. many analysts remain bullish on the group. the same can be said of aerospace.
>> they company exposed to the if you will, le ge, united technologies, honeywell, they've all seen a good results flow through their aviation segments and we expect that to continue as aviation, are the aviation business still appears to be quite strong. >> from the biggest losers this year have been transportses with transportation average down 11%. historically, many stocks do tend to outperform in the final three months of the year. benefits from the peak holiday season. according to the data firm ken show, dating back to '95, jb hunt and union pacific have both traded higher 90% of the time. each hauling it outsized gains on average have been better than the broader market. i'm morgan brennan. >> the casual dining chain chipotle reports earnings after the bell today. that is where we begin tonight's market focus. mixed results as the company continues see slower same store sales. it an raised its target for
opening new restaurants from 190 to 205 stores to 215 to 225 next year. shares of the eatery down almost 2% during regular trading to finish at 705.63 and took another salsa dip after the bell. >> yum brnds known for kfc and pizza hut brands announcing it will spin off its china business. the move comes after a food safety scandal last summer as well as slowing sales and more competition locally over in china. the news senten yum shares up just shy of 2% to 73.06. and the physicians services supply am surge offered to buy medical staffing company team health for more than $5 billion. this comes after the two companies met last month to discuss a merger, no deal was reached at that time. shares of team health up almost 20% to $62.59 am ser fell to 74.88. >> motorcycle maker
harley-davidson reported third quarter earnings and the street did not respond well. it the cut shipment guidance for the rest of the year as it continues to lose market share in the u.s. shares falling nearly 14% to 48.25. defense contractor lockheed martin cited strong sales in its arrow naught ticks unite which lifted overall revenue. the company though did see a drop in profit for the quarter. shares of lockheed down slightly to 208.73. brinker international owner of chains such ascallyes showed aid decline in foot traffic in restaurants and cut its revenue growth forecast for the year. shares of brinker down over 7% to 47.67 to end the day. late yesterday, united continental named its general council bret hart acting ceo. the move comes as its current ceo oscar munoz recover from i heart attack suffered last week. does this temporary replacement settle questions about the company's next steps? bill george former ceo of
medtronic now at harvard business school joins us to discuss. he's also on the board of goldman sachs and exxon. bill, forgive me for asking a somewhat long question but take me inside the board here. are you moral concerned about the delay produced by united in appointing this new interim ceo, we first got news of mr. munoz's heart attack on thursday and this didn't come till last month night or are you more troebled by the speed which the board moved to appoint him in the first place after the former ceo was ousted after a scandal? >> i'm concerned about the latter. that they moved too quickly. let me just say, this he didn't have a lot of information on thursday or even on friday about the severity of mr. munoz's heart attack and i'm quite familiar with this area. i have a lot of empathy for what
they went through. so they moved on monday. i'll cut them a lot of slack for na. let's go all the way back to jeff smisek's termination. i don't think they had a success plans in place. why not?wh where was the short-term succession? every board i've served on has a clear plan and a long-term plan and they didn't have one in place. and frankly, if they didn't have anyone inside, i would rather have seen them appointed a board member as interim ceo, somebody like henry myer could have stepped into that role where they conduct a search. mr. munoz got off to a good started. i would rather see an airline veteran take this role. this airline is a mess and needs real experience and expertise to put it back on track. >> what i wasacoing to say is how much of what we're seeing or not seeing from united is because of the other issues that are going on with the airline? >> well, are they've got a lot of issues going on. i can tell you, it's just not
well organized. i don't know why they paid smisek almost $20 million to go away after he did an appropriate deal with the port authority of new york. the same person hob had gotten in trouble over the bridgegate crisis. on the gw bridge. i think they've got to sharpen up right now and they need to conduct a very good external search and find somebody from the industry that really knows this business. bret hart is clearly an interim. but they need somebody that operationally, this is an operational mess. a sat in an airplane the lower day for an lawyer and no one said why we were being delayed. they said paperwork. >> mr. munoz came from the transportation industry from the railroad business. though he had been on the board here. what you seem to be driving at is the need for boards to be prepared for any contingency both short term and long-term and to have someone presumably in house whom they can go to on a moment's notice at least as an
interim. >> absolutely. you should have one of your top senior people ready to go as an interim, maybe even as a permanent for three to five years until you get the right ceo. look, i think their management is going to need a lot of turnover. someone's going to have to do a can complete restructuring of united. these are no longer the friendly skies of united. >> thank you very much, big george with harvard business school. >> thanks, tyler. coming up, the complex journey a flu shot takes starts on a farm and ends up in your arm. it's the second part of our series on the big business of the flu.
the big business of preventing the flu getting the shots a relatively simple process. you have to see a health care provider. but making the vaccine is a very different story. in the second part of our series, meg terrell shows us how the flu shot gets from a chicken farm to a manufacturing plant to your arm. >> reporter: flu vaccination rates are on the rise. and manufacturers are distributing a record number of doses in the u.s. this year. up to 179 million. wonder what goes into your shot? the manufacturing process is a six-month mad dash. sometimes through multiple countries. and a chicken egg all to be ready before flu season begins. it's so complicated because the strains of flu virus in circulation can change every season. >> every year, the world has to reassess are those strains in the vaccine the right strains or not. >> companies can't start the work till february when the world health organization settles on the strains to be included based on what's circulating around the globe.
they designate lead to for the trivale trivalent. public health agencies provide seed strainses to the manufacturers. next enter the chicken egg or hundreds of thousands of themselves. >> the egg is fully sterile, totally equipped. all you need to do it put it at the right temperature and put the virus into it. >> glaxo explains they're not just any chicken eggs but birds raced on high biosecurity farms to ensure the safety of the flocks. the biggest threat, bird flu. manufacturers say this year's bird flud outbreak didn't harm it the flocks. once the eggs arrive they're collected for infection and to ensure they contain embryos, key to the process. then power washed, injected are virus and left to incubate for four to five days while the virus replicates. it is extracts, killed and shipped from their plants in germany or canada to their
manufacturing facility in pennsylvania to be outfitted into syringes. every dose comes marked with a two-dimensional barcode so it can be tracked every step of the way when it leaves this facility to when 2 gets to your health care provider's office. containing lot number and expiration date which can be scanned into their electronic medical record. manufacturers have till early summer to finish making the vaccine, perform quality control and secure fda clearance. a risk losing business to a competitor. >> it's very, very important to be very fast in the manufacturing because the for instance in the u.s., the retailers want to have the flu vaccine very early in the season in august. and they negotiate access to doses during the early summer and if you don't have your manufacturing and you don't have the doses, they don't commit to you. they commit to your competitor. >> gsk's biggest competitor
sanofi pasture plans to distribute 65 million doses. protein sciences formulates a vook seen without using eggs at all, an option for those with egg allergies. in the rush to be ready for flu season, every day counts. nor "nightly business report," i'm meg terrell. >> and that does it for "nightly business report" for tonight. i'm sue herara. thanks for watching. >> i'm tyler mathison. have a great even g, everybody. and we'll see you back here tomorrow night.
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