Transcripts For KQED Nightly Business Report 20170725

Alphabet. The stock which you may own in a fund or retirement account or individually initially fell by more than 3 when the Company Reported profits 28 lower than a year ago. That was largely because the company booked a 2. 7 billion fine from european regulators. Ongoing Regulatory Risk is apparently what spooked investors this afternoon. Overall, the business is clicking right along. Net revenue rose 21 to 26 billion. Clicks on ads jumped 52 compared with a year ago. Cloud revenue up smartly as well. Josh lipton has our report on alphabet, the Worlds Largest advertising company. Reporter 18. 4 billion, that was a big number in alphabets latest earning report, refers to google property revenue, revenue generated from search and youtube. Raymond james says its critical because thats the highest margin businesses for google and the revenue jumped 20 year over year. Kessler notes there could have been some disappointment in the report specifically with traffic acquisition costs, thats what google pays its partners for mobile traffic. When that rises, it can pressure Overall Company margins. For nightly busin im josh lipton in san francisco. Lets turn to a. B. Mendez for more on googles parent companys earnings and the beat there and sees ahead for the company. Hes Portfolio Manager at frost investment advisers. He does own the stock. Welcome back. Its nice to have you here. Thanks, sue, good to be with you. Youve held this stock for quite a long time and you intend to continue to do so, correct . Correct. We bought google shares, first bought them a decade ago in june of 2007. Few years after the 2004 ipo, the company is consistently outperformed the broader tech base since then and in our view is on the cutting edge of innovation especially around Artificial Intelligence and Machine Learning and also kind of coming into its own as an Enterprise Cloud vendor. Are there any nits to pick in this report other than the headline number which overall the profits were down because of the big european fine . One thing ive seen some people point to is not the number of ad clicks they got, but the price per ad click which was apparently a little lower than some expected. Yes, tyler. Its a good point. The total count of the clicks is growing extremely well, if anything, you know, positive inflecti inflection but the postp cost p click is different as they come from mobile channels. Thats a lower cost per click. Where do you see the biggest potential for this company . The company is in early innings in terms of its international business. The Digital Media business, especially the Cloud Business where its sort of in its infancy where microsofts azure cloud was two, three years ago. Specifically look the at their capx priorities, spending a lolot of money on the cloud side. Artificial intelligence, i. P. , where they have leadership, could have very valuable application in that area. You like the stock, in the high 900s something a share. Where do you see it in two, three years . 99 l. Its hard to predict with precision. In the decade we owned it, its performed well ahead of the Broader Market and even the broader technology space. Looking at a valuation basis, its currently trading at 20, 21 times price to free cash flow, compare that to facebook or amazon, 33 times. Coca cola traded 27 times free cash flow. Relative, we view it as very attractive. Well leave it there. Thanks so much. Thank withdrew. Good to see you, a. B. Mendez with frost investment advisers. On wall street, the hnasdaq began the heavy earnings week. The Dow Jones Industrial average dropped 66 to 21,513. Nasdaq up 23 to an alltime high. The s p 500 dipped. Domestic crude was higher after saudi arabia pledged to lower crude exports and nigeria plans to limit its production. It was the first rise for oil in three sessions. Relatively low oil prices have been good for the global economy. Thats according to the International Monetary fund which said the World Economy is strengthening. But the organization cut its forecast for u. S. Economic growth reflecting doubts about president trumps ability to deliver on his planned tax cuts and infrastructure spending. The organization now calls for the economy to grow at a little bit more than 2 both this year, and next. Home prices hit a record even as sales stumbled. National association of realtors say sales of existing homes retreated 1. 8 in june. Its not for a lack of demand, its supply. There are so few homes for sale that what is listed is going fast and at a high price. The median house price rose to a record of 263,000 last month. In some cases the houses arent going, though, to the highest bidder but the buyer who can pay all cash. Diana olick tells us why cash is king. Reporter t in the dallas suburb sold in less than a week. Not surprising to anyone whos out shopping for a home today. Every house kind of goes pretty quick, you know, its not on the market very well. Reporter in fact, laura barnett, the agent showing the house, put this similar home on the market three weeks ago and got 22 offers. But she did not take the top one. With todays prices rising so fast, she took the cash offer because todays appraisals are not keeping up. Yes, they are coming in low. Theyre putting a Glass Ceiling on our market. Reporter barnett says sellers dont want to risk a deal falling through due to financing. Even if they have to take a little less money. The median price of a home sold in june hit a new high according to the realtors but days on market dropped dramatically, with homes going so quickly appraisers cant keep up with the comparable sale prices. They are being instructed that unless they have actual comp from past sales, that they cannot go on just the fact that theyve been given multiple offers. They have to have comps to support it. Reporter during the last housing boom, appraisers did just the opposite. Often inflating prices because lenders wanted the deal done. And we all know what happened next. Lenders today are far more leery of home values and would rather err on the side of caution. That hits young mortgage dependent buyers hardest. The cash buyers always pushes out the firsttime buyers who are more reliant on low down payment mortgages and from sellers perspective, they see all these different offerings and say, well, if we go with cash, we solve much of the problem. Reporter the problem for sellers, perhaps, but not for younger shoppers who long to be homeowners but are short on cash. For nightly business report, im diana olick in washington. So are cash deals the sign that the Housing Market could be reaching a top . Senior economist at zillow joins us now to discuss. You know, aaron, die wrap thane te decade or so ago, the appraisals were sort of outstripping the real value. Here it may be the opposite. Are these prices rising so fast that the appraisers cant keep up with them . Theyre afraid. Is that a sign of a top . So, particularly in fastmoving markets like dallas, you know, where home values are rising, 3 in a quarter, to take some time for those appraisals to hit kind of the transaction records. So, you know, certainly, whats transacting today could be a little bit ahead of what appraisers are seeing. But do you see that as the mark topping out or not yet . Its very different. When we talk about the market topping out, really people are worried about a repeat of what we saw a decade ago. Kind of a drop in home values. And remember, that was driven by loose lending standards which cause people to overpay and then the markets drop. We dont have loose lending standards today. Lending standards are still kind of really prudent so its impossible for the market to drop like it did a decade ago. And this is evidence, i guess you would say, here the case in dallas, it is evidence that the lending standards are stricter. The appraisers are restraining themselves from just sort of green lighting a value based on the number of offers that are there. Thats correct. Its frustrating, particularly for those firsttime and entrylevel buyers who just cant borrow as much as they would like. And it benefits people who have the cash to come to the table. That said, it does almost function like a natural break on excess consumption and overtaking of risk. So, in some ways its frustrating for a lot of people, but it does prevent us from repeating the mistakes we made a decade ago. It does, but if youre selling your house, and you have multiple offers above your asking price, which essenticerts s and in dallas and other places, its almost as though the appraiser is functioning is skewing the market. In other words, the market is not regulating itself. Well, the market is the appraisers are slowing down the pace of Market Growth and, you know, their job really is to provide this independent assessment of what a home is worth. Theyre not paid to make an appraisal in the interest of the seller, nor the buyer, so, you know, yes, their job is to put the brakes on excess. What are the hottest markets in the country right now and what are the major metros that arent . Quickly. So, certainly the hottest markets are in the northwest and the southeast. Places like seattle and portland. The southeast, you have dallas and orlando and nashville. Its important to remember, right now, kind of the labor market particularly in those communities is as strong as its ever been. At the same time, Interest Rates are at historic lows. All right, aaron, thanks very on health care w. Tomorrow, but its not clear whats going to happen. Malena health, an insurer that specializes in the oba obamacar plans to cut 10 of its workforce as first reported by reuters. The companys decision came after it recently repo a quarterly loss related to the Affordable Care act exchanges. Senate Majority Leader Mitch Mcconnell said the senate will vote tomorrow on whether to open debate on a Health Care Bill. He added that the only way the senate can actually consider ways to overhaul the Current Health care law is by opening debate in chamber. And the president is applying pressure to members of his own party. Every member of the senate, i say this, the American People have waited long enough. Theres been enough talk and no action. Now is the time for action. We are here to solve problems for the people. Obamacare has broken our health care system. Its broken. Its collapsing. Its gone. John harwood joins us, hes covering the action in washington. So, john, why is tomorrows vote so important for the republicans, and what do you think is going to happen . Reporter well, if they cant get 50 votes tomorrow with a tie being broken by Vice President mike pence to take up the Health Care Bill, that means the debate on the effort that republicans have launched at the beginning of this year that got through the house to write a republicanonly Health Care Bill will have failed. And that point, they will have to turn to other options Mitch Mcconnell has suggested, working on democrats with a bill to stabilize the marketplaces. It does not look good. A strategist familiar with mcconnells thinking told me today they do not expect the legislation to ultimately pass, but whether they can get 50 to begin the debate is something that were just going to have to see when they lay the votes on the table tomorrow. Part of mcconnells thinking has been to make people take a stand even if hes going to lose so that everyone will have been forced to stake out a position and then they can move on if need be. I assume john mccain will not be there to vote, john. Reporter assume not, though theres discussion by john cornyn, the Senate Republican whip, of somehow getting john mccain flown back to washington to vote. Now, if mccain shows up, you would think that would mean that they do have the votes because its hard to imagine his colleagues imposing on him in the wake of that surgery to return to washington if they dont have the votes. What about this democrat plan called the better deal that was announced today . Whats in it, what makes it better . Reporter well, democrats have been facing pressure, tyler, for seemingly only emphasizing their opposition to trump rather than an affirmative agenda, so what they did was, the democrat caucuses in the house and senate retreated. They came up with a plan and what they came out with today was some familiar stuff and some new stuff. The familiar was a call for big infrastructure plan. They say will create jobs. Calls for reducing Medicare Prescription Drug prices by letting the federal government negotiate with drug companies. The new point of emphasis for democrats was a newly hawkish approach to reviewing corporate mergers. Saying that one of the problems that consumers face is lack of competition which drives up prices and reduces their opportunities. Right. John, on that note, i know its going to be another busy day tomorrow. Well see you then. John harwood in washington. Arconic, the American Company that sold the panels at the certainnter of the london fire a month or so ago has long awaited positive news. It reported better than expected news and also raised its fullyear outlook. Despite distancing itself from the fire, shareholders still have some concerns. And that sent the stock lower. Morgan brennan has more. Reporter it was a quarter packed with drama. Yet arcanic managed to beat wall streets expectations. Analysts largely welcomed the results especially since the stock recently whip swsawed. R reported a strong second especially concerning the noise surrounding the companys construction and Aerospace Engine businesses. However, we dont think the fu range is enough to get investors excited. Reporter arcanic which was spun out aftof aluminum giant l fall has come under scrutiny for grenfell tower. Speaking to ing ting to journa hes srngs called the fire, quote, a terrible strategy. Stressed arcanic was not involved in the design or installation of the broader system used. We believe weve been compliant in the sale of our product. Reporter nonetheless, arcanic recently halted sales for the panels for a highrise application and one shareholder has been filed. Its the latest incident to impact the maker of plane and auto parts which was also blamed for the temporary grounding of boeings hotly anticipated 737 max just days before the jetliners debut. As a Company Coming out as a new brand, its definitely had some challenges here in a short life span of six to nine months. Reporter including finding a new ceo. After an abrupt departure in the fight with elliott management. The next catalyst for the stock, whoever they bring in, able to puc plan thats aerospace focused, thats good for us over the long term. Reporter shares of arcanic have largely regained ground despite closing in the red today. For nightly business report,. The health site, webmd, is going private and thats where we begin tonights market focus. The private equity firm, kkr, is buying the online Information Company for nearly 3 billion. Under the deal, kkr will fold webmd into its Internet Brands unit which operates several other healthfocused websites. Webmds shares rose nearly 20 to 6610. Rising sales of transformer Action Figures and nurf toys helped hasbro top profits and revenue estimates. The gains were enough to offset weaker demand for products like easybake ovens and playschool toys. Shares fall 9 to 105 even. The retailer Hibbett Sports said challenging sale trends would negatively impact its results and as a result, the Company Expects samestore sales for the Second Quarter to fall 10 . Hibbett also sees that weakness weighing on its gross margin. Shares plunged 33 to 13. 10. And calmaine foods posted a bigger than expected quarterly loss that missed estimates by a wide margin. Lower selling prices and competition from egg alternative products hurt its results. Revenue also came in light. Calmaine shows off 6 to 34. 85. Strong sales at Stanley Black and decker helped sales and pr rise more than wall street expected. Those results prompted the company to raise its Earnings Guidance for the full year. Stanley says the integration of craftsman, which it bought from sears, is progresses and expects 100 million a year in revenue initially from the craftsman brand. Shares off 2 . The Oil Services Giant halliburton reported a stronger than expected rise in revenue. As the company saw higher demand for pumping and well Construction Services in the u. S. Halliburton also swung to a profit that beat expectations but the company warned that growth in u. S. Oil rigs is showing signs of plateauing. And that sent shares down 4 to 42. 51. The apparel retailer vp corp said Strong Demand online as well as internationally helped drive sales higher. The maker of the north face and wrangler jeans also reported profit that Beat Estimates by a penny. Shares were up 23 cents to 58. 888. And boeing said it expects solid demand for Aircraft Personnel over the next two decades. Aerospace and defense contractor said over the next 20 years it sees demand for more than 1 million pilots and technicians to support the worlds growing commercial airplane fleet. Boeing shares up a tick to 212. 18. Shares of amazon rose today after a wall street analyst said the online retailer will one day be the most valuable company on the planet. A note to clients, the analyst wrote he says few competitive threats to its core retail and marketplace businesses. The stock is now trading firmly above 1,000 a share. It still trails apple, though, in market cap by a wide margin. Now the amazon juggernaut may be setting its sights on a new target to disrupt. Bob pisani takes a look. Reporter its not just retailers. Now theres a broader concern, amazon has the potential to disrupt middlemen in general. Heres the issue. If you dont make the object youre selling, or you dont have some sort of intellectual property, then youre just a middleman. And youre increasingly more vulnerable. So, amazon is taking aim at middlemen in the whole industrial space and beyond. In 2005, they bought a business called smallparts. Com. In 2020, it was renamed amazon supply with the idea of supplying industrial and commercial customers. In 2015, it was rebranded again, this time its called amazon business. And its got a bigger goal, to be a supplier to the entire businesstobusiness community. Amazon b corporate buyers according to crane. And passed 1 billion in sales according to reuters. Thats big. G to impact industrial distributors like granger. They sell screws and pumps and tools and other parts for industrial america. Last week, Goldman Sachs urged investors to sell granger in a note as well as Genuine Parts Company which is a distributor of automotive Replacement Parts because of their susceptibility to price competition and lower margins particularly due to amazon. They could get more aggressive. Pulling the whole foods deal in the industrial space. Last week an analyst said, quote, we would not rule out an accusation of granger by amazon if such a deal were embraced by both parties. Amazon for its part had no comment. Bob pisani at the new york , stock exchange. Coming up, in this world of oversharing on social media, why you may want to read the fine print on a new popular app. Shares of snap, owner of popular messaging app, snapchat, hit a new low. Snap is also approaching the expiration of its socalled lockup period, means the first time it will be the first time many Company Insiders can sell shares following the ipo. Snap has another issue it is dealing with, that would be privacy. Recently its snap map has become a big worry for users. Especially teenagers who may be sharing too much. Andrea day has our story. Theres two of my friends hanging out right now. Bitmoji . Thats a friend on snapchat. You can see exactly where they are. Driving. Listening to music. Even playing tennis. The app is very addictive. Every time you open it, it marks where you are. Reporter it can also work like a breaking news feed. Letting you pan around the globe and see what people are doing right now. Where is she . Shes in sweden. Reporter hot spots show where big crowds are all snapping. Theres a protest. Reporter users are snapping it up. People are getting more comfortable sharing more and more information. Reporter and experts say it could become a powerful tool for advertisers, but does map take sharing and connectivity too far . If you opt in, snap shares your location with friends. Down to the address. Attorney michael kazins specializes in prifty. Theres the risk of real bad actors. Someone stalking and someone being able to locate someone in the real world. Reporter a concern for teenage users. Who may just download apps and not read the fine print. A lot of people often dont look at it, dont really understand sort of the scope of what theyre agreeing to. Reporter and according to him, its something businesses need to be aware of, too. Giving this much information to, you know, snapchat, itself, allows them to really target our behavior in ways that are a step up from what they would be able to do without this type of location data. Reporter if you turn it on, you can always opt out of the feature by turning it on ghost mode. Its easy to forget to turn it off and wind up being tracked. Gps tracking apps like this are all right on law enforcements radar. Creates almost a flash mob mentality. Reporter former chief Michael Downing says showing where big crowds are in realtime are a Security Risk especially after events like manchester. Soft targets are something that we are trying to defend against right now, not only on the inside of stadiums and arenas, but hardening the outside core. Where you have less control. Reporter according to snapchat, the safety of our community is very important to us. With snap map, location sharing is off by default for all users and is completely optional. Snapchatters can choose exactly what they want to share their location with, if at all, and can change the setting any time. Parents still need to be very aware of what their kids are doing. Teenagers might not be thinking too much about privacy but just connecting with friends and doing what everyone else is doing. For nightly business report, im andrea day. On that note, that is nightly for tonight, im sue herera. Thanks for joining us. Im tyler mathisen. Thanks from me as well. Have a great evening, everybody, and well see you right back here tonight this is a bbc america. Funding of this presentation is made possible by. The freemen foundation. And coal Fuller Foundation pursuing solutions for americas neglected me. Planning a vacation escape thats relaxing inviting. And exciting. Is a lot easier than you think. You can find it here in aruba. Families couples and friends can all find their escape on thean