tv Nightly Business Report PBS April 25, 2014 6:30pm-7:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by thestreet.com, featuring stephanie link who shares her investment strategy and stock picks, and the multi million dollar portfolio she manages with jim cramer, you can learn more are at the thestreet.com. and on edge, the dow closes with a triple digit loss as tensions over ukraine rise and earnings disappoint. what should investors expect in the days and weeks ahead. and shares drop hard as investors take a closer look at the earnings outcome. what wall street is telling the ceo, but is he listening? and stock in reverse, ford's profits drop, so does its stock,
what is behind this and can it get the engine revving again? all this and more. good evening, everyone, and welcome, this was not the way anyone really wanted to end the week after a generally positive earnings season so far, traders pull back hard today. after big names like ford motors, visa and amazon.com released earnings or outlooks that sent investors heading to the exits. also, the strike between russia and the ukraine as the u.s. warned of even tougher sanctions against russia, meanwhile, s&p downgraded russia's grading one notch above status. and stocks were not pretty and were enough to wipe out all of the week's gains, nasdaq fell 1120, the s&p lost 15.
now, with a closer look at how all the saber rattling out of russia is impacting markets in and around the globe and what else is giving the traders the jitters. >> stock markets around the world again came to the conclusion that geo-political risks matter. ukraine and russia is a big driver behind friday's selloff. and even though ukraine is thousands of miles away and has little to do with the u.s. economy it still matters, armed conflict anywhere around the world has a way of sending investors to the sidelines. >> i worry about if russia spills over to europe. and europe happens to be the second largest global economy in the world. so if the tension there spreads into europe that will affect the u.s. companies that sell their good goods and services there and i believe it is reason to be concerned and we're watching it very, very closely. >> but worries about tensions between ukraine and russia are only part of the story, another
big driver for the stock market is still coming by the earning season, just about half of the companies in the s&p 500 have reported their numbers and the results have been generally positive. over two thirds of those companies have beaten wall street expectations. remember, though, that those expectations had already been set very low this time around. it will be another big week for earnings next week among the companies slated to report, social networking company twitter, drug maker merck, as well as exxon mobil. others say that earnings and sells still matter. >> we're paying attention not just to the earnings that are being reported. there can be a lot of one-time issues that go into that, but also what the guidance is looking like, what the companies are saying about their underlying business. so if we can find companies that are reporting good numbers and still have good expectations for the rest of the year that is a
positive. and we want to focus on those areas. >> beyond just this next week you will still have companies like disney, whole foods and tesla that will report later on in the season. as well as many of the major retail companies like macy's and walmart. so it is too early to just sit back and watch just yet, investors are watching global markets and of course that earnings picture. for nightly business report i'm dominic chu. well, those global estimates are being watched closely. barbara marson has more. >> what if there are new sanctions, how significant would that be? >> i think it could be significant. i'm surprised that we with haven't seen more of a reaction. we have seen a little bit of stock market reaction and the russian stock market and the
ruble have reacted. but usually things like risky bonds, assets, sometimes you see reaction in things like oil. we haven't seen much reaction yet but i would say that is ahead of us. >> gold up a bit today, bonds came down, which indicates a little flight from risk. >> that could be. >> so taking that one off the table for now, earnings this quarter have been roughly flat. >> yes. >> up a little bit. there is an awful lot riding on better earnings in the current quarter and going forward, isn't there. >> i would agree, you know, we had the last couple of years -- last year the earnings were up 5% year over year, last year all the market appreciation came from multiple expansions. we can't really expect to get that this year so we have been hoping for a stronger earnings period and it really doesn't look like we're going to get it it if -- if this year falls on the quarter -- the market going forward is about 15.2 times
earnings, and that is a mediocre value if you're at full earnings, we hoped to see an,er rotation this year, but i'm not sure. >> a lot of issues, the economy, and global developments but you still have a couple of stocks that you like, i am sure our viewers want to hear all about them. haliburton is at the top, stock doing very well this time of year. is it worth it to put fresh money -- >> haliburton is selling at a chief valuation, which of course is what we want to invest in. they are a leader in pumping, solid demand for the services in the next three or four years. i think it closed today about $62 a share. this year will earn about $4 a share, but within the next few years that can be 657. if we put a 13 or 14% number on
it, there is strong growth in the company. >> you like their stuff, you like their stock, apple. tell me this, though, barbara, i don't want you to give me the case for apple, but tell me, should i buy it before the split or after? >> i would buy it now, yesterday the stock was up 8% on two and a half times the normal trading value and so i think you're seeing a reset. and then today, it held onto all of that and still closed a little bit. very cheap stock. do you have a target price on apple? >> i, you know, i think that once we get -- it is selling about 12 times earnings, nine times without the cash. we'll see suspend increased multiple. i think we'll see the old highs. >> real quickly, aig, you like aig and this is a stock that has been flat for the year around the $50 range, why do you like it? >> yes, again, a very inexpensive stock which can grow dramatically over the next few
years. management isñr very motivated, very sophisticated company with good growth drivers ahead, company is selling about 75% of book value which is about $6 as of the end of the year. if that goes to about $80 in the next two years and go to a 1.2 multiple -- i think you can have good stock, i own all three of these. good to have you on the program. barbara marson, portfolio manager. and shares of ford zlslammi on the brakes today falling 3% after profits shifted. and the automaker warned of a leaner year ahead. phil lebeau has more. >> reporter: an interesting day for ford as the company fell shy of investments by 6%, there were a number of one-time charges that brought the earnings down about $1 million, some are
looking at the overall run rating in terms of the auto business over the next three quarters and they're pretty optimistic about where ford stands. but it is the mix, in other words, how many trucks versus cars that ford was selling that got a little attention. that mix was negative, and analysts wonder if ford can reverse that by this year. the cfo of ford said that will definitely happen. >> we did have mixed results, relating to the profit as we move towards new models. for the full year we believe it will be offset by the product mix or the types of products we sell. so i think for the full year it won't be an issue. >> there were a number of reporters, about how long the ceo mallaly will stay at the automaker. we report there were reports that the board of ford motor company will announce a succession plan in the next 30
days and that mullaly will be leaving ford at the end of the year. ford's losses were nothing compared to the sell off in amazon.com today. the stock got crushed down nearly 10%, making it the biggest decliner in the s&p 500. and that is with the posting of quarterly earnings that were in line with expectations as we told you last night. josh lipton explains what is troubling investors. >> this is the original sign. from the start, jeff base's strategies for amazon and the company rein vest be in the business. it is a business strategy that investors haveñr embraced becau they believe in his vision, building an e-commerce power house that also offers almost everything from tablets to cloud comput computers. some are losing patience after
amazon delivered strong sales but a disappointing out look. the market wants profitability sooner, getting what it wants. amazon's first quarter revenue jumped 23% to nearly $20 billion driven by new customers and new products. but amazon intends to keep spending a lot of money on hardware such as tablets and set top boxes as well as video content and delivery services, all the spending is having an impact on the bottom line. amazon projects a loss of $455 million. stock dropped hard in today's trade. suffering its worst day in months. it is now one of the worst performers this year in the s&p 500, despite big gains in 2013. bulls say amazon remains an important point where the company will enjoy both revenue
acceleration and market expansion. >> and the market waxes and wanes on the need for desire. my guess is that once again somewhere later on this year or maybe even as far away as next year they will have more leeway in the market for profitability. >> amazon shareholders are having a rough 2014, and to get back on track amazon needs to prove that all that investment will lead to big growth and more market gains, josh lipton, "nightly business report," silicon valley. and more on the analysis of amazon, global director of consumer equity search, r.j., great to see you again. what if anything is the market telling jeff bazos or saying about amazon, and has it got the company right or not? >> yeah, i think that the market right now is clearly fixated on the profitability number. and really, i think it has lost
a lot of patience, the company has been growing explosively the last couple of years. and there always was this promise of profitability behind it. with the second quarter guidance looking for a loss between $55 million and effectively $55 million that puts a dent as to whether or not the company can be profitable. but if you look at the company which generated operating profits of 4.7% that shows what the company can be. in my mind there is no reason why the success the companies had in the u.s. business in north america can't happen internationally. there is a lot of preparation that needs to be built up before the demand is satisfied. and i believe that is what we'll see in years to come. >> yeah, r.j., you make a good point, amazon has amazing products, hundreds of thousands of people are yoursing the service every single day. but having said that do you think that jeff bazos has to
change something he is doing here? >> yeah, i think he does a little bit but i think we also say that this past quarter. the company's signal, the increase in prime memberships, the company raised the annual prime membership fee from $79 to $99, i think the company is focused more on profitability across the entire portfolio. but as we look at not only as a prime but amazon web services, the things that can drive profitability are taking hold. locking in as many customers and you can can, now have you have them locked in and giving them a lot less reason to shop anywhere else, such as with amazon dash, i think you will see the company marketize the acquisitions and build a market expansion story in what has been -- >> the big selloff in the stock
today, r.j. would you buy it at this price? >> i think it has support at $300, right now to me it is quite a bit of a discount to my $400 fair value estimate. that amount assumes that only mid-teen revenue growth but also operating margins in the next single digit range over the next five years, it doesn't take a lot that the company is generating, not a lot of margin to generate a free cash story. i think it has been overlooked. i like it right now. >> i wanted to follow up. in your report you said fair value 400, which you just said buy it at $240, sell it at $620. talk us through a little bit on the 620 sell number. >> so the way morning star looking at stocks, we base it on the intrinsic value, my fair value at amazon is $400, and based on your comfort, is what
kind of level you feel comfortable. at $300 i feel pretty safe, it is a four-star name, in terms of buying, $240 would be the trigger point for a strong buy for a name like this where you think the worse case scenario has been priced. we feel comfortable this is the absolute right time. i think $300 for most investors, it is the right time to get in. >> all right, thank you very much, r.j., analyst, with morningstar. and home prices rising, many people are not buying, and focusing instead on their own houses and sending big money to change things up.
the initial public stock offering of alibaba, the internet behemoth known as china's google and internet combined could be the biggest ever, wall street says the interest in owning the piece of the e-commerce site is so high bankers say it could push the amount of money raised to more than $20 billion, possibly eclipsing the record of $22 billion in the agricultural bank of china's ipo back in 2010. and colgate reporting a 16% drop in profits, we begin there, the consumer products maker was forced to take a charge because of the fall in venezuela's currency, latin america is colgate's biggest market in terms of sales, shares fell slightly to $66.24. burger king serving up a higher than estimated profit. new restaurant openings overseas
and cost-cutting efforts helped the chain to offset weak sales in the u.s. shares rose to $26.35. and netflix signed a deal with three cable companies to bring its services to set top boxes, it will be integrated to services for small operators, you still have to subscribe to netflix but those companies won't need a streaming device to watch netflix, shares closed at $22 and change. and kellogg announcing plans for its dividends, it named ceo john bryant as the new chairman, replacing former ceo james gineffs who will remain on the board as executive director, we'll find out more about the food company next week when it is expected to report its earnings, shares were up a fraction to $66.71. the f corporation saw
earnings climb 10%, they saw double digit sales growth in the outdoor unit. no surprise, north face is one of their big brands, so is nautica, shares were up to 61.41, whirl pool's numbers were higher, companies in latin america and asia offset modest increases in latin america and northern europe. they blamed brutal weather for keeping customers out of show rooms, shares up a fraction today to $155.42. and a real setback in the housing recovery, you can blame it on rising prices, the reports fell to the lowest level in 14 years as homeowners cut back on re-financing and applications for new loans from potential home buyers. and the head of freddie mac
warns that a senate bill aimed at shutting down the government-run morning financeier and the sister company, fannie mae could pose a risk to the stability market. they alerted the market that is giving them a private lending role before the companies are eventually phased out would undermine the important roles that fanny and freddy play in guaranteeing 60% of the nation's home loans. now if you have been looking for buy or down size to a smaller home you will probably find there is not much out there on the market. so no wonder many home buyers are thinking of remodelling their old home instead of buying a new one. diana oleg has more on the push to renovate. >> reporter: the riley family is re-thinking the way they live. with one child already in college and another leaving in the fall, you might think they would be looking to down size. but it is just the opposite, because they expect the kids to
move back in. >> for them to come back here, they're going to spend thousands of dollars a month on rent. so the idea was to build a suite downstairs for them to have their own space when they came back home. and we had our own space on a separate floor. >> like so many others frustrated by higher home prices and limited supply, the rileys are choosing to renovate. >> the big trend is that people are re-doing their house instead of moving. we have seen a big spike in business, especially in the first quarter. there seems to be a good amount of pent-up energy on the remodel side. >> the remodelling has been surging in the past year as people regain both home equity and confidence in the housing market. they are still, however, slightly gun shy. >> you're still very nervous about over-building your neighborhood. putting more money in your house than you can get back if you were going to sell it. so we're seeing, for example, not $125,000 kitchen remodels
but 30, 40,000 kitchen remodels. >> architectures report kitchen and bath models leading the surge, only first-time buyers were weaker as prices of home re redoes rose. >> there has been a labor shortage in the market, builders are aware, not just in flooring but in all trades. so they understand that we have to bump up our labor rates to get all the products installed. >> remodelling did slow, so contractors are reporting a surge for the pent-up demand in the summer and spring, but then it should level off in the fall as the housing loses momentum. and coming up, instagram is not yet turning a profit for its owner, facebook, but that is not stopping some users from making money. a lot of it. that story is next.
the usual to unionize is spreading at jetblue. more than 10,000 flight attendants are lobbying to hold the vote on whether or not to unionize, they are working with the transport worker's union of america after a similar drive last year fell short of the necessary number of yes to force a vote. earlier the pilots voted on the union. and coming up, the influence on how a lot of social media customers are actually getting paid by brands to post photos and comments on instagram touting their products and
services. and it turns out being in insta-famous can be a pretty good living. >> six years ago if you said your favorite brands in stores, they're going to choose you to be the face of an event, or for an advertisement in a magazine, i would be like okay, sure. >> once my following kind of passed 400,000 it was a little crazy, because they wanted to pay me good money to mention them and to do what i do naturally. >> justin livingston and daniel burnstein make it their full-time jobs on social media. a job that can play between 65,000 and $255,000 per year. >> when you have a person with the followers, it is a no-brainer. >> once the idea is set with the
client then we go higher out of this pool of instagramers, in which they're taking photos and talking about the campaign in the captions. >> it is cheaper, it is social. but is it sneaky? >> when they do giveaways, those are clearly advertising. >> i think that readers are not naive. they know that for bloggers to find success -- >> they're saying they're excited to be working with the client. >> and that is enough. >> that is enough, sure. other times can you add a hash tag sponsored or commissions. >> would it bother you to know that some people are being paid or compensated in some way to post a picture on instagram wearing a pair of nikes? >> that is not what they're for. >> i wish i could do that. >> they say it has to feel authentic. >> i stay really true to myself, i wouldn't just work with a brand because they want to pay
me. >> i don't want to feel like i'm shucking some product like snuggy, my reader is going to be like, wait a second. >> anyone, it seems but instagram is making money. for "nightly business report," i'm courtney reagan in new york. let's take a selfie here, susie, i don't know how to do this. say good night, susie. >> good night, deal. >> i'm not susie gharib, i'm tyler mathisen, thank you for joining us.
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