this is "nightly business report" with tyler mathisen and sue herera. >> measure shore shows, more vi what netflix ordered and that's what it got. the stock took off late today. big showdown. a staunch activist investor goes after a powerful corporation. and it could be like no fight we've seen before. are these boardroom battles good for shareholders? the check is in the mail. is the raise american workers have been waiting for finally on its way? those stories and more tonight july 17th. business report" f good evening, everyone, two prominent household name companies are making news tonight. one reflects the economy of the 21st century. netflix. the other was born in the 19th

century, procter & gamble. we begin tonight with netflix and the earnings story that broke after the closing bell. millions more people than expected subscribed to the streaming service in the latest quarter. new shows helped attract those new viewers at a time when competition in original content is intensifying. here are the numbers. for the second quarter, netflix earned 15 cents a share. that was a penny below expectations, but revenue was more than 30% higher than a year ago, beating forecasts at rou roughly $2.8 bil and the stock took off as you see there. rising initially in after-hours trading, hitting a new all-time high easily. julia boorstin has more on netflix's quarter. >> reporter: netflix continues to grow subscribers faster than expected adding a total of 5.2 million new subscribers in the second quarter, 2 million more than the company projected. it looks like netflix is going to continue to exceed

expectations. netflix projecting, a stronger than expected 4.4 million subscribers in the third quarter. so what's driving that growth? a massive amount of new content including 14 new seasons of global netflix original series, 13 original comedy specials, 6 original documentaries and 9 original feature films as the company invests more in movies to debut on netflix first. and it's now easier for consumers to sign up for netflix thanks to new product partnerships such as one the company just announced with cable carrier altese in france. setting up the streaming giant for more growth this year. back over to you. >> thanks very much, julia boorstin. now to the boardroom battle at procter & gamble that could mark a new milestone for shareholder activism. investor nelson peltz of trian is taking on p&g, becoming the biggest company ever to face a proxy fight. trian which owns roughly $3.5

billion of the company wants a board seat and he wants a higher stock price. shares of p&g which is widely owned in mutual funds and controls brands like bounty, gillette and tide, has underperformed the market over the past year. over the years mr. peltz has taken on other consumer companies like heinz, pepsi and food maker mondalese. leslie picker reports. >> a big investor called trian is pushing for one board seat at procter & gamble but the hedge fund needs to convince a majority of shareholders to give it a seat. it's the largest company to face such a fight against an investor. trian ceo nelgsson peltz saying the company could use fresh blood. >> you have people at p&g, for the most part, no, not for the most part, 9 the 99% that never

had another job but p&g. you should have a soft target that at least 25 of them come from other companies because these guys only know one playbook at p&g. okay? when they get together to solve a problem, you know what they're doing? they're talking to themselves. >> reporter: p&g responded to trian in a statement saying, "t rirks rian has not provided new or actionable ideas to drive additional value for p&g shareholders beyond the successful execution of the strategic plan that is in place." in a filing this morning trian said pelz could help p&g's cost and bureaucracy. peltz made it clear he's not looking to fire the ceo, break up the company or take on a bunch of debt, he just wants to boost the stock price. for "nightly business report," i'm leslie picker. >> what should you do if you own a stock that becomes the target on an activist investor like nelson peltz? let's turn to david nelson for some answers.

he's chief strategist at bellpoint asset management. david, you know, these situations can be good for the activist or work out not so well for the activist. i know you've got some examples in the top of your head. but how do i, as an investor, determine whether these act v t activists are going to be goods? >> like most things in life, the devil is in the details. what and vester needs to do, look at the proxy, look what the investor is looking to is he looking at short-term value for the company, maybe just returning cash to share holders, boost the stock price and get out or looking like nelson peltz is with proctor and gamble, looking to enhance shareholder value, shaking up the company and get rid of some of the bureaucracy and get better operating metrics. >> are there instances, david, where an activist investor could be a negative for a stock? >> sure.

unquestionably. for, you know, some activist investors, they might be looking pat nothing more than a quick buck and generally, you'll see them foescus on financial engineering gimmicks a lot of debt, buy back a lot of stock that will boost the earnings in short run but usua comes at the expense of the long-term health of the company. sthoo so they're out there. i think nelson peltz is on the other side of that equation. >> one example you cite as actually a positive outcome is carl icahn's involvement with apple a couple years ago where basically what he wanted is what you just said was kind of one of those telltales of maybe trouble and that is he wand them to buy back stock because they had all this cash on the sidelines. why is that the exception that may prove the rule? >> it's clearly the exception. in the case of apple, there was so much cash on the balance sheet, there was literally no way they could invest it all in a productive manner. i think carl icahn recognized that. he came in and he looked to cook

and others to return some of that cash to shareholders and it was a home run for investors and the stock and the stock did very well with carl's involvement in the country -- company. but it was clearly the exception to the rule. >> you know, david, there's also, we cover it certainly, companies that are considered, quote/unquote, ripe for activist investors. ge was a focus for a lot of -- for a lot of people. as an individual investor, do you ever try and identify those and invest in them? i mean, it hasn't really moved the needle on ge's stock recently, but it has on others. >> it can be easy to identify some of the companies, but you might be sitting for a long time waiting for an activist investor to recognize that. i think a lot of boards out there, they're supposed to be an advocate for the shareholder, but unfortunately, there's a good number of them that act as a little more than an agent for the ceo, awarding out, you know, very large compensation packages, even when the

performance is poor. if withdrew cyou can iden hangie waiting for a carl icahn or nelson peltz help you out. >> i'd like to see one of the boards work for me and get my compensation package going. thank you very much. on wall street, stocks were little changed as investors remained reluctant to make moves ahead of a busy week for earnings. today the dow jones industrial average fell eight points to 21,629. the nasdaq up nearly two. the s&p 500 off just a fraction. while the major indexes remain near records, the small cap index, the russell 2000, is at one, closing at its highest level ever. eric marshall, co-portfolio manager at hodges small cap fun joins us to talk about the run in the small caps. nice to have you here, eric. welcome. >> good to be here. >> what do you think in general has been driving the performance of the small caps? >> we've definitely over the last couple weeks started to see the market broaden out.

meaning that we had more stocks participating in this rally than we did in the previous first and second quarter. i think part of that is a recovery that you're seeing in some of the bank and financial stocks. some of the industrials. and the consumer discretionary stocks doing better here and tend to be more tied to the russell 2000 and the smaller cap indexes. >> can this rally continue? >> we think so. you know, small caps are really well positioned to benefit from things like potential tax reform, which we're starting to hear more rhetoric about, and also m&a activity continuing to pick up. and it's probably the area of the market that is the most fertile for picking individual stocks and there's still a lot of opportunities out there to go out and find companies that aren't necessarily overvalued. even though the market is hitting new highs. >> are you doing some shopping?

>> we are. and we found opportunities in things like tower semiconductor which is a semiconductor foundry. the stock trades about 12, 13 times forward earnings, and we also like companies like cooper tire which is a tire manufacturer. not necessarily tied to new car sales, but more replacement tires. we see opportunities in low multiple stocks like that. and we like legacy texas, which is a regional bank here in texas that we think is very attractively valued. >> you know, it's interesting that when people think of small caps, they often think of the little go-go high-tech companies but the ones you just pointed to, i mean, tower semiconductor obviously a tech company, but a basic bank and a tire company. >> yeah. i think that's the important thing is that within small caps, there are companies that are really overvalued and very high-priced biotech companies and really high-flying stocks

that don't have a lot of earnings or fundamentals underneath them but you can also find some more basic companies out there that are underneath the radar that may have been overlooked that really represent good values. >> on that note, eric, thank you. eric marshall with the hodges small cap fund. one of the biggest economic mysteries lately has been the lack of wage growth, despite a tightening job market. a new survey may provide much-needed answers. steve liesman reports. >> reporter: that check with your raise in it might finally be in the mail. a new survey from the national association for business economics suggesting that wages could already be on the rise. 47% of the 101 businesses surveyed said they're hiking wages, up eight points from last quarter and the second highest reading since the end of the recession. the same percentage said they expect wages to rise in the next three months. those gains are not the type of wage inflation the fed should be worried about. >> we've been looking for wage growth.

it's only when wage growth really outstrips productivity for a period of time that you have trouble. i think this is good. it's a sign the labor market's tightening. that's a good thing. not a bad thing. we need to do more to bring people back into the workforces, but that's a tougher problem. >> a big problem in the survey, employers are saying it isn't easy to find workers. more than a third saying they're having difficulty hiring. in response, they're employing several different strategies. 22% say they're raising pay 19% or hiring more internally. 10% turning to robots or automati automati. 4% even report lowering the job requirements. the survey shows businesses are also reporting positive outlooks for sales along with capital sending and offsetting some of the profit pressure from higher wages. fewer firms are reporting rising material costs so the profit outlook remains positive. for "nightly business report," i'm steve liesman. still ahead, the gop's health care bill was supposed to come up for a vote this week, but that's now unlikely because

of an improbable new wrinkle. the health of a single senator. the u.s. has ended a laptop ban on middle eastern airlines. saudi arabian airlines is the final carrier of nine to be removed from that laptop ban aboard flights heading into the u.s. from certain airports. the restrictions were imposed last march on certain airlines based on intelligence about the potential for hidden explosives in electronics. more recently, the department of homeland security said airlines could be removed from the list if they met tougher security

measures. and now to washington where health care was expected to be the focus this week but the senate vote on the legislation has been delayed following senator john mccain's surgery for a blood clot over the weekend. john harwood is in washington. john, we know that they've had to delay this because of senator mccain's medical condition, but what does it mean maybe a little bit furrther down the line for the senate health care bill? >> reporter: well, as you indicated, sue, they cannot move forward on health care without john mccain present because he is the 50th vote as we speak right now to even take up the bill, much less pass it. the consequence of the delay is to give opponents more time to hammer the bill, as susan collins, the moderate from maine, was doing over the weekend saying it would shred the safety net for vulnerable people, poor people, rural hospitals, that sort of thing. so, it diminishes the prospect for the health bill by delay. >> two most gop leaders of the

bill, rand paul, thinks the bill doesn't go far enough in repealing obamacare, and miss collins who is concerned about what's getting repealed. other aspects of the a dministrati mccain's health? >> reporter: yes, because the administration and republicans in congress need to move past health care in order to pass a new budget resolution and take up tax reform. they can't do it until they've disposed of health care one way or the other. if it fails, they can move immediately. if it passes, they can move. but it can't be in limbo and move ahead on tax reform. that is very important to the president, to republicans in congress. they've also, of course, got to raise the debt limits sometime in the next couple of months to avoid a debt crisis. >> yeah. the administration has had various weeks that they've been highlighting. infrastructure week and the like. this week was made in america week. or is made in america week.

how did it start out? >> reporter: well, it started with the president showcasing american-made products and trying to cheer lead for manufacturing here. there was very odd moment at the white house today when sean spicer, the press secretary, was asked the obvious question about trump family businesses that manufacture overseas. clothing, shoes, home products and the like. and what sean spicer said was, well, there are supply chains and scaleability that are not available in the united states. of course, that's precisely the argumentha mu make about shifting jobs overseas which president trump's been hammering them for. >> indeed, john, thank you very much. john harwood in washington. lower fees hurt results at blackrock. that's where we begin tonight's market focus in an effort to attract more customers, the world's largest asset manager cut product fees in the latest quarter. resulting in earnings that trailed estimates. investors funneled a record amount of cash into blackrock's exchange traded funds business.

low price business, by the way. but it wasn't enough to lift revenue above expectations. shares fell 3% to 424.63. fedex warned the cyber attack that recently impacted one of its units would cut into full-year results. the delivery giant said its tnt express division still experiencing severe disruptions from the attack and doesn't know when the issues would be resolved. causing lost revenue and higher costs. fedex shares off more than 1.5%, at 215.48. consumer products company church & dwight is buying privately held oral health care company waterpik for about $1 billion. church & dwight also reaffirmed its profit outlook for 2017. shares were up 1% at 53.33. some retailers close locations, ross stores is opening them. the retailer said it opened 28 stores in new and existing markets as part of the company's plan to expand. ross said it continues to see

plenty of opportunity to grow, and expects to eventually operate more than 2,000 stores. shares of the company fell fractionally to 54.73. sears just received another line of cred the ceo's hedge fund. a securities filing disclosed that eddie lampert's esl part r partners gave the struggling retailer a $200 million credit line so it could generate additional liquidity on an as-needed basis. over the past two years the hedge fund has loaned sears more than $1.5 billion. shares of sears responded by jumping 12% to 904. and wire and cable maker general cable could be considering selling itself. the compan said it was launching a strategic review to increase shareholder value that could result in a potential sale. shares rose nearly 10% on the news to $18.20. china's economy expanded faster than expected in the second quarter. the world's second largest economy grew at a rate of 6.9%.

the report puts china on track to meet its 2017 growth target of about 6 .5%. firmer imports in production, in particular, steel, whi of cours trade tensions with the united states. and trade will be a major topic of talks on wednesday when american and chinese officials gather for an annual economic dialogue. startups in china are a growing part of that country's economy, of course. some of those fast-growing firms are in the financial services sector. and one company in particular is using artificial intelligence to change the way money is borrowed and spent. eunice yun has our story from beijing. ♪ >> reporter: when beijing restaurant owner is short of money, he pulls out his smartphone. not to make a call, but to click on an app. "this app is very convenient and practical" he says "when you're

dining out with friends, shopping or travelinging and need a little extra cash." translates to "need money pal" in chinese, is the brain child of loan startup, smart finance. the beijing-based company founded by the ceo blooes compared to traditional loan offices, artificial inte can accurately asset if a customer is credit worthy by collecting data on their mobile phone. "traditional banks aren't suitable to assess large amounts of tate to, bdata. but a.i. can. compared to humans, machines don't tire out and are unbiased." the company reviews their data like bank account information. the a.i. program also tracks that person's mobile and online behavior. and based on the action of millions of other borrowers, can determine if they're at a higher risk of default or fraud. "we can see the way users input data the," he says "we find if someone is honest, they fill out

the forms differently compared to a fraud. loans are generally approved in about eight seconds. they range from $70 to $700 and most are due within one month and if you don't pay back the loan, the company still has your contacts. for this 29-year-old, privacy isn't a problem. like most chinese, he has no credit card, no credit score and makes most payments on his mobile pho. "i don't think there's anything to worry about," he says. "many other online services also require personal information just like this app. but many borrowers do care about not losing faith. "for chinese people, it's considered a disgrace to borrow money," he says. "they don't want to ask friends, so we take pride in being a friend who won't judge them for their financial situation but who can help." and who can go wherever they take their smartphone. for "nightly business report," in beijing. meantime the ceo of tesla issued a warning about artificial intelligence.

appearing before a meeting of the national governor's association over the weekend the visionary called technology the greatest risk we face as a civiliza and said the technology needs regulation. >> a.i.'s a rare case where i think we need to be proactive in regulation instead of reactive. because i think by the time we're reactive in a.i. regulation's too late. >> musk described the worst-case scenario which included massive job loss to robots, and the potential for war. it's not the first time he has warned of the risks posed by artificial intelligence, but others in silicon valley do not necessarily share musk's skepticism. coming up, while amazon is looming large over a large number of consumer-related companies that are set to go public.

here's a look at what to watch tomorrow. dow components goldman sachs, j&j, gianted health care, ibm all report their profits. big day for that. senate finance committee will hold its first hearing on tax reform. report on the home builder sentiment will show us whether the sector is upbeat about the housing market and ready to build more. > seems like there's an amazon story every day. tonight is no different. the e-commerce company appears to be getting into the meal kit delivery business. it recently registered a trademark for a service described as, quote, we do the prep, you be the chef, end quote. amazon has already been testing both food delivery and meal kits

with its amazon fresh business. but shares of blue apron, the largest meal kit provider in the u.s., which recently went public, fell 10%. and it is not just the meal delivery business, or the grocery industry or all retail that amazon is changing. the company may also be shaking up the market for initial public offerings. bob pisani explains. >> reporter: amazon is putting retail ipos on notice. the announcement today that amazon would be entering the meal kit delivery business that hammered competitor blue apron for another 10% tee kledecline. it's been pretty much straight down since the second day of trading and broke below $7 today. this is leading to a wider discussion within the ipo market mace. how much can amazon disrupt other retail operations particularly those waiting to go public? john from ipo scoop called amazon the 800 pound gorilla in the room. they have the money and the facilities, he says, to make anything work if they want it

to. now, pet i.q., this is a distributor of low-cost pet medications, plans to go public on the nasdaq this friday. they don't mention amazon as a direct competitor, they note the companies you might not think of like leslie, mars, all compete in the pet health and wellness category. self-other retail ipos could go public in the next few weeks, sun basket, fresh direct, also meal delivery in germany, and yedi which makes coolers. amazon's aggressive moves will make any of these easier to get out of the gate but doesn't spell the death of retail ipos, for example. one is below $13. retailer floor and decor, went public in april, is now dl$39. pet i.q. already smells to walmart and sams club. regardless, amazon's clues,

since the whole foods announcement, has served notice with a company the size and scale of amazon, the barriers to entry are not nearly as great as they used to be. for "nightly business report," i'm bob pisani at the new york stock exchange. and that does it for us tonight. you got to get home and make your meal kit. >> chop up my meal kit. >> there you go. i'm sue herera. thanks for joining us. >> i'm tyler mathisen. thanks from me as well. have a great evening, everybody. we'll see you back here

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