Transcripts For KQEH Nightly Business Report 20140123 : vima

Stocks. Crude awakenings. Oil is being shipped through the controversial Keystone Pipeline. Its not just refiners who can benefit but consumers as well. All that and more tonight on nightly Business Report for wednesday, january 22nd. Good evening, everyone. Netflix dazzled investors today with spectacular earnings after the market closed the Company Reported Fourth Quarter earnings 245 far exceeded forecasts, gaining many more subscribers than predicted. In the final three months of the year, netflix earned 79 cents a share. That was 13 cents more than estimates. Revenue also topped expectations. And then on totop of that the cy gave a very strong outlook. During tradings days it roh moohyun rose as much as 1. 5 . More on the results and what the companys predicting for the Current Quarter. Reporter netflix didnt just beat expectations on the top and bottom lines. The key number in focus, streaming subscribers, came in higher than projected as well with the addition of 2. 33 million u. S. Streaming subscribers and more than 1. 7 million overseas. In the Current Quarter the company says it expects to add another 4 million streaming subscribers worldwide. Netflix also says its evaluating tiered pricing and experimenting what higherpriced service but existing members would be grandfathered in without a price hike. Net neutrality would result in higher costs for the company. In a letter to shareholders the ceo said hes not concerned and think its unlikely that Internet Service providers will discriminate against subscribers. Shares of coach fell 6 today after an earnings miss during the all important Holiday Quarter. The problem a substantial decline in sales here in the United States. Courtney reagan has more now on what coach plans to do to stay in fashion. Reporter another retail for add to the just wrapped up holiday seasons bah humbug list. High end accessory maker coach posted a disappointing Holiday Quarter missing forecast for profit and revenue. Sales fell by 14 in north American Stores open at least one year. Perhaps the one bright spot for coach is china, where the same metric rose at a doubledigit rate. Newly installed ceo Victor Louise said coach saw substantially lower traffic in stores. Adding to the broader retail conversation about too many stores and not number customers visiting them. People are staying at home, theyre shopping on their mobile devices. The mobile internet is a gigant gigantic secular development killing Companies Like coach for example. Coach is make kind of oldfashioned belts you have to go to the store and buy. Nobodys buying them anymore. Therefore they got killed on earnings. Reporter the holland accessorymaker is undergoing somewhat of a reinvention at both the brand and executive level. The company is working to expand and improve its products, moving more into a lifestylebrand strategy under new ceo Victor Louise after longtime ceo lou frankfurt stepped down in december. But analysts think reinvention will be difficult and will take time. Time that coach may not have for spare as it seemingly continues to lose market share to rival michael kors. On wall street, stocks ended the session mixed and little change with earnings keeping the major averages in check. The dow ended lower again from pressure on ibm. Big blue was the biggest decliner in the index, falling more than 3 after reporting weak results late tuesday. With that the dow lost 41 points but the nasdaq added 17. That was enough for another fresh 13year closing high. And the s p up 1 point. The nasdaq got some help today from shares of apple which edged higher after the billionaire activist investor carl icahn tweeted about a big increase in his stake in the company. But not without sharply criticizing the company for not increasing the size of its Share Buy Back plan. Heres icahn needling apples board to reward shareholders. The decision to use a cash order of 150 billion just sitting there doing nothing and not use it to do huge buy backs i think is sort of disgraceful. And i think its doing a tremendous disservice to its shea share hoerlsd and really to the smaller shareholders. Earlier icahn surprised wall street by announcing on twitter that he purchased another half billion dollars in the iphone maker upping his stake to 3 billion. He said he likes using twitter because it makes it so easy to disseminate information but he doesnt like it enough to invest in it. Back now to apple. Our guest tonight says investors should date apple but not merit. Hes chad morganlander and hes the manager at washington crossings advisers. Nice to have you on the set. Since youre talking about relationships, your fund has had an on againoff again relationship with apple stock. Currently you dont have any apple in your portfolios. What gives . Well, were rather neutral in the long term on apple. Perhaps over the next 6 to 12 months you can get a nice pop in the stock price and perhaps the price goes to 650. But nonetheless, were more concerned about the outer years and the growth trajectory. Lets keep in mind this companys had a wonderful move from in 2008 revenues of 35 billion now to 180 billion. But the obsolescence of technology and competition should start to kick in. It sounds to me like youre hungry for a new product. You are worried that they are going to get surpassed as some would argue they have been by samsung. Theyve had the product, right . And theyve enjoyed that over the last three to five years. But now you have the likes of amazon with their kindle, or google with their platform. Thats going to eat away at their operating margins and Gross Margins in the outer years. Theyre not the only show. And thats the issue at this reflection point. It is cheap, nonetheless, the valuation does make sense. And thats why im saying that the price target you could go to 650. But nonetheless, you dont want to own this as think that you could own this for the next five to ten years like proctor a gamble or perhaps mcdonalds. Today there were a number of people making predictions about where the stock could go. Some saying it could go to 1,000, this year or next year, then you have all these comments from carl icahn. What do you make of all that in terms of giving some momentum to the stock and ensure investors Pay Attention to this. They certainly could over the short run in the coming months. Perhaps you can get that 15 run. But the problem is, in order to create real shareholder wealth, youre going to need innovation and revenues to accelerate again. Revenue growth has been dede sell rating into the potential low Single Digits in the coming years. You need to see that get back into the teens. As well that would work with the buy back. But if you just have a buyback with no innovation or revenue growth. You say youre neutral on it. What would be the trigger that would get you off the fence and say nows the moment im going to get in here . Is it a decline in price where it becomes more value oriented or what . We would look for another generation of instruments and cell phones or Consumer Products that will really start to gin up the revenue line. Were not seeing that as of yet. Nonetheless, you do have clarity over the next 18 months. Thats why the stock price target is 650 that im throwing out there. But to get this to a point where you get a 500 billion market cap of which it is, to a 750 or 1 trillion market cap, youre really going to need that next great instrument. Were going to have to wrap up. Real quickly earnings come out on monday. Thats always a big event for investors looking at apple. What do you expect . I expect them to do terrific. Theyll probably be on the top line as well as bottom line and nice run in the short run. Chad morganlander, Portfolio Manager at washington crossings advisers. Even after that tremendous runup in the averages last year, a lot of investors poured money into stocks last week following strong economic reports. The Investment Company institute says u. S. Based stock funds attracted 8. 3 billion into those stock funds last week. In ten weeks. Surprisingly, money has also been flowing back into bonds. Nearly 3 billion went into mutual fund that specialize in bond investing according to that ici report tyler just told you about. Thats a change from last year when investors pulled billions out of bond funds. Pink gold was a victim of that trend. 2013 was its worst year since 1994. And then yesterday, pinkos ceo said hes resigning as cochief executive. What does his exit mean for pimco investors . If you own this right now or youre interested in them, i dont think his departure should change your mind about any of them. Even the one that he is currently comanaging. He didnt have any under his belt that were entirely his own. He had comanagers with him who will remain on those funds. So its still a nonevent even if you own some of those funds like the pimco global allocation fund. Still ahead, man versus machine. Why robots may shape the future of manufacturing in america. Crude is beginning to flow freely today as a major portion of the controversial Keystone Pipeline opened for business. But will that mean Cheaper Energy costs for consumers . Jack jackie deangeles reports. Reporter a tale of two pipe lines. The southern leg of keystones pipeline bringing oil from cu cushing, oklahoma to three refineries are likely to receive some 700,000 barrels of light sweet crude per day. Not just port arthur will benefit. The entire Gulf Coast Region could tap into this new supply, giving it greater access to mid continent crude. As that oil arrives into the port arthur area, it will now be accessible to about 25 of the nations refinery capacity because it will be connected by pipeline not only to port arthur but to lake charles and to the new orleans refining centers. Reporter the benefit of moving cushing crude by pipe . Saves refiners big money. The oil sells for around 15 to 20 a barrel less than the imported crude coming in by ship. The more you can reduce the cost of the crude oil, the better chance you have of seeing savings at the gas pump. Reporter the southern leg raises questions about the northern leg, still awaysing washingtons approval. It would bring 830,000 barrels of heavier crude oil per day from alberta, canada to the gulf coast. We want to replace that diminishing supply of crude with ample supplies of crude from canada. Same kind of oil, just from a different place. So thats why we support the northern leg of keystone to bring that oil all the way down to the gulf coast where the Refining Capacity exists to process it. But canadians are getting impatient with the u. S. , saying recently that president obama has punted on the issue. Secretary kerry saying last week that the u. S. Wont be pushed into making a decision. At stake, however, tens of thousands of jobs to which the administration cannot turn a blind eye. The vast majority of people in this area support it. Not only does it guarantee jobs, but it also is vital to our national security. Hopefully it should bring quite a few jobs. We need jobs around here. Reporter whether or not the northern leg of the Keystone Pipeline gets approval from washington, the industry says that oil will get where it needs to go whether its by truck, by barge, by pipe or by rail. But remember, recent accidents have put Rail Transport under scrutiny because of safety issues. The United States remains the Largest Consumer of petroleum and petroleumbased yields. Thats not going to change. Reporter as we wait to see what washington will do, the southern leg opening today is hail by the industry as a step in the right direction. For nightly Business Report im jackie deangeles from port arthur, texas. If youve been waiting for chrysler to go public, your wait just got a little bit longer. Italys fiat, which now has total ownership of chrysler, withdrew paperwork filed back in september for an initial public stock offerings slated to happen sometime this year. No reason was given for pulling the ipo plans. Well, fiat along with some other automakers have a lot more to worry about right now like the safety of their small cars in crash tests. The latest crash tests of mini cars by the Insurance Institute for Highway Safety showed that only one of the 11 cars tested received a passing grade in a front end collision. The chevy spark was the only car to earn a top safety pick. The honda fit scored the worst. We begin market focus tonight with a huge after the bell spike in shares of ebay. The Company Announcing a 5 billion buy back plan after its earnings Beat Estimates by a penny. It was also revealed that carl icahn, yes, carl icahn again, owns slightly less than 1 of the company and is nominated two directors to its board. Icahn also filed a nonbinding proposal urging ebay to split pay pal and its marketplace businesses. The stock initially surged after the close. Shares ended the regular session slightly higher at 54. 41. American eagle shares falling in the afterhours trade. The struggling teen retailer said its ceo of two years, robert hansen, would leave the Company Effective immediately. The Company Named a chairman as interim ceo and stood by Earnings Guidance it gave earlier this month. Shares ended the regular session 2 lower at 14. 31. United technologies saw profits plunge 29 in the Fourth Quarter. The maker of otis elevators and blackhawk helicopters saw profits decrease from last year. Still united managed to top estimates. The company was actually helped by a delay in shipping a helicopter order because the helicopters are actually sold at a loss. Also revenue came in a bit light. Still shares were up slightly to 116. 12. Totally different story for norfolk southern, the Railroad Operator said earnings increased by 24 as strong chemicals, Construction Materials and auto shipmentses offset a dip in coal volumes. The Company Announced it will raise its Quarterly Dividend by 2 cents a share. That sent the stock up to 92. 64. Shares of General Dynamics also soaring today. The military contractor ceo warned of a slight drop in earnings and revenue in 2014. Investors shrugged that off, focusing instead on his promise to aggressively return cash to shareholders who buy backs and dividends. The stock popped 4. 5 to 99. 65. The owner of chilis posted better than expected Second Quarter earnings on higher sales. New menu items helped chilis increase sales for the first time in a year. Shares climbed up 6. 5 to 49. 72. Sears is closing its flagship Downtown Chicago store in april. Its a move to cut costs and focus on online retailing. According to a company spokesperson, the store has lost millions of dollars since opening in 2001. Shares of the retailer fell slightly to 37. 59. Some Health Care Changes to tell you about. At target, the retailer announced it will no longer offer Health Coverage for its nearly 36,000 parttime workers. Target said that by offering the insurance it might disqualify them, at least some of them, from the eligibility for subsidies in plans offered through the Affordable Care act. Separately the Company Announced plans to lay off 475 workers at its minneapolis headquarters and says it wont fill 700 open positions there. As American Manufacturing rebounds and profits grow, another trend is taking hold in plants across the country. The rise of machines as robots work alongside humans. The latest wave of robots are smarter and less expensive, allowing small manufacturers to expand and even hire more people. Phil lebeau has more. Reporter meet baxter, a small, easily programmable robot now working side by side with the men and women at vanguard plastics in southington, connecticut. At the beginning i was kind of nervous. Its the first time ive been working with a robot like that. But i like it. I love working with baxter. Hes amazing. Reporter vanguard paid 25,000 for baxter, a steal of a deal according to vanguards ceo who says baxter makes his company more productive by freeing up workers to do other jobs. They do not mind the employees on the floor. Because they know that that technology is going to help them keep whatever job that they have now. Reporter manufacturers have been adding robots and automation for decades. Its made plants around the world far more efficient. It has also sparked a debate about whether or not robots have made Manufacturing Companies so efficient they dont need to hire as many workers. In fact, the drop in manufacturing jobs over the last 15 years has happened at the same time the number of industrial robots around the world has surged. Employment is falling off a cliff. Median income is lower now than it was in the 1990s. There are definitely some troubling trend. Science fiction has long predicted robots would eventually have the Artificial Intelligence to interact with people and perhaps even think like a person. The makers of baxter say thats why