tv Nightly Business Report PBS January 16, 2013 4:30pm-5:00pm PST
captioning sponsored by wpbt >> this is n.b.r. >> susie: good evening everyone. i'm susie gharib. blockbuster earnings from j.p. morgan, and goldman sachs. but will they be able to keep up the pace? >> tom: i'm tom hudson. the growing concern over america's ability to pay its i.o.u.s is turning into a debate over the defition of a "debt default." why washington's wrangling could hurt the u.s. economy.
>> susie: and from chipotle to dunkin' donuts, did fast food chains meet investors' appetites for big returns? we're talking food stocks. >> tom: that and more tonight on "n.b.r."! >> tom: we begin with banking. two giant financial powerhouses reported big gains in fourth quarter earnings today. j.p. morgan chase booked its third straight year of record profits. and goldman sachs reported fourth quarter earnings that were almost triple the same period a week ago. erika miller reports. >> reporter: before we get to jp morgan's profits, let's talk about the earnings of it's c.e.o., jamie dimon. the board cut his pay in half as punishment for a more than $6 billion loss at j.p. morgan's london trading desk. but dimon will still pocket a $10 million bonus. add on $1.5 million in salary, and his total compensation was $11.5 million last year. >> we don't think it's inappropriate, what the board did. butt the end of the day jamie
dimon is stl doing pretty well for himself. he's not exactly living out of a refrigerator box on park avenue. >> reporter: at the same time, j.p. morgan's fourth quarter earnings rose by more than 50% in the fourth quarter, to $1.39 a share. that was better than expected. j.p. morgan, wells fargo, and other retail banks are benefiting from an improving housing market. >> it's a large factor. i mean, some companies are seeing mortgage growth of 50% over a year ago. it's a major factor. also, refinancing activity is very high right now. as housing prices have increased, that's allowed more people to qualify to refinance their loans. >> reporter: but goldman sachs is a different story. it deals almost exclusively with institutions, not consumers. it's fourth quarter earnings growth came from a surge in investment banking revenues thanks to gains in stock and bond underwriting. goldman earned $5.60 a share in the period, compared to a $1.84 a year ago.
that was also better than expected. big banks aren't the only financials expected to do well in the fourth quarter. the financial sector as a whole is expected to post an earnings gain of 11.5%, making it the best performing group for the fourth quarter. but that doesn't necessarily mean now's a good time to buy most big bank stocks. >> there's a couple names out there in the regionals that look attractive. but for the most part, most of the companies are trading very close to our fair value. >> reporter: there's another trend to watch for this earnings season: cost cutting. banks have been cutting workers and compensation in an effort to shore up earnings. erika miller, "n.b.r.," new york. >> tom: we'll have more banking coverage tomorrow with earnings from citigroup and bank of america, and we'll get analysis from s.n.l. financial's nancy bush. >> susie: also today, ebay reporting solid earnings after the market close.
this momentum going to continue in 2013? >> certainly. we've started to see see ebay with their set of apps for mobile devices, start to pick up an substantial number of new users, about four million, over the course of 2012. certainly you saw about $13 billion worth of products being sold through these mobile acts. so it certainly has had a significant impact on the company's results in 2012. this is a trend we'll expect to continue going into 2013. >> susie: i was going to ask you, you expect that the numbers were something like up 120% in mobile
commerce in 2012. how much more can that grow, and how important is that for ebay? >> well, certainly they can grow substantially in that we can look at what the numbers are like across the broader technology landscape, for how much it is people are accessing the internet through mobile devices, and that has been very substantial. but for ebay, the impact on this on the holiday shopping season, was on black monday, the monday after thanksgiving, you had volumes through ebay's mobile app were up three times, year-over-year, and through paypal, their payment, the mobile app there so volumes up two times, just for that one day alone. these numbers were better than the 120% increase discussed for the year as a whole. and certainly auger for n])jñ you could see in the course of 2013. >> susie: what does all of this mean for ebay stock? in 2012 it had a terrific year, the shares were up 75%. after this earnings
report, the shares were up about 1% in after-hours trading. what is your ranking on the stock? >> our ranking on the stock is it is trading pretty much at a premium to its growth rate. we haven't seen anything coming out of guidance from the company to say they're raising that growth rate ap appreciationably. and we're more interested in the stock if it pulls back a little. we think over the next 12 months, the stock will get to 58, but we believe if the stock pulls back to 50 before making a move to 52, up to 58. >> susie: let me ask you about apple. people came back into the stock, closing above the $500 level again. the last time you and i talked, you had a target of $750 on apple. how do you feel about it today? and have you changed your target? >> we stand by the $750 target. we think the company, which will come out with earnings after the close on thursday, january 23rd, will probably put up a strong
set of numbers. the a numberof factors in the fourth quarter 2013 that prompted the selloff from the high after the iphone launch, in some cases were due to the expected changes in the capital gains tax, which didn't come to fruition, but nevertheless, prudent visitorinvestors sold the stock. and from that standpoint, the stock attracts current levels, especially out of earnings. >> susie: and earnings are coming out next week, and we'll be tracking that. and we'll see how the stock does after that. thanks, david, david garrity. >> tom: investors sorting through a slew of economic data today. u.s. industrial production hit its highest point in more than four years in december, while consumer prices, were flat last month, pointing to muted inflation pressures. still, the u.s. major averages ended mixed: the dow off 23 points, pulled lower by weakness in boeing shares, the nasdaq rose six, the
s&p up just a fraction. >> susie: and the federal reserve's latest snapshot of the u.s. economy isn't picture perfect, but it is positive. today's beige book report showed signs of solid overall economic growth. each of the fed's 12 districts showed either "moderate" or "modest" growth, steady or expanding real estate activity, and some growth in consumer spending from december through the first week of january. but the fed noted job market conditions didn't change much. one reason companies are cautious about hiring, is they are worried about fiscal uncertainty in the u.s. and that uncertainty is growing as some republicans in washington argue for a narrow definition of what it means for the government to default. skipping payments on government bonds would be a default they say. but skipping payments for other government services wouldn't be. this debate could have real consequences, as darren gersh explains. >> reporter: next month, the u.s. government will owe $38
billion in interest payments on the debt it's sold to investors here and overseas. but the u.s. government will take in about $210 billion in tax revenues in february. a vocal minority in washington now argues those figures show it is possible for the u.s. government to avoid defaulting on its debts even if the debt ceiling is not raised. >> and there is no reason for the government to default unless president obama and the democrats want us to. it's just a scare tactic to continue the spending that they don't want to address. that's why they keep saying, "oh, we're going to default. we're going to default. we're going to default." it's just not true. >> reporter: but talk like that scares many budget analysts in washington. they argue markets will see a failure by the unit ed states to pay any of its bills as a threat it could one day stop paying some or all of its bills, including terest on its debt. if we pay the chinese the interest we owe them on their sovereign debt holdings, on time and in full, but we don't pay social security recipients or
armed services personnel their salaries, is that a default? well, of course it is. >> reporter: a recent inspector general's report found the treasury doesn't have the computer systems in prioritize some payments over others. so if the treasury runs short of cash, it would most likely delay writing checks until it collects enough in tax revenues to avoid going into the red. but that means unpaid bills would pile up and take longer and longer to be paid. >> it's almost a reverse ponzi scheme where you just get worse and worse and at some point, at some point and we're working on it right now, you won't be able to pay the interest on the national debt, because you won't have enough cash coming in. >> reporter: it's hard to tell how much of the tough talk about default is real and how much is a bargaining strategy. a u.s. default is still considered highly unlikable, though no longer impossible. darren gersh, "n.b.r.," washington. >> susie: from bentley to cadillac to b.m.w., how the
comeback in the u.s. economy, is fueling new interest in luxury cars. >> tom: as we mentioned earlier consumer inflation in december was tame, but food prices were up for the seventh straight month. and the higher prices come as pay checks shrink by two percent thanks to the payroll tax returning to its previous level. but chipotle and dunkin donuts, two very different restaurants, are opening dozens of new locations this year. continuing to expand. stevestephen anderson joins us from the new yor new york stock exchange. mexican grills and chipotles hurt by higher food costs. a third of the sales will be eaten
formidable head wind in the next several quarters. >> tom: what about its foot point? it opened 60 stores. do you expect that pace to continuement. >> chipotle is opening new units, about 13% new growth rate. it is best in class, not just in the casual segment, but across all the industry segments, chipotle, far and away the leader. we expect that to continue. on top of that, they are doing so without adding any new debt.
they're generating positive free cash flow. >> tom: i want to ask you about growth in dunkin' donuts. first> i'm absolutely a buyer. the top-line growth trend on same restaurant sales, traffic is actually the same for the last couple of quarters. that, we think, should mitigate any concerns that consumers are going to the competition that is lower priced. >> tom: let's move from burritos to doughnuts, and coffee. dunkin' donuts announcing an expansion into california. 150 stores by the end of the decade. the share pice raling significantly. and why california and why now? >> california had been a market that dunkin' donuts had competed into the 1990s. we think the second go around is focused on beverages. that is something in the prior generation, dunkin' donuts had not done in
california. we do think it will succeed in california,9t- as it has in other new markets it has entered, where it is the same as the legacy markets in the northeast. >> tom: steve, you mentioned how chipotle can pay for its expansion out of earnings, and can dunkin' donuts afford it? >> it is really up to the franchisee. the good news for dunkin is the cash on cash returns is among the best in the industry. that enables the franchise to expand. >> tom: cream or sugar for you, steve? >> i take the splenda. >> tom: it's noted. do you own any position in the two stocks? >>neither. >> tom: he's a coffee drinker. stephen anderson, miller tabak. >> susie: regulators say "pom wonderful products," may not be
as "wonderful" as marketers made them out to be. the federal trade commission is barring the maker of pomegranate juice and tea from making unsupported health claims about its products, like the ability to treat heart disease and prostate cancer. the f.t.c. first filed a complaint, two years ago, alleging that pom wonderful used deceptive advertising. pom says it will appeal. >> 4wé: automakers are placing big bets on the luxury vehicle market this year. as ruben ramirez reports tonight, they're hoping that as u.s. economic recovery continues, more drivers will upgrade what they drive. >> reporter: automakers are optimistic the u.s. economy may
be turning a corner and that in turn will spur consumers to spend a little extra on their next car. >> luxury seems to be on the upswing because people i think economically are on the upswing. when there's a little more confidence and a little more satisfaction in where the future is going to go, people treat themselves and they buy luxury cars. >> reporter: over the last three years, u.s. luxury car sales have grown 25%, sales of german brands have surged 50%. b.m.w. has been the leader in the luxury segment over the past two years. this week, the german car maker unveiled seven new models, looking to fill in gaps in its product portfolio. >> the ongoing challenge is how do we bring value to the u.s. segment. the luxury market has become incredibly competitive when the market contracted. >> reporter: the competition may be heating up. cadillac's ats took home car of the year honors this week and the company unveiled its electric, the cadillac elr. >> the americans are making good inroads in the luxury segment so
the cadillac ats is important because it probobably the first legitimate bmw 3 series contendar that cadillac has had in decades. >> reporter: volkswagen is also firing on all cylinders, 2012 was its best year since the early 70's. while it's known for the beetle, it also owns a stable of luxury nameplates. >> we've got bugatti, bentley, lamborghini, porsche now as well as audi so each of these brands have got plans for continued growth. and this isn't just about short- term growth. it's about putting in the fundamentals that drive that sustained growth. >> reporter: ultra-luxury buyers, there's the new bentley continental gts, its first convertible, debuting on u.s. shores this summer with a stickerprice of a mere $240,000. >> the u.s. is still our biggest market. it's our biggest market in the world and it's the biggest for convertibles. so clearly, we are launching this car here to show the importance america has in terms
of sales for u.s. >> reporter: whether its a british, german or erican luxury brand, all see the their biggest sales opportunities here in the u.s. ruben ramirez, "n.b.r.," new york. ordered all boeing 787 dreamliners grounded until further safety checks. the decision comes after another emergency landing for a boeing 787
dreamliner. tom, this one way all nippon ai airways. they detected a burning smell, and they decided to ground all their 787s. thiscentur is the second fire problem involving the boeing's 787 lith thian batteries. they were counting on the success of the dreamliner to being a real boost to business, but since its launch, it has had all of these problems. investors have been bailing out of the stock. it lost another 3% today. it closed at $74. it was down $2.60. it has been really a bumpy ride, nightmarish for boeing. >> tom: lots of delays in getting this plane to market. lots of trouble showing up when it is in the market. and the f.a.a. issuing the warning, affecting u.s. planes for the dreamliner
until they can demonstrate that the batteries are safe. we'll have more on boeing's share price coming up in a moment. let's get started with tonight's "market focus." >> tom: for the third session in a row it was a mixed finish for the major indices, as they continue trading in very narrow ranges. the s&p 500 illustrates the lack of conviction by both buyers and sellers. the index hit its low for the session in the first 15 minutes, but those losses were cut as we saw the strong industrial production data. the index wavered in the final hour to end higher by a fraction. volume on the big board was 597 million shares. almost 1.7 billion traded on the nasdaq. again we saw the telecom sector weigh on the market, falling 1.2%. but the technology sector rebounded some from its recent selling pressure to end higher by 0.7% today. boeing was back in focus with more problems for its dreamliner 787. a plane flown by all nippon airways in japan may an
emergency landing after alarms were set off indicating smoke. the plane landed safely but three passengers had minor injuries from using evacuation slides. both nippon and japan airlines have grounded their dreamliners. so almost half of the 50 in fleets are not flying. the concerns center around the plane's auxiliary batteries. the problems come as boeing's engineers' union agreed to extend parts of its existing contract to concentrate on the comprehensive safety review of the plane. shares have been see-sawing as the dreamliner news has come out over the past several trading sessions. today the stock fell 3.4% on heavy volume. it is about 20 cents above last week's low. the selling pressure of big phone companies continued. despite selling a record number of smart-phones in the fourth quarter, some analysts are concerned all those smart- phones, with their subsidies could hurt quarterly profit margins. verizon fell another 1.1% to a fresh two month low. a.t.&t. dropped another 1.5% to its lowest price since new year's eve. investment firm sanford bernstein notes the companies were successful in delaying customers from upgrading, but thinks those efforts waned in the holidays. the worry is customers upgrades come with one time subsidy costs, hurting earnings. after casting a shadow over technology, apple shares found buyers today.
the stock rebounded from an 11 montlow to gn 4.1%, closing back over $500 per share. morgan stanley dismissed rumors and worries over iphone sales. apple earnings for the holiday period will be out a week from tonight. in the financial industry, while there was plenty of focus on j.p. morgan and goldman sachs, which we reported on earlier, two so-called trust banks also were in focus. bank of new york mellon fell 2.8%. shares were at a 52 week high a week and a half go. while quarterly profits as in as expected, expenses were higher than expected thanks to higher compensation and services costs. higher costs also hit shares of northern trust. it's stock fell 5.7%. both banks reported big drops in income from foreign exchange currency, driven down by a lack of currency volatility. but overall revenues were up at both banks. president obama unveiled a set of gun-control measures today that included 23 executive orders signed today. he also called on congress to
approve universal background checks and ban military style assault weapons. but the stocks of gunmakers rallied. smith and wesson gained 5.7%. sturm and ruger was up 5%. previous talk of new gun control has led to higher gun sales in the meantime. three of the five most actively traded exchange traded products were lower with the s&p 500 volatility note dropped 2.1%. volatility has fallen as the stock indices make small moves. and that's tonight's "market focus."
>> susie: when a company decides to go public there is often anxiety about facing more scrutiny. but there are also plenty of positives: likehe potential to raise a lot of cash, and the opportunity to grow a budding business. in tonight's commentary, inc editor-in-chief eric schurenberg previews what's on the horizon for i.p.o.'s in 2013. >> at inc, we follow hundreds of companies that are good-looking candidates for an i.p.o. here are three favorites that haven't announced an i.p.o. yet, but are companies you'll want to know about. the first is square, started by one of the co-founders of twitter. it's now the leader in the burgeoning field of mobile payments, allowing merchants to process credit cards at a kind of mobile register and letting cutome paysing their phone. the company just became starbucks' mobile payments processor. if square keeps locking up deals like that, someone's going to get rich. the second is evernote, a suite
of online programs that let you store anything you want to remember and then retrieve it effortlessly. people who use evernote swear it will one day be a household name. the company is valued at over $1 billion and the c.e.o. says an i.p.o. is inevitable. keep an eye out. finally, there's zumba fitness. the latin dance craze already is a household name. what's less well known is what a money machine it is. in addition to the exercise classes, zumba has music and a line of clothing that already does an estimated $100 million in sales. is it going public? zumba's c.e.o. says that's not on the radar now but it seems obvious that a company that makes clients so happy could one day do the same for shareholders. >> susie: great ideas aren't limited to start-ups. innovation is one of the keys to longevity for an established business. got a bright idea? visit: www.nbr.cofor ps on hoto pitch aidea to your company. just click on the "nbr-u" tab.
>> tom: tomorrow on "n.b.r." putting shovels in the ground, an update on the housing recovery, with the latest data on home starts. and resolving to help your kids learn about money, its tomorrow's kids & cash. >> tom: and finally tonight, you >> susie: that's "nightly business report" for wednesday, january 16. have a great evening everyone, and you too tom. >> tom: goodnight susie, we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org