The latest phil melissa, not surprisingly boeing will take a big hit when it comes to the q2 earnings that it reports next week lets run down the numbers the Company Announced within the last half hour it is taking a 4. 9 billion after tax charge that works out to 8. 74 a share. Thats for the Second Quarter. Essentially it comes down to the 737 max, they say it is due to concessions and considerations theyre going to be needing to make to customers, not only those they made in the Second Quarter but extending over the next couple of years revenue and pretax earnings are going to drop by 5. 6 billion in the Second Quarter or theyre going to be reduced by that much in the Second Quarter. Production costs in the Second Quarter, up an estimated 1. 7 billion, but we should point out that is accounted for over the life of the program so it is going to be extended out over many years since they have more than 4,000 737 maxes on order the assumption from boeing at this point is that the airplane returns to service in the Fourth Quarter. Now, we should point out that is a very general, vague assumption they are not saying for sure that it will happen. Theyre not putting a date out there. Theyre simply saying their assumption is it returns to service in the Fourth Quarter. In terms of production, which is what so many have focussed on it, it remains at 42 per month and the company is saying as part of this new guidance that theyve issued they still believe they can get to 57 per month at some point in 2020. In terms of guidance, melissa, remember, they pulled it after the first quarter. They said were not really sure what is going on with the max at this point, therefore were not giving guidance. Today they said they will give guidance for 2019 at some point in the future. When remains unknown melissa. At a future date is the exact wording. Phil, i mean, what were analysts expecting in terms of this charge how should we extrapolate or should we extrapolate this charge in the Second Quarter to future quarters if the 737 max remains grounded for longer, for beyond the Fourth Quarter . Well, i think most of the assumptions were roughly in this neighborhood i have not seen a definitive, hey, we are expecting this charge thats the consensus on the street i know most analysts i talked with are around this area, this 4. 9 billion after tax in terms of whether or not you can extrapolate this and say, look, they didnt deliver in the Second Quarter on the 737 max, they didnt deliver in the Third Quarter or may not dwlifr elive the Third Quarter therefore we should see the same charge, i wouldnt do that, melissa. Remember, there are certain costs in here they will be accounting for over the life of the program, and in terms of that concessions of the 4. 9 billion, thats for concessions and other considerations to customers, they make it very clear in the announcement it is not just nor the Second Quarter, while it is where the charge is being taken, it is over many years. So we may see a charge for the Third Quarter related to the max, but it may not be at the same degree we are seeing here phil, it is karen let me ask you something do you have any idea about the Purchase Price of a 737 max, what it was a year ago or six months ago even, before any of this happened, and what it is now . Right. Because this is their, you know, future for years yes, well, the book price hasnt changed, karen. They still list it and i dont know the exact amount but i do know it hasnt changed. But keep in mind, when they sell these planes they never sell them at the price thats listed there. You usually is at a great discount to the price that they listed at. So as a result, it is hard to sit there and say, well, look, theyre knocking off this amount on each of these planes. I think it depends on the customer, it depends on the size of the order, and it also depends on to a certain extent the kpus mcustomer saying, look are paying the price in some fashion, whether it is leasing other aircraft, change your our schedule, reducing the amount of flights we have, all is factored into how much the end price will be. Phil, thanks for the details. Phil lebeau with the latest on boeing shares up nearly 2 in the after hours session. We should note that the stock was down more than 2 today. Guy, what do you make of this . Obviously you just said, it got back what it lost during the day. At least you have a degree of certainty now in terms of a number i mean theyve basically came out and told you what they expect it to be, what theyre taking in terms of a charge. I still say this this stock when it troughed back in march it traded down to 365, slightly lower and higher side ways but here we are at the same price. I will say this. Valuation makes sense. I think you are underestimating the defense component of this company which is not as big as commercial airlines, i get it, but still forget it. I think you can own it in earnings i understand why you want to avoid it, but i still think it is a but it trumps any type of defense but here it is in play. But you still have to train people on how to use the plane still, even when it comes back there could be a yearlong Training Program on this so if you have it, maybe you hold on to it. I would not step in and be a buyer right now. Let me ask you this when the 737 max goes back into service, lets say it goes back into service december 5th, dan, you will take your family on holiday and christmas, are you going on a 737 max or wait i was on a flight yesterday and the Flight Attendant went out to say, you are on a 737 blah, blah, blah, not a max. This is definitely top of mind guy is saying he thinks the valuation makes sense. If you think they get above 20 in earnings next year, then the valuationmakes sense here if you are willing to kind of take a little time with this thing because it is going to really you know, it is going to take months to figure it out. I will make one point. The stock is still up 12 , it is trading to the year, trading at the same level where it was when the lion air crash happened in october, and there was another crash. 350 people have died if this was any other sort of company, i dont know why this stock is still trading with a three handle remember, last year when apple oh, my goodness iphone sales were slowing and china was week, that stock sold off 35 peak to trough. And nobody died. Yes. Leapt me ask something, dan dont you think that the stock weve seen a drum beat of news, obviously the two crashes horrific news and the delays and uncertainty about how to train the pilots. All of that though, and then the air show where they sold the first today nothing, and it seems to me like the drum beat of bad news is actually played out. Here is a gigantic charge, nobody cares it seems to me like that has already played out. If theres nothing else what happens if theres one other incident there will be a learning curve each time it trades down, thats on bad news. Right. But once you get that the pilots cant be trained and it is a little more difficult at first they said it was a software fix, then the pilots have to be retrained the story keeps getting longer granted, your point i agree with. But the stock has sort of bottomed even with whatever bad news has come out in the last months. It is trading decently the fact it is up over 11 yeartodate. Yes. Is phenomenal with everything going on. Everyone wants to give it a chance though . I have owned this stock on and off over the years, and the people that own the stock believe in it forever. I sold it up 150 points. I thought it was a hero. I cant go back into it right now. I mean this is this is just crazy. Even though the valuation is not nuts, it just feels like im gambling with 100 move. We have more breaking news here on the airlines lets get to eamon jacksonvilveh white house. Thats right. We are told this meeting may be breaking up right now. It is a meeting between airline ceos and the president of the United States in the oval office which has been going on this afternoon. I am picking up on a relatively intense controversy thats been swirling behind the scenes about this meeting let me tell you what the controversy is a person familiar with the meeting tells me that the us air carriers here requested a meeting through mick mulvaney, the White House Acting chief of staff, with the president of the United States, and then after that according to this person the white house invited Qatar Airlines to attend the same meeting. Now, the meeting was to discuss, according to this person, the frustrations on the u. S. Side about Qatar Airlines and their ownership stake in an italian carrier flying into the United States they feel it is anticompetitive they feel it is not fair, and they wanted to voice some of those grievances when the qataris were added to the white house meeting, im told the reaction was, quote, utter shock. The person said they were shocked that he would be included, the ceo of the Qatar Airlines it must have been a Jared Kushner idea, this person said maybe jareds getting 666 fifth avenue refinanced right now in this meeting so some intense frustration here on the part of some familiar with this meeting that the qatari side even attended. When you look at the list of airlines that are in the room with the president today, you see that it is some of the big american names, American Airlines, yufr nighted, jet blue, and also qatar, fedex and atlas, which is a cargo carrier. Both sides of this debate are represented in this room now, i can also tell you that i spoke to a white house official just now about this who pushes back on this characterization of events and says that qatar was always scheduled to be in this meeting and that Jared Kushner is not scheduled to attend the meeting. That is he wasnt on the official invite list for the meeting. The person familiar with the meeting initially said that they suspected that Jared Kushner had been the person to suggest that the qataris be invited but the white house suggesting that may not be the case. So a dispute here. Some real hurt feelings and some controversy behind the scenes about this meeting, which is just breaking up now, melissa. Basically, eamon, the u. S. Airlines feel that perhaps the administration is sort of taking the side of Qatar Airlines and this also the backdrop is the house, as i understand it, has sponsored a bill limiting the access of Foreign Airlines flag of convenience i think is what it is called where they have joint ventures such as Qatar Airlines to access the u. S. Yes, i think the feeling on the american side is the president will see it as about american jobs and that will be the way this is adjudicated, this dispute but well see what happens the meeting is just breaking up now, but i can tell you during the meeting you are hearing from people familiar with the meeting, and theres really intense frustration and shock that the qataris were invited to the thing in the first place. Eamon, thank you. Eamon javers at the white house for us. You bet karen, i forget what company you were talking about being called to the white house and the hill and you say it is never a good thing. Right. What do you make of this meeting . Youre a shareholder in the airlines. Right i would be perturbed if i were an Airline Executive to be sort of blindsided, one, but even if you werent blindsided, two, this is the president who talks about america first, right you would think that that would be what they would hope to come out of a meeting like this. Right. Not after the qatar. Right grasso. I dont know what the meeting is going to result in. There was a lot of he said, she said we dont know what was said there, so getting back to a trade, if you look at delta, lets tie it in with the boeing trade. If you look at delta no exposure to max. Or limited exposure to the max, and then you get American Airlines with exposure or united with some exposure but the stark difference in the yeartodate performance you cannot deny. Delta airlines, quickly, i thought the quarter was great. They raised full year guidance, the stock at 8 1 2 times forward earnings, still cheap. 60 was the breakout level, i think now at an alltime high. If you want to buy an airline, you trade delta. Microsoft jumping after a conference meet. The Conference Call is about to kick off in the next 90 minutes. Plus new kids on the street reported earnings, chewy and crowd strike out with their first report after going public. We will bring you the latest there as the stocks are up live itin mes square in new york city, much more fast money right after this oothpaste away. And you should be mad at people who take unnecessary risks. How dare you, hes my emotional support snake. But youre not mad, because you have e trade, whose tech helps you understand the risk and reward potential on an options trade its a paste. Its not liquid or a gel. And even explore whatif scenarios. Wheres gate 87 . Dont get mad. Get e trade and start trading today. Here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Earnings alert on microsoft up more than a percent after hours on its earnings. The Conference Call kicking off in a few minutes to john fortt with the details. What we want to hear on the call is the guidance it is the end of the fiscal year, beginning of another one in this particular report where microsoft showed strength in a lot of business units, one of the areas of investment was artificial intelligence. So if that operating expense guidance is a little higher or a little lower than expected, well see, expect ai to be a part of that overall not only does the cloud momentum continue to be solid with azure still picking up its share of the slack, that intelligent Cloud Business faring well, also productivity business process you look at office 365, you look at linkedin, the mix there actually positive for gross margin goes at microsoft so expect to hear a little more about whether it is going to continue, guys. All right, john thanks john fortt keeping us updated heave. Dan, what do you make of the quarter . Pretty astounding Revenue Growth at 12 . Obviously john mentioned margins in the key cloud areas Margin Expansion is one thing that is really important one of the bear cases into the quarter was that a third growth is slowing, at 64 year over year, you know, a big run rate i think it was like north of 10 billion, but down from like 75 the last couple of quarters. Here is the thing. The stock is up 33 coming into the year with a massive trillion dollar market cap. It seems to be a lot of unusually positive sentiment here and putting up the right numbers. To me i dont know how you buy the stock at 138 at an alltime new high, making new alltime highs every day this quarter, but theyre doing a lot of stuff right there. It is impossible to say anything negative against microsoft. Except the valuation. Well, even that i dont know. I mean you probably have a problem with the valuation. A little. But i would use the so you say i would treat it as wait until it breaks through 140, treat it as your support level but dont buy it here. It seems aggressive buying at alltime highs. Where do you see it it is a little rich every time it comes up i feel stupid not owning it but if they are successful having more subscription revenue, the pe should be higher it is interesting that, god, those numbers are fantastic and stock only up above 80. Why wouldnt they get an expansion . It is my own fault, having seen it at mid teens, it is hard to do. Now at mid 30 i think it is a question here, and that is does the stock deserve a rerating the prior metrics in terms of being highly valued should be relooked at, reexamined and maybe brought higher. To dans point, it has been getting that for the last year dan coined maga, it is brill yaan and the m in maga is microsoft. There you go. It used to be mattel but he changed it. Brilliantly changed it. At certain point valuation matters. Youre right but it is trading 28 times next years earnings. You could say a lot of great things operating margins, much better than the street was looking for. At a certain point valuation matters, and we played the game what is that game we play. Which game . There are so many. Thats the new game. Pick your poison is genius. Trade it, fade it, would you rather you came into microsoft and said look, im trying to play by the rules, but i would trade it in earnings and pull the rip cord and ill stand by it. Is there a chance at 150 i think somebody put a 150 price tag on it. Maybe. With the stock sitting here and john fortt just said youre going to wait for what is it, fiscal 2020 guidance looks like, eps is expected to grow 8 , a massive deceleration from the last few years despite the margin improvement and sales are expected to grow 10 i think you have to go to 20142015 when satya took over and they changed to cloudbased model. Earnings were not zbroeing and the stock was dead in the water and started to take off with the numbers up when you have the deceleration, talking about buying at alltime high i know you are not, but im saying it seems odd. You had a shock when it broke out above 120. I agree when you see walgreens science, university lever with 155,000 it is catching on and better than the old model it all hinges on how much more the multiple expansion story can go from here you know, dan l